-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ReP+uLC/85plTWAwJWc52Ny9DOPnmlb6VmFGh3DUeWZh2zMh/PT1CFgs5g39laPo JQtnrrMK82yEHmNNsDM2pw== 0000912057-00-017799.txt : 20000414 0000912057-00-017799.hdr.sgml : 20000414 ACCESSION NUMBER: 0000912057-00-017799 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 56 FILED AS OF DATE: 20000413 EFFECTIVENESS DATE: 20000413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C CENTRAL INDEX KEY: 0000353894 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 350472300 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-25990 FILM NUMBER: 600004 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-03214 FILM NUMBER: 600005 BUSINESS ADDRESS: STREET 1: P O BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 BUSINESS PHONE: 2194553018 MAIL ADDRESS: STREET 1: P O BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 FORMER COMPANY: FORMER CONFORMED NAME: LINCOLN NATIONAL PENSION VARIABLE ANNUITY ACCOUNT C DATE OF NAME CHANGE: 19890508 485BPOS 1 485BPOS As filed with the Securities and Exchange Commission on April 13, 2000 Registration No. 33-25990 811-3214 - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 18 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 33 (Check appropriate box or boxes.) LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C ------------------------------------------- (Exact Name of Registrant) LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------------------------------- (Name of Depositor) 1300 South Clinton Street Fort Wayne, Indiana 46802 ------------------------------------------- (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code: (219)455-2000 Elizabeth A. Frederick, Esquire The Lincoln National Life Insurance Company 1300 South Clinton Street Post Office Box 1110 Fort Wayne, Indiana 46802 Telephone No. (219)455-2000 ------------------------------------------- (Name and Address of Agent for Service) Copies of all communications to: Brian M. Burke, Esquire The Lincoln National Life Insurance Company 1300 South Clinton Street Post Office Box 1110 Fort Wayne, Indiana 46802 Telephone No. (219)455-2000 Approximate Date of Public Offering: Continuous ---------- 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) of Rule 485 ----- ----- 60 days after filing pursuant to paragraph (a)(1) of Rule 485 on (date) pursuant to paragraph (a)(1) of Rule 485 ----- Title of Securities Being Registered: Units of Interest Under Variable Annuity Contracts LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C INDIVIDUAL VARIABLE ANNUITY CONTRACTS Home Office: Lincoln National Life Insurance Company 1300 South Clinton Street Fort Wayne, IN 46802 www.lincolnlife.com This Prospectus describes individual variable annuity contracts that are issued by Lincoln National Life Insurance Company (LINCOLN LIFE). They are for use with nonqualified and qualified retirement plans. Generally, you do not pay federal income tax on the contract's growth until it is paid out. The contracts are 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 the annuitant dies before the ANNUITY COMMENCEMENT DATE, we will pay your BENEFICIARY a DEATH BENEFIT. This Prospectus offers three types of contracts. They are a single premium deferred annuity, a flexible premium deferred annuity and a periodic premium deferred annuity. The minimum PURCHASE PAYMENTS for each contract are: 1. Single premium deferred contract: $1,000 for Roth IRAs, IRAs and SEPs; $3,000 for all others; 2. Flexible premium deferred contract (Multi- Fund-Registered Trademark- 2,3,4,): $1,000 for Roth IRAs, IRAs and SEPs; $3,000 for all others (minimum $100 subsequent PURCHASE PAYMENT); and 3. Periodic premium deferred contract (Multi-Fund-Registered Trademark- 1): $600 per CONTRACT YEAR (minimum $25 per PURCHASE PAYMENT). You choose whether your CONTRACT VALUE accumulates on a variable or a 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 WITHDRAWALS AND TRANSFERS FROM THE FIXED SIDE OF THE CONTRACT. SEE THE FIXED SIDE OF THE CONTRACT. All PURCHASE PAYMENTS for benefits on a variable basis will be placed in Lincoln National Variable Annuity Account C (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 SUBACCOUNTS you take all the investment risk on the CONTRACT VALUE and the retirement income. If the SUBACCOUNTS you select make money, your CONTRACT VALUE goes up; if they lose money, it goes down. How much it goes up or down depends on the performance of the funds and series you select. WE DO NOT GUARANTEE HOW ANY OF THE SUBACCOUNTS WILL PERFORM. ALSO, NEITHER THE U.S. GOVERNMENT NOR ANY FEDERAL AGENCY INSURES OR GUARANTEES YOUR INVESTMENT IN THE CONTRACT. The available funds and series are listed below: Deutsche Asset Management VIT Funds Formerly BT Insurance Funds Trust (IFT): Equity 500 Index Fund Small Cap Index Fund Baron Capital Asset Fund Trust (Insurance Class) Delaware Group Premium Fund (DGPF) (Standard Class) Global Bond Series Growth & Income Series Trend Series Fidelity Variable Insurance Product Fund: VIP Growth (Service class) Fidelity Variable Insurance Product Fund II: VIP II Contrafund (Service class) Janus Aspen Series, Worldwide Growth Fund (Institutional Shares) Lincoln National Aggressive Growth Fund Lincoln National Bond Fund Lincoln National Capital Appreciation Fund Lincoln National Equity Income Fund Lincoln National Global Asset Allocation Fund Lincoln National Growth and Income Fund Lincoln National International Fund Lincoln National Managed Fund Lincoln National Money Market Fund Lincoln National Social Awareness Fund Lincoln National Special Opportunities Fund Neuberger Berman Advisors Management Trust (AMT): Partners Fund Mid-Cap Growth Fund ON OR ABOUT MAY 22, 2000 THE FOLLOWING FUNDS WILL BE AVAILABLE: Alliance Variable Products Series Fund (AVP) (Class B) Growth Portfolio Technology Portfolio American Funds Insurance Series (AFIS) A/K/A American Variable Insurance Series-Registered Trademark- (AVIS) (Class 2) Growth Fund International Fund Delaware Group Premium Fund (DGPF) (Standard Class) -- REIT Series This Prospectus gives you information about the contracts that you should know before you decide to buy a contract and make PURCHASE PAYMENTS. You should also review the Prospectuses for the funds and series that are attached, and keep the Prospectuses for reference. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE CONTRACTS OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. You can obtain a current Statement of Additional Information (SAI), dated the same date as this prospectus, about the contracts which has more information. Its terms are made part of this Prospectus. For a free copy, write: Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, Indiana 46801, or call 1-800-4LINCOLN (454-6265). The SAI and other information about LINCOLN LIFE and the VAA are also available on the SEC's web site (http://www.sec.gov). There is a table of contents for the SAI on the last page of this Prospectus. May 1, 2000. 1 TABLE OF CONTENTS
PAGE - -------------------------------------------- Special terms 2 - -------------------------------------------- Expense tables 3 - -------------------------------------------- Summary 6 - -------------------------------------------- Condensed financial information 8 - -------------------------------------------- Investment results 11 - -------------------------------------------- Financial statements 11 - -------------------------------------------- Lincoln National Life Insurance Company 11 - -------------------------------------------- Variable annuity account (VAA) 11 - -------------------------------------------- Fixed side of the contract 11 - -------------------------------------------- Investments of the variable annuity account 12 - -------------------------------------------- Description of the Funds and Series 14 - -------------------------------------------- Charges and other deductions 17 - --------------------------------------------
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PAGE The contracts 19 - -------------------------------------------- Annuity payouts 23 - -------------------------------------------- Federal tax matters 24 - -------------------------------------------- Voting rights 28 - -------------------------------------------- Distribution of the contracts 28 - -------------------------------------------- Return privilege 29 - -------------------------------------------- State regulation 29 - -------------------------------------------- Restrictions under the Texas Optional Retirement Program 29 - -------------------------------------------- Records and reports 29 - -------------------------------------------- Other information 29 - -------------------------------------------- Statement of Additional information table of contents for the VAA 31 - --------------------------------------------
SPECIAL TERMS (We have italicized the special terms that have special meaning throughout this Prospectus) ACCOUNT OR VARIABLE ANNUITY ACCOUNT (VAA) -- The segregated investment account, Lincoln National Variable Annuity Account C, 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 on whose life the annuity benefit payments made after an ANNUITY COMMENCEMENT DATE are based. 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 OPTION -- 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 for the variable side of the contract after the ANNUITY COMMENCEMENT DATE. BENEFICIARY -- The person you designate to receive any DEATH BENEFIT paid if the annuitant dies before the ANNUITY COMMENCEMENT DATE. CONTRACTOWNER (you, your, owner) -- The person who has the ability to exercise the rights within the CONTRACT (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 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 annuitant dies before the ANNUITY COMMENCEMENT DATE. An enhanced guaranteed minimum death benefit (EGMDB) is also available. 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 class of a particular fund or series available under the contracts. There is a separate SUBACCOUNT which corresponds to each fund or SERIES. VALUATION DATE -- Each day the New York Stock Exchange (NYSE) is open for trading. VALUATION PERIOD -- The period starting at the close of trading (currently normally 4:00 p.m. New York time) on each day that the NYSE is open for trading (VALUATION DATE) and ending at the close of such trading on the next VALUATION DATE. 2 EXPENSE TABLES SUMMARY OF CONTRACTOWNER EXPENSES: The maximum surrender charge (contingent deferred sales charge) as a percentage of CONTRACT VALUE (for single premium and periodic premium contracts), or of PURCHASE PAYMENTS (for flexible premium contracts), 7% (SINGLE AND surrendered/withdrawn: FLEXIBLE) 8% (PERIODIC)
The surrender charge percentage is reduced over time. The later the redemption occurs, the lower the surrender charge with respect to that surrender or withdrawal. We may reduce or waive these charges in certain situations. See Charges and other deductions -- Surrender charges. ANNUAL CONTRACT FEE: Periodic and flexible premium Multi-Fund-Registered Trademark- 2 contract only: $25 VAA ANNUAL EXPENSES: (as a percentage of average account value):
WITH EGMDB WITHOUT EGMDB Mortality and expense risk charge 1.00% 1.00% Enhanced guaranteed minimum DEATH BENEFIT charge .30% -- ---- ---- Total annual charge for each VAA SUBACCOUNT 1.30% 1.00%
ANNUAL EXPENSES OF THE FUNDS AND SERIES FOR THE YEAR ENDED DECEMBER 31, 1999: (as a percentage of each fund's or series' average net assets):
MANAGEMENT 12B-1 OTHER TOTAL FEES + FEES + EXPENSES = EXPENSES - ----------------------------------------------------------------------------------------------------------------------- 1. Aggressive Growth 0.73% 0.00% 0.14% 0.87% - ----------------------------------------------------------------------------------------------------------------------- 2. AMT Mid-Cap Growth(1)* 0.85 0.00 0.15 1.00 - ----------------------------------------------------------------------------------------------------------------------- 3. AMT Partners 0.80 0.00 0.07 0.87 - ----------------------------------------------------------------------------------------------------------------------- Aspen Worldwide Growth (Institutional 4. Shares) 0.65 0.00 0.05 0.70 - ----------------------------------------------------------------------------------------------------------------------- 5. Bond 0.45 0.00 0.08 0.53 - ----------------------------------------------------------------------------------------------------------------------- 6. Capital Appreciation 0.72 0.00 0.06 0.78 - ----------------------------------------------------------------------------------------------------------------------- 7. Capital Asset (Insurance Class)(7)* 0.62 0.25 0.63 1.50 - ----------------------------------------------------------------------------------------------------------------------- 8. DGPF Global Bond (Standard Class)(2) 0.75 0.00 0.10 0.85 - ----------------------------------------------------------------------------------------------------------------------- 9. DGPF Growth & Income (Standard Class)(3) 0.60 0.00 0.11 0.71 - ----------------------------------------------------------------------------------------------------------------------- 10. DGPF Trend (Standard Class)(4) 0.75 0.00 0.07 0.82 - ----------------------------------------------------------------------------------------------------------------------- 11. Equity-Income 0.72 0.00 0.07 0.79 - ----------------------------------------------------------------------------------------------------------------------- 12. Global Asset Allocation 0.72 0.00 0.19 0.91 - ----------------------------------------------------------------------------------------------------------------------- 13. Growth and Income 0.31 0.00 0.05 0.36 - ----------------------------------------------------------------------------------------------------------------------- 14. IFT Equity 500 Index(6)* 0.14 0.00 0.16 0.30 - ----------------------------------------------------------------------------------------------------------------------- 15. IFT Small Cap Index(6)* 0.13 0.00 0.32 0.45 - ----------------------------------------------------------------------------------------------------------------------- 16. International 0.77 0.00 0.15 0.92 - ----------------------------------------------------------------------------------------------------------------------- 17. Managed 0.36 0.00 0.06 0.42 - ----------------------------------------------------------------------------------------------------------------------- 18. Money Market 0.48 0.00 0.11 0.59 - ----------------------------------------------------------------------------------------------------------------------- 19. Social Awareness 0.33 0.00 0.05 0.38 - ----------------------------------------------------------------------------------------------------------------------- 20. Special Opportunities 0.37 0.00 0.07 0.44 - ----------------------------------------------------------------------------------------------------------------------- 21. VIP II Contrafund (Service Class)(8)* 0.58 0.10 0.10 0.78 - ----------------------------------------------------------------------------------------------------------------------- 22. VIP Growth (Service Class)(8)* 0.58 0.10 0.09 0.77 - ----------------------------------------------------------------------------------------------------------------------- 23. AVP Growth (Class B)+ 0.75 0.25 0.12 1.12 - ----------------------------------------------------------------------------------------------------------------------- 24. AVP Technology (Class B)+ 0.71 0.25 0.24 1.20 - ----------------------------------------------------------------------------------------------------------------------- 25. AFIS Growth (Class 2)+ 0.38 0.25 0.01 0.64 - ----------------------------------------------------------------------------------------------------------------------- 26. AFIS International (Class 2)+ 0.55 0.25 0.05 0.85 - ----------------------------------------------------------------------------------------------------------------------- DGPF Real Estate (REIT) (Standard 27. Class)(5)+* 0.64 0.00 0.21 0.85 - -----------------------------------------------------------------------------------------------------------------------
*After waivers and/or reimbursements. +These funds are not available to you until on or about May 22, 2000. At that time the new funds may not be available in California. 3 VOLUNTARY FEE REIMBURSEMENTS: The following funds VOLUNTARILY waive expenses to the extent necessary to maintain a maximum total expense ratio. (1) Expenses reflect expense reimbursement. Neuberger Berman Management Inc. ("NBMI") has undertaken through May 1, 2001 to reimburse certain operating expenses, including the compensation of NBMI and excluding taxes, interest, extraordinary expenses, brokerage commissions and transaction costs, that exceed in the aggregate, 1.0% of the AMT Mid-Cap Growth Portfolio's average daily net asset value. Absent such reimbursement, Total Annual Expenses for the portfolio for the year ended December 31, 1999 would have been 1.08%. (2) The investment advisor for the Global Bond Series is Delaware International Advisers Ltd. ("DIAL"). Effective May 1, 2000 through October 31, 2000, DIAL has voluntarily agreed to waive its management fee and reimburse the Series for expenses to the extent that total expenses will not exceed 0.85%. Under its Management Agreement, the Series pays a management fee based on average daily net assets as follows: 0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the next $1,500 million, 0.60% on assets in excess of $2,500 million; all per year. (3) The investment advisor for the Growth and Income Series is Delaware Management Company ("DMC"). Effective May 1, 2000 through October 31, 2000, 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%. Effective May 1, 1999, DMC voluntarily elected to cap its management fee for this Series at 0.60% indefinitely. (4) The investment advisor for the Trend Series is Delaware Management Company ("DMC"). Effective May 1, 2000 through October 31, 2000, DMC has voluntarily agreed to waive its management fee and reimburse the Series for expenses to the extent that total expenses will not exceed 0.85%. Under its Management Agreement, the Series pays a management fee based on average daily net assets as follows: 0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the next $1,500 million, 0.60% on assets in excess of $2,500 million; all per year. (5) The investment advisor for the REIT Series is Delaware Management Company ("DMC"). Effective May 1, 2000 through October 31, 2000, DMC has voluntarily agreed to waive its management fee and reimburse the Series for expenses to the extent that total expenses will not exceed 0.85%. Without such an arrangement, the total annual operating expenses for the Series would have been 0.96%. Under its Management Agreement, the Series pays a management fee based on average daily net assets as follows: 0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the next $1,500 million, 0.60% on assets in excess of $2,500 million; all per year. (6) 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. Under the Advisory Agreement with the "Advisor", the Small Cap Index Fund will pay an advisory fee at an annual percentage rate of 0.35% of the average daily net assets of the fund. These fees are accrued daily and paid monthly. The Advisor has VOLUNTARILY undertaken to waive its fee and to reimburse the fund for certain expenses so that the fund's total operating expenses will not exceed 0.45% 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 and 1.18% for the Small Cap Index Fund. CONTRACTUAL FEE REIMBURSEMENTS: The following Funds contractually waive the management fee to the extent necessary to maintain a maximum total expense ratio. (7) The Advisor is contractually obligated to reduce its fee to the extent required to limit Baron Capital Asset Fund's total operating expenses to 1.5% for the first $250 million of assets in the Fund, 1.35% for Fund assets over $250 million of assets in the Fund and 1.25% for Fund assets over $500 million. Without the expense limitations, total operating expenses for the Fund for the period January 1, 1999 through December 31, 1999 would have been 1.88%. (8) A portion of the brokerage commissions that certain funds pay was used to reduce fund expenses. In addition, though arrangements with certain funds', or 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: Contrafund 0.75% (service) and Growth 0.75% (service). 4 EXAMPLES (expenses of the SUBACCOUNTS and the funds and series): 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------- ---------------------- ---------------------- ---------------------- SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. - ------------------------------------------------------------------------- ---------------------------------------------- 1. Aggressive Growth $ 94 92 92 102 122 119 118 148 151 149 147 197 251 255 251 278 - ------------------------------------------------------------------------- ---------------------------------------------- 2. AMT Mid-Cap Growth $ 95 93 93 103 126 122 122 152 157 153 153 203 264 264 264 291 - ------------------------------------------------------------------------- ---------------------------------------------- 3. AMT Partners $ 94 92 92 102 122 118 118 148 151 147 147 197 251 251 251 278 - ------------------------------------------------------------------------- ---------------------------------------------- 4. Aspen Worldwide Growth $ 92 90 90 100 117 113 113 143 143 138 138 189 233 233 233 261 - ------------------------------------------------------------------------- ---------------------------------------------- 5. Bond $ 91 89 89 99 113 110 108 138 134 133 129 181 215 222 215 244 - ------------------------------------------------------------------------- ---------------------------------------------- 6. Capital Appreciation $ 93 92 91 101 120 117 115 145 147 144 142 192 241 246 241 269 - ------------------------------------------------------------------------- ---------------------------------------------- 7. Capital Asset $100 98 98 108 140 137 137 165 181 178 178 226 313 313 313 339 - ------------------------------------------------------------------------- ---------------------------------------------- 8. DGPF Global Bond $ 94 92 92 102 122 119 117 147 150 148 146 196 248 253 248 276 - ------------------------------------------------------------------------- ---------------------------------------------- 9. DGPF Growth & Income $ 93 91 90 100 118 115 113 143 143 141 138 189 234 239 234 262 - ------------------------------------------------------------------------- ---------------------------------------------- 10. DGPF Trend $ 94 92 92 102 121 118 116 147 149 146 144 194 245 250 245 273 - ------------------------------------------------------------------------- ---------------------------------------------- 11. Equity-Income $ 93 92 91 101 120 117 116 146 147 145 142 193 242 247 242 270 - ------------------------------------------------------------------------- ---------------------------------------------- 12. Global Asset Allocation $ 94 93 92 102 123 121 119 149 153 151 149 199 255 259 255 282 - ------------------------------------------------------------------------- ---------------------------------------------- 13. Growth and Income $ 89 87 87 97 108 104 102 134 126 123 120 172 197 202 197 226 - ------------------------------------------------------------------------- ---------------------------------------------- 14. IFT Equity 500 Index $ 89 86 86 97 106 101 101 132 123 117 117 170 190 190 190 219 - ------------------------------------------------------------------------- ---------------------------------------------- 15. IFT Small Cap Index $ 90 88 88 98 110 105 105 136 130 125 125 177 206 206 206 235 - ------------------------------------------------------------------------- ---------------------------------------------- 16. International $ 94 93 93 102 124 121 119 149 153 151 149 199 256 260 256 283 - ------------------------------------------------------------------------- ---------------------------------------------- 17. Managed $ 90 88 88 98 109 106 104 135 129 126 123 175 203 208 203 232 - ------------------------------------------------------------------------- ---------------------------------------------- 18. Money Market $ 91 90 89 99 114 111 109 140 137 135 132 183 221 226 221 250 - ------------------------------------------------------------------------- ---------------------------------------------- 19. Social Awareness $ 89 88 87 97 108 104 103 134 127 124 121 173 199 204 199 228 - ------------------------------------------------------------------------- ---------------------------------------------- 20. Special Opportunities $ 90 88 88 98 110 106 105 136 130 127 124 176 205 210 205 234 - ------------------------------------------------------------------------- ---------------------------------------------- 21. VIP II Contrafund $ 93 91 91 101 120 115 115 145 147 142 142 192 241 241 241 269 - ------------------------------------------------------------------------- ---------------------------------------------- 22. VIP Growth $ 93 91 91 101 119 115 115 145 146 141 141 192 240 240 240 268 - ------------------------------------------------------------------------- ---------------------------------------------- 23. AVP Growth* $ 96 95 95 104 129 126 126 155 163 159 159 208 276 276 276 303 - ------------------------------------------------------------------------- ---------------------------------------------- 24. AVP Technology* $ 97 95 95 105 132 128 128 157 167 163 163 212 284 284 284 311 - ------------------------------------------------------------------------- ---------------------------------------------- 25. AFIS Growth* $ 92 90 90 100 116 111 111 141 140 135 135 186 227 227 227 255 - ------------------------------------------------------------------------- ---------------------------------------------- 26. AFIS International* $ 94 92 92 102 122 117 117 147 150 146 146 196 248 248 248 276 - ------------------------------------------------------------------------- ---------------------------------------------- 27. DGPF Real Estate* (REIT) $ 94 92 92 102 122 117 117 147 150 146 146 196 248 248 248 276 - ------------------------------------------------------------------------- ----------------------------------------------
*These funds are not available to you until on or about May 22, 2000. At that time the new funds may not be available in California. 5 If you do not surrender your contract, you would pay the following expenses on a $1,000 investment, assuming a 5% annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------- ---------------------- ---------------------- ---------------------- SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. SGL MF2 MF3&4 PER. - ------------------------------------------------------------------------ ---------------------------------------------- 1. Aggressive Growth $22 22 22 19 68 69 68 60 117 119 117 104 251 255 251 224 - ------------------------------------------------------------------------ ---------------------------------------------- 2. AMT Mid-Cap Growth $23 23 23 21 72 72 72 64 123 123 123 110 264 264 264 238 - ------------------------------------------------------------------------ ---------------------------------------------- 3. AMT Partners $22 22 22 19 68 68 68 60 117 117 117 104 251 251 251 224 - ------------------------------------------------------------------------ ---------------------------------------------- 4. Aspen Worldwide Growth $20 20 20 18 63 63 63 55 108 108 108 95 233 233 233 206 - ------------------------------------------------------------------------ ---------------------------------------------- 5. Bond $19 19 19 16 58 60 58 50 99 103 99 86 215 222 215 188 - ------------------------------------------------------------------------ ---------------------------------------------- 6. Capital Appreciation $21 22 21 19 65 67 65 57 112 114 112 99 241 246 241 215 - ------------------------------------------------------------------------ ---------------------------------------------- 7. Capital Asset $28 28 28 26 87 87 87 79 148 148 148 135 313 313 313 288 - ------------------------------------------------------------------------ ---------------------------------------------- 8. DGPF Global Bond $22 22 22 19 67 69 67 60 116 118 116 103 248 253 248 222 - ------------------------------------------------------------------------ ---------------------------------------------- 9. DGPF Growth & Income $20 21 20 18 63 65 63 55 108 111 108 95 234 239 234 207 - ------------------------------------------------------------------------ ---------------------------------------------- 10. DGPF Trend $22 22 22 19 66 68 66 59 114 116 114 101 245 250 245 219 - ------------------------------------------------------------------------ ---------------------------------------------- 11. Equity-Income $21 22 21 19 66 67 66 58 112 115 112 99 242 247 242 216 - ------------------------------------------------------------------------ ---------------------------------------------- 12. Global Asset Allocation $22 23 22 20 69 71 69 61 119 121 119 106 255 259 255 228 - ------------------------------------------------------------------------ ---------------------------------------------- 13. Growth and Income $17 17 17 14 52 54 52 45 90 93 90 77 197 202 197 169 - ------------------------------------------------------------------------ ---------------------------------------------- 14. IFT Equity 500 Index $16 16 16 14 51 51 51 43 87 87 87 74 190 190 190 162 - ------------------------------------------------------------------------ ---------------------------------------------- 15. IFT Small Cap Index $18 18 18 15 55 55 55 47 95 95 95 82 206 206 206 179 - ------------------------------------------------------------------------ ---------------------------------------------- 16. International Fund $23 23 23 20 69 71 69 62 119 121 119 106 256 260 256 229 - ------------------------------------------------------------------------ ---------------------------------------------- 17. Managed Fund $18 18 18 15 54 56 54 46 93 96 93 80 203 208 203 175 - ------------------------------------------------------------------------ ---------------------------------------------- 18. Money Market $19 20 19 17 59 61 59 52 102 105 102 89 221 226 221 194 - ------------------------------------------------------------------------ ---------------------------------------------- 19. Social Awareness $17 18 17 15 53 54 53 45 91 94 91 78 199 204 199 171 - ------------------------------------------------------------------------ ---------------------------------------------- 20. Special Opportunities $18 18 18 15 55 56 55 47 94 97 94 81 205 210 205 178 - ------------------------------------------------------------------------ ---------------------------------------------- 21. VIP II Contrafund $21 21 21 19 65 65 65 57 112 112 112 99 241 241 241 215 - ------------------------------------------------------------------------ ---------------------------------------------- 22. VIP Growth Port $21 21 21 18 65 65 65 57 111 111 111 98 240 240 240 213 - ------------------------------------------------------------------------ ---------------------------------------------- 23. AVP Growth* $25 25 25 22 76 76 76 68 129 129 129 116 276 276 276 250 - ------------------------------------------------------------------------ ---------------------------------------------- 24. AVP Technology* $25 25 25 23 78 78 78 70 133 133 133 120 284 284 284 258 - ------------------------------------------------------------------------ ---------------------------------------------- 25. AFIS Growth* $20 20 20 17 61 61 61 53 105 105 105 92 227 227 227 200 - ------------------------------------------------------------------------ ---------------------------------------------- 26. AFIS International* $22 22 22 19 67 67 67 60 116 116 116 103 248 248 248 222 - ------------------------------------------------------------------------ ---------------------------------------------- 27. Delaware Real Estate* (REIT) $22 22 22 19 67 67 67 60 116 116 116 103 248 248 248 222 - ------------------------------------------------------------------------ ----------------------------------------------
*These funds are not available to you until on or about May 22, 2000. At that time the new funds may not be available in California. We provide these examples to help you understand the direct and indirect costs and expenses of the contract. For the single premium deferred contract and the flexible premium (Multi-Fund-Registered Trademark- 2,3,4) deferred contracts, the examples assume that an enhanced DEATH BENEFIT is in effect. Without this benefit, expenses would be lower. For more information, see Charges and other deductions in this Prospectus, and the Prospectuses for the funds and series. Premium taxes may also apply, although they do not appear in the examples. We also reserve the right to impose a charge on transfers between SUBACCOUNTS and to and from the fixed account. Currently, there is no charge. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE. SUMMARY WHAT KIND OF CONTRACT AM I BUYING? It is an individual annuity contract between you and LINCOLN LIFE. It may provide for a fixed annuity and/or a variable annuity. This Prospectus describes the variable side of the contract. See The contracts. WHAT IS THE VARIABLE ANNUITY ACCOUNT (VAA)? It is a separate account we established under Indiana insurance law, and registered with the SEC as a unit investment trust. VAA assets are allocated to one or more SUBACCOUNTS, according to your investment choices. VAA assets are not chargeable with liabilities arising out of any other business which LINCOLN LIFE may conduct. See Variable annuity account (VAA). 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' OR SERIES' PORTFOLIOS. WHAT ARE MY INVESTMENT CHOICES? Based upon your instruction, the VAA applies your PURCHASE PAYMENTS to buy fund and series shares in one or more of the investment funds of the SUBACCOUNTS: Aggressive Growth, AMT Mid-Cap Growth, AMT Partners, Aspen Worldwide Growth, Bond, Capital Appreciation, Capital Asset, DGPF Global Bond, DGPF Growth & Income, DGPF Trend, Equity-Income, Global Asset Allocation, Growth and Income, IFT Equity 500 Index, IFT Small Cap Index, International, Managed, Money Market, Social Awareness, Special Opportunities, VIP II Contrafund, VIP Growth, AVP Growth, AVP Technology, AFIS Growth, AFIS International, and DGPF Real Estate (REIT). 6 In turn, each fund or series holds a portfolio of securities consistent with its investment policy. See Investment of the variable annuity accounts and Description of the funds and series. WHO ADVISES THE FUNDS? The investment advisor for the Lincoln National funds is Lincoln Investment Management, Inc. (Lincoln Investment), Fort Wayne, Indiana. The investment advisor for the Trend Series, Real Estate (REIT) Series and Growth & Income Series is Delaware Management Co, Inc. (DMC), and the investment manager of the Global Bond Series is Delaware International Advisers, Ltd. (DIAL) London, England, an affiliate of Delaware Management, Philadelphia, Pennsylvania. Each is an indirect subsidiary of Lincoln National Corporation (LNC). The investment advisor for the IFT Equity 500 Index Fund and the IFT Small Cap Index Fund is Bankers Trust Company, New York, New York. The investment advisor for the Capital Asset Fund is BAMCO, Inc., New York, New York. The investment advisor for the Aspen Worldwide Growth Fund is Janus Capital Corp., Denver, Colorado. The investment advisor for the AMT Partners and AMT Mid-Cap Growth Fund is Neuberger Berman Management, Inc., New York, New York. The investment advisor for the Variable Insurance Products Fund (VIP) and Variable Insurance Products Fund (VIP II) is Fidelity Management & Research Company, Boston, Massachusetts. The investment Advisor for the AVP Growth Fund and AVP Technology Fund is Alliance Capital Management, L.P., New York, New York. The investment Advisor for the AFIS Growth Fund and AFIS International Fund is Capital Research and Management Company, Los Angeles, California. Each investment advisor to a fund or series is registered as an investment advisor with the SEC. See Investments of the variable annuity account -- Investment advisors. HOW DOES THE CONTRACT WORK? If we approve your application, we will send you a contract. When you make PURCHASE PAYMENTS during the accumulation phase, you buy ACCUMULATION UNITS. If you decide to receive retirement income payments, your ACCUMULATION UNITS are converted to ANNUITY UNITS. Your retirement income payments will be based on the number of ANNUITY UNITS you received and the value of each ANNUITY UNIT on payout days. See The contracts. WHAT CHARGES DO I PAY UNDER THE CONTRACT? If you withdraw CONTRACT VALUE, you pay a surrender charge from 0% to 8%, depending upon how many CONTRACT YEARS have elapsed (single premium and periodic premium), or how many CONTRACT YEARS the PURCHASE PAYMENT has been in the contract (flexible premium), and which type of contract you choose. We may waive surrender charges in certain situations. See Charges and other deductions -- Surrender charges. 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 charge an annual contract fee of $25 under the periodic and the flexible premium Multi-Fund-Registered Trademark- 2 contracts. We apply an annual charge totaling 1.30% of net asset value of the VAA. This charge includes 1.00% as a mortality and expense risk charge. If the enhanced DEATH BENEFIT is not in effect, the annual charge is 1.00%. See Charges and other deductions. Each fund and series pays a management fee based on its average daily net asset value. See Investments of the variable annuity account -- Investment Advisor. Each fund and series also has additional operating expenses. These are described in the Prospectuses for the fund or series. WHAT PURCHASE PAYMENTS DO I MAKE, AND HOW OFTEN? Subject to the minimum and maximum payment amounts for each type of contract, your payments may be flexible. See The contracts -- Purchase Payments. HOW WILL MY ANNUITY PAYOUTS BE CALCULATED? If you decide to annuitize, you 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 options. WHAT HAPPENS IF THE ANNUITANT DIES BEFORE I ANNUITIZE? If the enhanced DEATH BENEFIT is in effect, your BENEFICIARY will receive the greater of the enhanced guaranteed minimum DEATH BENEFIT or the CONTRACT VALUE. If the enhanced DEATH BENEFIT is not in effect, your beneficiary will receive the CONTRACT VALUE. Your beneficiary has options as to how the DEATH BENEFIT is paid. See Death benefit before commencement date. MAY I TRANSFER CONTRACT VALUE BETWEEN SUBACCOUNTS AND BETWEEN THE FIXED SIDE OF THE CONTRACT? Yes, with certain limits. See The Contracts - transfers between SUBACCOUNTS on or before the annuity commencement date; transfers following the annuity commencement date; and transfers to and from the general account on or before the annuity commencement date. MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL? Prior to the ANNUITY COMMENCEMENT DATE, yes. The surrender or withdrawal will be subject to contract requirements and to the 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. See Charges and other deductions. A portion of surrender/withdrawal proceeds may be taxable. In addition, if you decide to take a distribution before age 59 1/2, a 10% Internal Revenue Service (IRS) tax penalty may apply. A surrender or a withdrawal also may 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 receive the contract. You need to return the contract, postage prepaid, to our home office. In most states you assume the risk of any market drop on PURCHASE PAYMENTS you allocate to the variable side of the contract. See Return privilege. 7 CONDENSED FINANCIAL INFORMATION FOR THE VAA ACCUMULATION UNIT VALUES The following information relating to ACCUMULATION UNIT values including the enhanced guaranteed minimum death benefit charge where applicable and number of ACCUMULATION UNITS for each of the 10 years in the period ended December 31, 1999 comes 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.
1999 1998* 1997 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------- ------- with without with without EGMDB EGMDB EGMDB EGMDB Aggressive Growth subaccount Accumulation unit value - - Beginning of period $1.559 1.567 1.684 1.687 1.384 1.196 .896 1.000 1.000** trading began in - - End of period $2.193 2.209 1.559 1.567 1.687 1.384 1.196 .896 1.000** 1994. Number of accumulation units - - End of period (000's omitted) 1.658 175,705 1,953 204,322 199,221 172,630 114,518 67,547 110 - ----------------------------------------------------------------------------------------------------------------------- ------- AMT Mid-Cap Growth subaccount Accumulation unit value - - Beginning of period $1.000** 1.000** - - End of period $1.463** 1.464** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 216 15,336 - ----------------------------------------------------------------------------------------------------------------------- ------- AMT Partners subaccount Accumulation unit value - - Beginning of period $1.000** 1.000** - - End of period $1.010** 1.011** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 449 2,642 - ----------------------------------------------------------------------------------------------------------------------- ------- Aspen Worldwide Growth subaccount Accumulation unit value - - Beginning of period $1.000** 1.000** - - End of period $1.434** 1.436** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 1,912 100,156 - ----------------------------------------------------------------------------------------------------------------------- ------- Bond subaccount Accumulation unit value - - Beginning of period $5.002 5.024 $4.625 4.632 4.283 4.228 3.585 3.780 3.398 3.181 - - End of period $4.776 4.812 $5.002 5.024 4.632 4.283 4.228 3.585 3.780 3.398 Number of accumulation units - - End of period (000's omitted) 1,022 61,314 1,160 70,180 60,078 62,709 62,644 57,900 62,765 52,842 - ----------------------------------------------------------------------------------------------------------------------- ------- Capital Appreciation subaccount Accumulation unit value - - Beginning of period $2.562 2.574 $1.881 1.884 1.520 1.294 1.017 1.000 1.000** trading began in - - End of period $3.678 3.706 $2.562 2.574 1.884 1.520 1.294 1.017 1.000** 1994. Number of accumulation units - - End of period (000's omitted) 8,525 487,946 4,553 284,822 234,328 174,073 98,067 52,125 110 - ----------------------------------------------------------------------------------------------------------------------- ------- Capital Asset subaccount Accumulation unit value - - Beginning of period $1.000** 1.000** - - End of period $1.205** 1.206** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 659 7,229 - ----------------------------------------------------------------------------------------------------------------------- ------- 1991 1990 - ----------------------------------- ---------------- Aggressive Growth subaccount Accumulation unit value - - Beginning of period trading trading began began in in - - End of period 1994. 1994. Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- AMT Mid-Cap Growth subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- AMT Partners subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- Aspen Worldwide Growth subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- Bond subaccount Accumulation unit value - - Beginning of period 2.737 2.591 - - End of period 3.181 2.737 Number of accumulation units - - End of period (000's omitted) 46,830 40,983 - ----------------------------------- ---------------- Capital Appreciation subaccount Accumulation unit value - - Beginning of period trading trading began began in in - - End of period 1994. 1994. Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- Capital Asset subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ----------------
* The EGMDB became available in June 1997, the first full year was 1998. ** These values do not reflect a full year's experience because they are calculated for the period from the beginning of investment activity of the subaccounts through December 31. 8
1999 1998* 1997 1996 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------- ---------------------------- with without with without EGMDB EGMDB EGMDB EGMDB DGPF Global Bond subaccount Accumulation unit value - - Beginning of period $ 1.179 1.184 1.189 1.191 0.991 1.000** - - End of period $ 1.121 1.130 1.362 1.368 1.191 0.991** trading began in 1996. Number of accumulation units - - End of period (000's omitted) 406 12,321 1,522 63,364 46,558 23,508 - ----------------------------------------------------------------------------------------------------- ---------------------------- DGPF Growth & Income subaccount Accumulation unit value - - Beginning of period $ 1.603 1.611 1.459 1.461 1.126 1.000** - - End of period $ 1.535 1.547 1.603 1.611 1.461 1.126** trading began in 1996. Number of accumulation units - - End of period (000's omitted) 3,351 72,781 4,111 90,935 64,052 12,220 - ----------------------------------------------------------------------------------------------------- ---------------------------- DGPF Trend subaccount Accumulation unit value - - Beginning of period $ 1.362 1.368 1.107 1.109 1.111 1.000** - - End of period $ 2.293 2.310 1.179 1.184 1.109 1.111** trading began in 1996. Number of accumulation units - - End of period (000's omitted) 2,693 138,282 373 12,869 11,177 7,613 - ----------------------------------------------------------------------------------------------------- ---------------------------- Equity-Income subaccount Accumulation unit value - - Beginning of period $ 2.388 2.399 $2.146 2.150 1.663 1.391 1.046 1.000 1.000** - - End of period $ 2.505 2.524 $2.388 2.399 2.150 1.663 1.391 1.046 1.000** trading began in 1994. Number of accumulation units - - End of period (000's omitted) 5,812 373,381 5,898 395,691 371,051 275,632 171,817 75,383 110 - ----------------------------------------------------------------------------------------------------- ---------------------------- Global Asset Allocation subaccount Accumulation unit value - - Beginning of period $ 3.042 3.056 $2.716 2.720 2.302 2.013 1.642 1.689 1.453 1.378 1.174 1.175 - - End of period $ 3.343 3.369 $3.042 3.056 2.720 2.302 2.013 1.642 1.689 1.453 1.378 1.174 Number of accumulation units - - End of period (000's omitted) 1,697 141,033 1,888 155,191 159,590 140,242 126,558 122,061 92,778 67,873 57,199 50,149 - ----------------------------------------------------------------------------------------------------- ---------------------------- Growth and Income subaccount Accumulation unit value - - Beginning of period $ 11.444 11.497 $9,635 9,650 7.453 6.292 4.593 4.579 4.084 4.050 3.125 3.126 - - End of period $ 13.278 13.379 $11.444 11.497 9.650 7.453 6.292 4.593 4.579 4.084 4.050 3.125 Number of accumulation units - - End of period (000's omitted) 2,510 338,008 2,252 353,739 357,850 332,885 291,063 253,621 226,072 188,659 144,515 114,974 - ----------------------------------------------------------------------------------------------------- ---------------------------- IFT Equity 500 Index subaccount Accumulation unit value - - Beginning of period $ 1.000** 1.000** - - End of period $ 1.088* 1.089** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 1,320 47,135 - ----------------------------------------------------------------------------------------------------- ---------------------------- IFT Small Cap Index subaccount Accumulation unit value - - Beginning of period $ 1.000** 1.000** - - End of period $ 1.163** 1.164** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 141 3,093 - ----------------------------------------------------------------------------------------------------- ---------------------------- International subaccount Accumulation unit value - - Beginning of trading period $ 1.765 1.773 1.560 1,562 1.488 1.368 1.271 1.243 .901 .990 1.000** - - End of period $ 2.042 2.057 1.765 1.773 1.562 1.488 1.368 1.271 1.243 .901 .990** began Number of in 1991. accumulation units - - End of period (000's omitted) 2,589 248,150 2,375 275,657 294,705 294,570 261,509 248,639 129,551 50,718 21,088 - ----------------------------------------------------------------------------------------------------- ----------------------------
* The EGMDB became available in June 1997, the first full year was 1998. ** These values do not reflect a full year's experience because they are calculated for the period from the beginning of investment activity of the subaccounts through December 31. 9
1999 1998* 1997 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ ------- with without with without EGMDB EGMDB EGMDB EGMDB - ------------------------------------------------------------------------------------------------------------------------ ------- Managed subaccount Accumulation unit value - - Beginning of period $ 5.236 5.260 4.707 4.714 3.913 3.515 2.747 2.827 2.558 2.492 - - End of period $ 5.568 5.610 5.236 5.260 4.714 3.913 3.515 2.747 2.827 2.558 Number of accumulation units - - End of period (000's omitted) 1,652 160,785 1,775 178,768 179,210 178,496 172,789 167,184 162,485 139,606 - ------------------------------------------------------------------------------------------------------------------------ ------- Money Market subaccount Accumulation unit value - - Beginning of period $ 2.505 2.517 2.415 2.419 2.324 2.235 2.137 2.079 2.044 1.996 - - End of period $ 2.590 2.610 2.505 2.517 2.419 2.324 2.235 2.137 2.079 2.044 Number of accumulation units - - End of period (000's omitted) 1,837 66,404 644 46,571 36,107 40,057 35,136 37,106 39,763 46,993 - ------------------------------------------------------------------------------------------------------------------------ ------- Social Awareness subaccount Accumulation unit value - - Beginning of period $ 5.848 5.875 4.942 4.950 3.638 2.843 2.005 2.021 1.796 1.750 - - End of period $ 6.664 6.714 5.848 5.875 4.950 3.638 2.843 2.005 2.021 1.796 Number of accumulation units - - End of period (000's omitted) 4,697 273,562 5,136 304,204 251,168 175,970 106,204 83,069 69,006 50,838 - ------------------------------------------------------------------------------------------------------------------------ ------- Special Opportunities subaccount Accumulation unit value - - Beginning of period $ 8.681 8.721 8.236 8.249 6.505 5.618 4.303 4.392 3.740 3.519 - - End of period $ 8.185 8.248 8.681 8.721 8.249 6.505 5.618 4.303 4.392 3.740 Number of accumulation units - - End of period (000's omitted) 819 75,238 899 98,734 101,475 97,744 88,993 73,673 62,314 51,056 - ------------------------------------------------------------------------------------------------------------------------ ------- VIP II Contrafund subaccount Accumulation unit value - - Beginning of period $ 1.000** 1.000** - - End of period $ 1.144** 1.145** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 1,475 21,393 - ------------------------------------------------------------------------------------------------------------------------ ------- VIP Growth subaccount Accumulation unit value - - Beginning of period $ 1.000** 1.000** - - End of period $ 1.188** 1.189** trading began in 1999. Number of accumulation units - - End of period (000's omitted) 1,636 44,763 - ------------------------------------------------------------------------------------------------------------------------ ------- 1991 1990 - ----------------------------------- ---------------- - ----------------------------------- ---------------- Managed subaccount Accumulation unit value - - Beginning of period 2.065 2.015 - - End of period 2.492 2.065 Number of accumulation units - - End of period (000's omitted) 115,929 104,011 - ----------------------------------- ---------------- Money Market subaccount Accumulation unit value - - Beginning of period 1.907 1.783 - - End of period 1.996 1.907 Number of accumulation units - - End of period (000's omitted) 77,812 57,377 - ----------------------------------- ---------------- Social Awareness subaccount Accumulation unit value - - Beginning of period 1.285 1.357 - - End of period 1.750 1.285 Number of accumulation units - - End of period (000's omitted) 30,735 19,486 - ----------------------------------- ---------------- Special Opportunities subaccount Accumulation unit value - - Beginning of period 2.481 2.710 - - End of period 3.519 2.481 Number of accumulation units - - End of period (000's omitted) 37,798 33,837 - ----------------------------------- ---------------- VIP II Contrafund subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ---------------- VIP Growth subaccount Accumulation unit value - - Beginning of period - - End of period Number of accumulation units - - End of period (000's omitted) - ----------------------------------- ----------------
* The EGMDB became available in June 1997, the first full year was 1998. ** These values do not reflect a full year's experience because they are calculated for the period from the beginning of investment activity of the subaccounts through December 31. Note: The AVP Growth, AVP Technology, AFIS Growth, AFIS International and DGPF Real Estate (REIT) subaccounts were not effective December 31, 1999, and did not have historical accumulation unit information as of that date. 10 INVESTMENT RESULTS The VAA advertises the annual performance of the SUBACCOUNTs for the funds and series on both a standardized and nonstandardized basis. The standardized calculation measures average annual total return. This is based on a hypothetical $1,000 payment made at the beginning of a one-year, a five-year, and a 10-year period. This calculation reflects all fees and charges that are or could be imposed on all CONTRACTOWNER accounts. The nonstandardized calculation compares changes in ACCUMULATION UNIT values from the beginning of the most recently completed calendar year to the end of that year. It may also compare changes in ACCUMULATION UNIT values over shorter or longer time periods. This calculation reflects mortality and expense risk fees. It also reflects management fees and other expenses of the FUND. It does not include surrender charges or the account charge; if included, they would decrease the performance. The money market subaccount's yield is based upon investment 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. For additional information about performance calculations, please refer to the SAI. FINANCIAL STATEMENTS The financial statements of the VAA and the statutory-basis financial statements of LINCOLN LIFE are located in the SAI. You may obtain a free copy by writing Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, Indiana 46801 or calling 1-800-4LINCOLN (454-6265). LINCOLN NATIONAL LIFE INSURANCE COMPANY LINCOLN LIFE was founded in 1905 and is organized under Indiana law. We are one of the largest stock life insurance companies in the United States. We are owned by Lincoln National Corp. (LNC) which is also organized under Indiana law. LNC's primary businesses are insurance and financial services. VARIABLE ANNUITY ACCOUNT (VAA) On June 3, 1981, the VAA was established as an insurance company separate account under Indiana law. It is registered with the SEC as a unit investment trust under the provisions of the Investment Company Act of 1940 (1940 Act). The SEC does not supervise the VAA or LINCOLN LIFE. The VAA is a segregated investment account, meaning that its assets may not be charged with liabilities resulting from any other business that we may conduct. Income, gains and losses, whether realized or not, from assets allocated to the VAA are, in accordance with the applicable annuity contracts, credited to or charged against the VAA. They are credited or charged without regard to any other income, gains or losses of LINCOLN LIFE. The VAA satisfies the definition of separate account under the federal securities laws. We do not guarantee the investment performance of the VAA. Any investment gain or loss depends on the investment performance of the funds and series. YOU ASSUME THE FULL INVESTMENT RISK FOR ALL AMOUNTS PLACED IN THE VAA. The VAA is used to support other annuity contracts offered by LINCOLN LIFE in addition to the contracts described in this prospectus. The other annuity contracts supported by the VAA invest in the same portfolios of the funds and series as the contracts described in this Prospectus. These other annuity contracts may have different charges that could affect performance of the SUBACCOUNT. FIXED SIDE OF THE CONTRACT PURCHASE PAYMENTS allocated to the fixed side of the contract become part of LINCOLN LIFE'S general account, and DO NOT participate in the investment experience of the VAA. The general account is subject to regulation and supervision by the Indiana Department of Insurance as well as the insurance laws and regulations of the jurisdictions in which the contracts are distributed. In reliance on certain exemptions, exclusions and rules, LINCOLN LIFE has not registered interests in the general account as a security under the Securities Act of 1933 and has not registered the general account as an investment company under the 1940 Act. Accordingly, neither the general account nor any interests in it are regulated under the 1933 Act or the 1940 Act. LINCOLN LIFE has been advised that the staff of the SEC has not made a review of the disclosures which are included in this prospectus which relate to our general account and to the fixed account under the contract. These disclosures, however, may be subject to certain generally applicable provisions of the federal securities laws relating to the 11 accuracy and completeness of statements made in prospectuses. This prospectus is generally intended to serve as a disclosure document only for aspects of the contract involving the VAA, and therefore contains only selected information regarding the fixed side of the contract. Complete details regarding the fixed side of the contract are in the contract. PURCHASE PAYMENTS allocated to the fixed side of the contract are guaranteed to be credited with a minimum interest rate, specified in the contract. For FLEXIBLE PREMIUM Multi-Fund-Registered Trademark- 4 contracts, the minimum credited interest rate will be 3% in all years. For all other Multi- Fund-Registered Trademark- contracts, the minimum credited interest rate will be 4.5% in the first five contract years, 4.0% in contract years six through ten, and 3.5% in all contract years after ten. A PURCHASE PAYMENT allocated to the fixed side of the contract is credited with interest beginning on the next calendar day following the date of receipt if all data is complete. LINCOLN LIFE may vary the way in which it credits interest to the fixed side of the contract from time to time. ANY INTEREST IN EXCESS OF THE GUARANTEED MINIMUM WILL BE DECLARED IN ADVANCE AT LINCOLN LIFE'S SOLE DISCRETION. CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF THE GUARANTEED MINIMUM WILL BE DECLARED. INVESTMENTS OF THE VARIABLE ANNUITY ACCOUNT You decide the SUBACCOUNT(S) to which you allocate PURCHASE PAYMENTS. There is a separate SUBACCOUNT which corresponds to each fund and series. You may change your allocations without penalty or charges. Shares of the funds and series will be sold at net asset value (See the Appendix to the funds' Prospectuses for an explanation of net asset value) to the VAA in order to fund the contracts. The funds and series are required to redeem their shares at net asset value upon our request. We reserve the right to add, delete or substitute funds and series. INVESTMENT ADVISOR Lincoln Investment Management (LIM)(owned by LNC) is the advisor for each of the Lincoln National funds and is primarily responsible for the investment decisions affecting the funds. The services it provides are explained in the Prospectuses of the funds. Under an advisory agreement with each fund, LIM provides portfolio management and investment advice to that fund, subject to the supervision of the fund's Board of Directors. Additionally, LIM currently has sub-advisory agreements in which the sub-advisor may perform some or substantially all of the investment advisory services required by those respective funds. LIM has informed the funds to which it provides advisory 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. LIM does not expect the merger to result in any change in the level of advisory services that it currently provides to these funds, although there may be some changes in, and additions to, personnel. See the prospectuses for these funds for more information. No additional compensation from the assets of those funds will be assessed as a result of the sub-advisory agreements. Following is a chart that shows the fund names and the advisors and sub-advisors for each of the funds or series: ADVISOR SUBADVISOR FUND/SERIES - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Putnam Investment Management, Inc. LN Aggressive Growth (LIM) - ------------------------------------------------------------------------------------------------------- Neuberger Berman Mgmt, Inc. Neuberger Berman, LLC AMT Mid-Cap Growth - ------------------------------------------------------------------------------------------------------- Neuberger Berman Mgmt, Inc. Neuberger Berman, LLC AMT Partners - ------------------------------------------------------------------------------------------------------- Janus Capital Corp. N/A Aspen Worldwide Growth - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt N/A LN Bond - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Janus Capital Corp. LN Capital Appreciation - ------------------------------------------------------------------------------------------------------- BAMCO, Inc. N/A Baron Capital Asset - ------------------------------------------------------------------------------------------------------- Delaware International N/A DGPF Global Bond Advisers, Ltd. (DIAL) - ------------------------------------------------------------------------------------------------------- Delaware Management Co., N/A DGPF Growth & Income Inc. DGPF Trend (DMC) - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Fidelity Management Trust Co. LN Equity-Income - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Putnam Investment Management, Inc. LN Global Asset Allocation - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Vantage Investment Advisors LN Growth and Income - ------------------------------------------------------------------------------------------------------- Bankers Trust Company N/A IFT Equity 500 Index - ------------------------------------------------------------------------------------------------------- CHART CONTINUED ON NEXT PAGE
12 ADVISOR SUBADVISOR FUND/SERIES - ------------------------------------------------------------------------------------------------------- Bankers Trust Company N/A IFT Small Cap Index - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Delaware International Advisers Ltd. LN International (DIAL) - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Vantage Investment Advisors LN Managed Fund (equity portion) - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt N/A LN Money Market - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Vantage Investment Advisors LN Social Awareness - ------------------------------------------------------------------------------------------------------- Lincoln Investment Mgmt Vantage Investment Advisors LN Special Opportunities - ------------------------------------------------------------------------------------------------------- Fidelity Investments N/A VIP II Contrafund - ------------------------------------------------------------------------------------------------------- Fidelity Investments N/A VIP Growth - ------------------------------------------------------------------------------------------------------- Alliance Capital N/A AVP Growth* Management, L.P. - ------------------------------------------------------------------------------------------------------- Alliance Capital N/A AVP Technology* Management, L.P. - ------------------------------------------------------------------------------------------------------- Capital Research and N/A AFIS Growth* Management Company - ------------------------------------------------------------------------------------------------------- Capital Research and N/A AFIS International* Management Company - ------------------------------------------------------------------------------------------------------- Delaware Management Lincoln Investment Management DGPF Real Estate (REIT)* Co., Inc. (DMC) - -------------------------------------------------------------------------------------------------------
* These funds are not available to you until on or about May 22, 2000. At that time the new funds may not be available in California. Note: "N/A" denotes no subadvisor for that fund or series. Additional information regarding the investment advisors to each of the funds may be found in the Prospectuses for the funds and series enclosed in this booklet. As compensation for their services to the fund, the investment advisors receive a fee from the fund, which is accrued daily and paid monthly. This fee is based on the net assets of each fund, as defined under the Purchase and Redemption of Shares, in the Prospectus for the fund. With respect to a fund, the advisor and/or distributor, or an affiliate thereof, may compensate LINCOLN LIFE (or an affiliate) for administrative, distribution, or other services. Some funds may compensate us more than other funds. It is anticipated that such compensation will be based on assets of the particular fund attributable to the contracts along with certain other variable contracts issued or administered by LINCOLN LIFE (or an affiliate). As of the date of this Prospectus, we were receiving compensation from each fund company except DMC. DESCRIPTION OF THE FUNDS AND SERIES Following are brief summaries of the investment objectives and policies of the funds and series. There is more detailed information in the current Prospectuses for the funds and series, which are included in this booklet. All of the funds with the exception of the Special Opportunities Fund are diversified, open-end management investment companies. 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 or series when you make a withdrawal, surrender the contract or transfer from one fund to another. Management investment company is the legal term for a mutual fund. The Special Opportunities Fund is open-end, but is non-diversified. Non-diversified means the fund may own a larger percentage of the securities of particular companies than will a diversified company. These definitions are very general. The precise legal definitions for these terms are contained in the 1940 Act. PLEASE BE ADVISED THAT THERE IS NO ASSURANCE THAT ANY OF THE FUNDS OR SERIES WILL ACHIEVE ITS STATED OBJECTIVES. Certain funds offered as part of this contract have similar investment objectives and policies to other portfolios managed by the advisor. The investment results of the funds, however, may be higher or lower than the other portfolios that are managed by the advisor. There can be no assurance, and no representation is made, that the investment results of any of the funds will be comparable to the investment results of any other portfolio managed by the advisor. 13 ON OR ABOUT MAY 22, 2000 FIVE ADDITIONAL INVESTMENT OPTIONS (#23 THROUGH #27) WILL BE AVAILABLE UNDER THE CONTRACTS. AT THAT TIME THE NEW FUNDS MAY NOT BE AVAILABLE IN CALIFORNIA. SOME PLANS LIMIT THE FUNDS AND SERIES AVAILABLE UNDER THE PLAN. PLEASE CONTACT YOUR INVESTMENT DEALER FOR CURRENT INFORMATION. FUNDS AND SERIES 1. AGGRESSIVE GROWTH FUND -- The fund seeks to maximize capital appreciation. The fund invests in stocks of smaller, lesser-known companies which have a chance to grow significantly in a short time. 2. AMT MID-CAP GROWTH FUND -- The fund seeks capital appreciation by investing primarily in common stocks of medium-capitalization companies, using a growth-oriented investment approach. 3. AMT PARTNERS FUND -- The fund seeks capital growth by investing mainly in common stocks of mid-to large capitalization established companies using the value-oriented investment approach. 4. ASPEN WORLDWIDE GROWTH FUND -- The fund seeks long-term growth of capital in a manner consistent with the preservation of capital. It pursues this objective by investing primarily in common stocks of companies of any size throughout the world. The Portfolio normally invests in issuers from at least five different countries, including the U.S. The Portfolio may at times invest in fewer than five countries or even a single country. 5. BOND FUND -- The fund seeks maximum current income consistent with prudent investment strategy. The fund invests primarily in medium-and long-term corporate and government bonds. 6. CAPITAL APPRECIATION FUND -- The fund seeks long-term growth of capital in a manner consistent with preservation of capital. The fund primarily buys stocks in a large number of companies of all sizes if the companies are competing well and if their products or services are in high demand. It may also buy some money market securities and bonds, including junk bonds. 7. CAPITAL ASSET FUND -- The fund seeks to purchase stocks, judged by the advisor, to have the potential of increasing their value at least 50% over two subsequent years, although that goal may not be achieved. 8. DGPF GLOBAL BOND SERIES -- The series seeks current income consistent with preservation of principal by investing primarily in fixed income securities that may also provide the potential for capital appreciation. At least 65% of the series' assets will be invested in fixed income securities of issuers organized or having a majority of their assets in or deriving a majority of their operating income in at least three different countries, one of which may be the United States. 9. DGPF GROWTH & INCOME SERIES -- The series seeks the highest possible total rate of return by selecting issues that exhibit the potential for growth while providing higher than average dividend income. 10. DGPF TREND SERIES -- The series seeks long-term growth by investing primarily in stocks of small companies and convertible securities of emerging and other growth-oriented companies. 11. EQUITY-INCOME FUND -- The fund seeks reasonable income by investing primarily in income-producing equity securities. The fund invests mostly in high-income stocks and some high-yielding bonds (including junk bonds). 12. GLOBAL ASSET ALLOCATION FUND -- The fund seeks long-term total return consistent with preservation of capital. The fund allocates its assets among several categories of equity and fixed-income securities, both of U.S. and foreign issuers. 13. GROWTH AND INCOME FUND -- The fund seeks long-term capital appreciation. The fund buys stocks of established companies. 14. IFT EQUITY 500 INDEX FUND -- The fund seeks to replicate as closely as possible the performance of the Standard & Poor's 500 Composite Stock Price Index before the deduction of Fund expenses. 15. IFT SMALL CAP INDEX FUND -- The fund seeks to replicate as closely as possible (before the deduction of expenses) the total return of the Russell 2000 Small Stock Index (the "Russell 2000"), an index consisting of approximately 2,000 small-capitalization common stocks. 16. INTERNATIONAL FUND -- The fund seeks long-term capital appreciation. The fund trades in securities issued outside the United States--mostly stocks, with an occasional bond or money market security. 17. MANAGED FUND -- The fund seeks maximum long-term total return (capital gains plus income) consistent with prudent investment strategy. The fund invests in a mix of stocks, bonds, and money market securities, as determined by an investment committee. 18. MONEY MARKET FUND -- The 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. 19. SOCIAL AWARENESS FUND -- The fund seeks long-term capital appreciation. The fund buys 14 stocks of established companies which adhere to certain specific social criteria. 20. SPECIAL OPPORTUNITIES FUND -- The fund seeks maximum capital appreciation. The fund primarily invests in mid-size companies whose stocks have significant growth potential. Current income is a secondary consideration. 21. VIP II CONTRAFUND FUND -- The fund seeks long-term capital appreciation by investing primarily in securities of companies whose value the advisor believes is not fully recognized by the public. 22. VIP GROWTH FUND -- The fund seeks to achieve long-term capital appreciation. The Portfolio normally purchases common stock. 23. AVP GROWTH SERIES FUND -- The fund seeks to provide long-term growth of capital. Current income is only an incidental consideration. The portfolio invests primarily 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. economy over time. 24. AVP TECHNOLOGY SERIES FUND -- The fund seeks to emphasize growth of capital and invests for capital appreciation. Current income is only an incidental consideration. The portfolio may seek income by writing listed call options. The portfolio 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. 25. AFIS GROWTH FUND -- The 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 appreciation through stocks. Investors in the Fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations. 26. AFIS INTERNATIONAL FUND -- The fund seeks to make your investment grow over time by investing 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. 27. DGPF REAL ESTATE (REIT) SERIES -- The 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. Shares of the funds and series may be sold to LINCOLN LIFE, its affiliates, and separate accounts of life insurance companies other than LINCOLN LIFE to fund variable annuity contracts and/or variable life insurance policies. See Other information. Shares of the funds and series are not sold directly to the general public. The shares of the funds and series are issued and redeemed only in connection with variable annuity contracts and variable life insurance policies (mixed funding) issued through separate accounts of LINCOLN LIFE and other life insurance companies (shared funding). The funds and series do not foresee any disadvantage to CONTRACTOWNERS arising out of mixed or shared funding. Nevertheless, the Boards intend to monitor events in order to identify any material irreconcilable conflicts which may possibly arise and to determine what action, if any, should be taken in response thereto. If such a conflict were to occur, one of the separate accounts might withdraw its investment in a fund or series. This might force a fund to sell portfolio securities at disadvantageous prices. We will purchase shares of the funds and series at net asset value and direct them to the appropriate SUBACCOUNTs of the VAA. We will redeem sufficient shares of the appropriate funds and series to pay ANNUITY PAYOUTS, DEATH BENEFITS, surrender/withdrawal proceeds or for purposes described in the contract. If you desire to transfer all or part of your investment from one SUBACCOUNT to another, we may redeem shares held in the first and purchase shares for the other SUBACCOUNT. The shares are retired, but they may be reissued later. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS All of the investment objectives of the funds and series are fundamental which means that no changes may be made without the affirmative vote of a majority of the outstanding voting securities of each respective fund or series. The extent to which the particular investment policies, practices or restrictions for each fund or series are fundamental or nonfundamental depends on the particular fund or series. If they are nonfundamental, they may be changed by the Board of Directors of the funds or series without shareholder approval. You are urged to consult the Prospectuses in this booklet and SAIs for each individual fund or series for additional information regarding the fundamental and non-fundamental policies, practices and restrictions of each of the funds and series. REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS All dividend and capital gain distributions of the funds and series are automatically reinvested in shares of the distributing funds and series at their net asset value on the date of distribution. Dividends are not paid out to 15 CONTRACTOWNERS as additional units, but are reflected in changes in unit values. ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS WE RESERVE THE RIGHT, WITHIN THE LAW, TO MAKE ADDITIONS, DELETIONS AND SUBSTITUTIONS FOR THE FUNDS AND SERIES HELD BY THE VAA. (We may substitute shares of another series or of other funds for shares already purchased, or to be purchased in the future, under the contract. This substitution might occur if shares of a fund and series should no longer be available, or if investment in any fund's and series' shares should become inappropriate, in the judgement of our management, for the purposes for the contract.) We cannot substitute shares of one fund for another without approval by the SEC. We will also notify you. CHARGES AND OTHER DEDUCTIONS DEDUCTIONS FROM PURCHASE PAYMENTS There are no front-end deductions for sales charges made from PURCHASE PAYMENTS. However, we will deduct premium taxes, when applicable. ACCOUNT CHARGE There is no account charge for flexible premium Multi- Fund-Registered Trademark- 3 and 4. Periodic premium Multi-Fund-Registered Trademark- 1 contracts and flexible premium Multi-Fund-Registered Trademark- 2 contracts will deduct $25 from the contract value on the last VALUATION DATE of each CONTRACT YEAR to compensate us for the administrative services provided to you; this $25 account charge will also be deducted from the CONTRACT VALUE upon surrender. Administrative services include processing applications; issuing contracts; processing purchase and redemptions of fund shares; maintaining records; providing accounting, valuation, regulatory and reporting services. SURRENDER CHARGES There are charges associated with the surrender of a contract or the withdrawal of CONTRACT VALUE (or of PURCHASE PAYMENTS, for flexible contracts) before the ANNUITY COMMENCEMENT DATE. 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. Charges are the same for surrenders/withdrawals except that, for the first withdrawal in a CONTRACT YEAR, up to 15% of CONTRACT VALUE (PURCHASE PAYMENTS for flexible contracts) may be withdrawn free of charges. This 15% withdrawal exception does not apply to a surrender of a contract. A. PERIODIC PREMIUM DEFERRED CONTRACT There will be a surrender charge for the first withdrawal each contract year in excess of 15% of contract value. Any subsequent withdrawals in the same contract year or upon surrender of contract will also incur a surrender charge.
CONTRACT YEAR in which surrender/withdrawal occurs ---------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 9 10 11+ Charge as a percent of Proceeds withdrawn 8 8 8 8 8 4 4 4 4 4 0
In addition, as explained previously in this prospectus, an account charge of $25 will be incurred upon surrender of the contract. Surrender charges will be waived in the event of the death of the ANNUITANT. If between the effective date of the contract and the ANNUITANT'S 65th birthday, the ANNUITANT should become totally and permanently disabled [as defined in Section 22(e)(3) of the tax code], surrender charges will also be waived. In addition, for 403(b) and 457 contracts only, surrender charges will be waived in the event the ANNUITANT: (1) has terminated employment with the employer that sponsored the contract; and (2) has been in the contract for at least five years (the five year date beginning either November 1, 1991 or the date of the contract, whichever is later); and (3) is at least age 55. B. SINGLE PREMIUM DEFERRED CONTRACT OR NONRECURRING LUMP SUM PAYMENT TO PERIODIC PREMIUM DEFERRED CONTRACT For a single premium deferred contract or a nonrecurring lump sum payment made to a periodic premium deferred contract, the surrender/withdrawal charges (when applicable as described previously) will be:
CONTRACT YEAR in which surrender/withdrawal occurs ---------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8+ Charge as a percent of proceeds withdrawn 7% 6 5 4 3 2 1 0
Investment gains attributable to a nonrecurring lump sum payment made to a periodic premium deferred contract will be subject to surrender charges of 8% in years 1-5, 4% in years 6-10, and no charge after the contract has been in force for 10 years. Lump sum payments may be deposited into a periodic premium deferred contract within 12 months of the effective date of the contract. After the 12-month period, a new contract must be established for a lump sum payment. For periodic premium deferred contracts under which a nonrecurring lump sum has been received, withdrawals will be made first from any amount subject to the lowest charge until that amount is gone. 16 Surrender charges will be waived in the event of the death of the ANNUITANT. If between the effective date of the contract and the ANNUITANT'S 65th birthday, the ANNUITANT should become totally and permanently disabled, surrender charges will also be waived. C. FLEXIBLE PREMIUM DEFERRED CONTRACT For a flexible premium deferred contract, the surrender/withdrawal charges (when applicable as described previously) will be: Completed CONTRACT YEARS between date of PURCHASE PAYMENTS and date of surrender/withdrawal* - ---------------------------------------------------------------------------------- 0 1 2 3 4 5 6 7+ Charge as a percent of total PURCHASE PAYMENTS surrendered/withdrawn in a CONTRACT YEAR 7% 6 5 4 3 2 1 0
* The surrender charge is calculated separately for each CONTRACT YEAR'S PURCHASE PAYMENTS. For the first withdrawal of PURCHASE PAYMENTS in each CONTRACT YEAR, up to 15% of PURCHASE PAYMENTS will be free of these charges. In addition, as explained previously, an account charge will be deducted for a surrender on Multi-Fund-Registered Trademark- 2 flexible premium contracts. Surrender charges will be waived in the event of the death of the ANNUITANT. If between the effective date of the contract and the ANNUITANT'S 65th birthday, the ANNUITANT should become totally and permanently disabled, surrender charges will also be waived. The surrender charge is calculated separately for each CONTRACT YEAR'S PURCHASE PAYMENTS to which a charge applies. (FOR PURPOSES OF CALCULATING THIS CHARGE, WE ASSUME THAT PURCHASE PAYMENTS ARE WITHDRAWN ON A FIRST IN-FIRST OUT BASIS, AND THAT ALL PURCHASE PAYMENTS ARE WITHDRAWN BEFORE ANY EARNINGS ARE WITHDRAWN.) The surrender charges associated with surrender or withdrawal are paid to us to compensate us for the loss we experience on contract distributions costs when CONTRACTOWNERS surrender or withdraw before distribution costs have been recovered. ADDITIONAL INFORMATION Participants in the Texas Optional Retirement Program should refer to Restrictions under the Texas Optional Retirement Program, later in this Prospectus booklet. The charges associated with surrender/withdrawal are paid to us to compensate us for the cost of distributing the contracts. The surrender and account charges described previously may be reduced or eliminated for any particular contract. However these charges will be reduced only to the extent that we anticipate lower distribution and/or administrative expenses or that we perform fewer sales or administrative services than those originally contemplated in establishing the level of those charges. Lower distribution and administrative expenses may be the result of economies associated with (1) the use of mass enrollment procedures, (2) the performance of administrative or sales functions by the employer, (3) the use by an employer of automated techniques in submitting deposits or information related to deposits on behalf of its employees, or (4) any other circumstances which reduce distribution or administrative expenses. The exact amount of surrender and account charges applicable to a particular contract will be stated in that contract. In certain circumstances a holder of an annuity contract issued by Lincoln Life may decide to surrender such a contract and purchase another (second) annuity contract issued by Lincoln Life. In that instance, the surrender charges (if any) applicable to the first annuity contract will be waived and the funds held in the first annuity contract will be transferred to the second annuity contract. Replacing one annuity contract with another may not be advantageous. Please review and compare the contractual terms and conditions of any potential replacement annuity contract before purchasing. DEDUCTIONS FROM THE VAA FOR ASSUMPTION OF MORTALITY AND EXPENSE RISKS We deduct from the VAA an amount, computed daily, which is equal to an annual rate of 1.002% of the daily net asset value, to compensate us for our assumption of certain risks described below. This charge is made up of two parts: (1) our assumption of mortality risks (0.900%) and (2) our assumption of expense risks (0.102%). The level of this charge is guaranteed not to change. Our assumption of mortality risks guarantees that the ANNUITY PAYOUTS made to our CONTRACTOWNERS will not be affected by annuitants receiving ANNUITY PAYOUTS that live longer than we assumed when we calculated our guaranteed rates. We assume this mortality risk through guaranteed annuity rates incorporated into the contract which we cannot change. We also assume the risk that the charges for administrative expenses, which, we cannot change, will be insufficient to cover actual administrative costs. If the mortality and expense risk charge proves insufficient to cover underwriting and administrative costs in excess of the charges made for administrative expenses, we will absorb the loss. However, if the amount deducted proves more than sufficient, we will keep the profit. 17 DEDUCTIONS FOR PREMIUM TAXES Any premium tax or other tax levied by any governmental entity as a result of the existence of the contracts or the VAA will be deducted from 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 administrative interpretation, or by judicial action. These premium taxes will generally depend upon the law of your state of residence. The tax ranges from 0.5% to 5.0% in those states where the tax is imposed. DEDUCTION FOR THE ENHANCED GUARANTEED MINIMUM DEATH BENEFIT (EGMDB) When the EGMDB becomes effective, we will begin deducting from the VAA an amount, computed daily, which is equal to an annual rate of 0.30% of the daily net asset value. This charge will start at the beginning of the next VALUATION PERIOD. This charge will continue for all future CONTRACT YEARS unless the owner elects to discontinue the EGMDB. If the EGMDB is discontinued, the 0.30% annual charge will stop at the end of the VALUATION PERIOD when the EGMDB is terminated. See The contracts -- Death benefit before the annuity commencement date. OTHER CHARGES AND DEDUCTIONS There are deductions from and expenses paid out of the assets of the funds and the series that are described later in this booklet in the Appendix to the funds' Prospectuses and in the Prospectus for the series respectively. THE CONTRACTS PURCHASE OF CONTRACTS If you wish to purchase a contract, you must apply for it through one of our authorized sales representatives. The completed application is sent to us and we decide whether we can accept it based on our underwriting guidelines. If the application is accepted, a contract is prepared and executed by our legally authorized officers. The contract is then sent to you through your sales representative or as directed by your state regulators or our sales representative. See Distribution of the contracts. Once a completed application and all other information necessary for processing a purchase order are received, an initial PURCHASE PAYMENT will be priced no later than two business days after we receive the order. While attempting to finish an incomplete application, we may hold the initial PURCHASE PAYMENT for no more than five business days. If the incomplete application cannot be completed within those five days, the PURCHASE PAYMENT will be returned immediately (unless you have authorized us to keep it until the application is complete). Subject to regulatory approvals, we may in the future take up to 35 days to complete an application before returning an initial purchase payment. Current applicants will be notified if we implement this procedure. Once the application is complete, the initial PURCHASE PAYMENT must be priced within two business days. WHO CAN INVEST To apply for a contract, you must be of legal age in a state where the contract may be lawfully sold and also be eligible to participate in the type of contract for which you're applying. For a periodic premium deferred contract, the ANNUITANT cannot exceed age 74. A non-recurring lump sum payment to a periodic premium deferred contract can be made through the annuitant's 84th birthday. For a flexible premium deferred contract or a single premium deferred contract, the ANNUITANT cannot exceed age 84. PURCHASE PAYMENTS PURCHASE PAYMENTS are payable to us at a frequency and in an amount selected by you in the application. The minimum PURCHASE PAYMENT for a single premium deferred contract is $3,000 ($1,000 for IRAs and SEPs). The minimum initial PURCHASE PAYMENT for a flexible premium deferred contract is $3,000 ($1,000 for IRAs and SEPs), and additional PURCHASE PAYMENTS must be at least $100. For a periodic premium deferred contract, the minimum amount of any scheduled PURCHASE PAYMENT is $25, and the scheduled PURCHASE PAYMENTS must total at least $600 per year. PURCHASE PAYMENTS in any one CONTRACT YEAR which exceed twice the amount of PURCHASE PAYMENTS made in the first CONTRACT YEAR may be made only with our permission. PURCHASE PAYMENTS in total may not exceed $2 million for each ANNUITANT. If you stop making PURCHASE PAYMENTS, the contract will remain in force as a paid-up contract as long as the total CONTRACT VALUE is at least $600. Payments may be resumed at any time until the ANNUITY COMMENCEMENT DATE, the maturity date, the surrender of the contract, or payment of any DEATH BENEFIT, whichever comes first. VALUATION DATE ACCUMULATION and ANNUITY UNITS will be valued once daily as of the close of trading (currently, normally, 4:00 p.m., New York time) on each day that the NYSE is open for trading (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 or series, according to your instructions. 18 The minimum amount of any PURCHASE PAYMENT which can be put into any one SUBACCOUNT is $20 under periodic premium deferred contracts, $1,000 under single premium deferred contracts and $100 under flexible premium deferred contracts. Upon allocation to a SUBACCOUNT, PURCHASE PAYMENTS are converted into ACCUMULATION UNITS. The number of ACCUMULATION UNITS credited is determined by dividing the amount allocated to each SUBACCOUNT by the value of an ACCUMULATION UNIT for that SUBACCOUNT on the VALUATION DATE on which the PURCHASE PAYMENT is received at the home office if received before 4:00 p.m., New York time. If the PURCHASE PAYMENT is received at or after 4:00 p.m., New York time, we will use the ACCUMULATION UNIT value computed on the next VALUATION DATE. The number of ACCUMULATION UNITS determined in this way shall not be changed by any subsequent change in the value of an ACCUMULATION UNIT. However, the dollar value of an ACCUMULATION UNIT will vary depending not only upon how well the investments perform, but also upon the related expenses of the VAA and the underlying funds and series. VALUATION OF ACCUMULATION UNITS PURCHASE PAYMENTS allocated to the VAA are converted into ACCUMULATION UNITS. This is done by dividing each PURCHASE PAYMENT by the value of an ACCUMULATION UNIT for the VALUATION PERIOD during which the PURCHASE PAYMENT is allocated to the VAA. The ACCUMULATION UNIT value for each SUBACCOUNT was or will be established at the inception of the SUBACCOUNT. It may increase or decrease from VALUATION PERIOD to VALUATION PERIOD. The ACCUMULATION UNIT value for a SUBACCOUNT for a later VALUATION PERIOD is determined as follows: (1) The total value of the fund or series shares held in the SUBACCOUNT is calculated by multiplying the number of fund or series shares owned by the SUBACCOUNT at the beginning of the VALUATION PERIOD by the net asset value per share of the fund or series at the end of the VALUATION PERIOD, and adding any dividend or other distribution of the fund or series if an ex-dividend date occurs during the VALUATION PERIOD; minus (2) The liabilities of the SUBACCOUNT at the end of the VALUATION PERIOD; these liabilities include daily charges imposed on the SUBACCOUNT, and may include a charge or credit with respect to any taxes paid or reserved for by us that we determine result from the operations of the VAA; and (3) Dividing the result 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 multiplied by the number of calendar days in the VALUATION PERIOD. Because a different daily charge is made for contracts with the EGMDB than for those without, each of the two types of contracts will have different corresponding ACCUMULATION UNIT values on any given day. TRANSFERS 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 as of the VALUATION DATE immediately following receipt of the transfer request. For single premium deferred contracts, periodic premium Multi-Fund-Registered Trademark- 1 contracts and flexible premium Multi-Fund-Registered Trademark- 2 and 3 contracts, transfers between SUBACCOUNTS are restricted to once every 30 days. Transfers cannot be made during the first 30 days after the contract date for flexible premium Multi-Fund-Registered Trademark- 4 and no more than six transfers will be allowed in any Contract Year. We reserve the right to waive any of these restrictions. The minimum amount which may be transferred between SUBACCOUNTS is $500 or the entire amount in the SUBACCOUNT, if less than $500. If the transfer from a SUBACCOUNT would leave you with less than $100 for periodic premium Multi-Fund-Registered Trademark- 1, flexible premium Multi- Fund-Registered Trademark- 2 and 3 contracts or $500 for flexible premium Multi-Fund-Registered Trademark- 4 contracts, we may transfer the total balance of the SUBACCOUNT. (We have the right to reduce these minimum amounts.) A transfer may be made by writing to the home office or, if a Telephone Exchange Authorization form (available from us) is on file with us, by a toll-free call. Telephone transfer requests are recorded and written confirmation of all transfer requests will be mailed to the CONTRACTOWNER on the next VALUATION DATE. We will not be liable for following telephone instructions we reasonably believe are genuine. In most instances, a transfer between subaccounts can also be made through the Internet Service Center or Voice Response Unit. In order to prevent unauthorized or fraudulent transfer instructions, we require a CONTRACTOWNER to provide certain identifying information before we will act upon their instructions. We may also assign the CONTRACTOWNER a Personal Identification Number (PIN) or password to serve as identification. Transfers will be processed on the VALUATION DATE that they are received when they are received at the home office before 4:00 P.M. New York time. For transfers from the Fixed Account of the Contract to the Variable Account, the sum of the percentages of fixed value transferred will be limited to 25% in any 12 month period. We reserve the right to waive any of these restrictions. When thinking about a transfer of CONTRACT VALUE, you should consider the inherent risk involved. Frequent 19 transfers based on short-term expectations may increase the risk that a transfer will be made at an inopportune time. There is no charge to you for a transfer. However, we reserve the right to impose a charge in the future for any transfers. TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE You may transfer all or a portion of your investment in one SUBACCOUNT to another SUBACCOUNT or to the fixed side of the contract. Those transfers will be limited to three times per CONTRACT YEAR. HOWEVER, AFTER THE ANNUITY COMMENCEMENT DATE, NO TRANSFERS ARE ALLOWED FROM THE FIXED SIDE OF THE CONTRACT TO THE SUBACCOUNTS. DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE You may designate a BENEFICIARY during the life of the ANNUITANT and change the BENEFICIARY by filing a written request with the 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 ANNUITANT dies before the ANNUITY COMMENCEMENT DATE and the enhanced guaranteed minimum death benefit (EGMDB) is not in effect, a DEATH BENEFIT equal to the CONTRACT VALUE will be paid to your designated BENEFICIARY. An optional EGMDB is available for nonqualified, Roth IRA and IRA flexible premium deferred annuity contracts, for ANNUITANTS up to age 75. (Please check with your representative for availability to current CONTRACTOWNERS.) The EGMDB will take effect on the VALUATION DATE when the EGMDB election form is approved at our home office, if before 4:00 p.m. New York time. The OWNER may discontinue the EGMDB at any time. If discontinued, the EGMDB will terminate on the VALUATION DATE written notice is received at our home office, if before 4:00 p.m. New York time. If after 4:00 p.m. New York time, the EGMDB election or termination will be effective with the next VALUATION DATE. The OWNER may not reelect the EGMDB once it is discontinued. As of the annuity commencement date the EGMDB will be discontinued and the charge for the EGMDB will stop. See Charges and other deductions -- Deduction for the EGMDB. If the ANNUITANT dies before the ANNUITY COMMENCEMENT DATE and the EGMDB is in effect, the DEATH BENEFIT paid to your designated BENEFICIARY will be the greater of: 1. the CONTRACT VALUE at the end of the VALUATION PERIOD when the death claim is approved for payment by LINCOLN LIFE, or 2. the higher of: (a) the CONTRACT VALUE at the end of the VALUATION PERIOD when the EGMDB becomes effective and; (b) the highest CONTRACT VALUE, at the end of the VALUATION PERIOD, on any contract anniversary date up to and including age 75 following election of the EGMDB; increased by PURCHASE PAYMENTS and decreased by any withdrawals, annuitizations, and premium taxes incurred after the contract anniversary or EGMDB effective date the highest CONTRACT VALUE occurred. The CONTRACT VALUE available upon death is the value of the contract at the end of the VALUATION PERIOD during which the death claim is approved for payment by LINCOLN LIFE. The approval of the death claim payment will occur after receipt of: (1) proof, satisfactory to us, of the death of the ANNUITANT; (2) written authorization for payment; and (3) our receipt of all required claim forms fully completed. The EGMDB may not be elected on or after the ANNUITY COMMENCEMENT DATE. At any time during a 60-day period the BENEFICIARY may elect to receive payment either in the form of a lump sum settlement or an ANNUITY PAYOUT. If a lump sum settlement is requested and the amount of the settlement is $10,000 or more, a SecureLine-Registered Trademark- account may be established in the name of the BENEFICIARY for that amount. If the lump sum amount is less than $10,000, it will be sent to the BENEFICIARY. In either event, the proceeds will be disbursed within seven days of receipt of satisfactory claim documentation, as discussed previously, subject to the laws and regulations governing payment of DEATH BENEFITS. If an election has not been made by the end of the 60-day period, a lump sum settlement will be made at that time using SecureLine-Registered Trademark- if the amount is $10,000 or more; if the amount is under $10,000 it will be sent to the BENEFICIARY. This payment may be postponed as permitted by the 1940 Act. SecureLine-Registered Trademark- is an interest-bearing checking account established in the name of the BENEFICIARY which is administered by State Street Bank and Trust Company of Boston, MA. Once the SecureLine-Registered Trademark- account is established, only the BENEFICIARY can authorize checks to be drawn on the account. ANNUITY PAYOUTS will be made in accordance with applicable laws and regulations governing payment of DEATH BENEFITS. Death benefits are taxable. See Federal tax matters -- Taxation of death benefits. Unless otherwise provided in the BENEFICIARY designation, one of the following procedures will take place on the death of a BENEFICIARY: 1. If any BENEFICIARY dies before the ANNUITANT, the CONTRACTOWNER may elect a new beneficiary. If no new beneficiary election is made, that beneficiary's interest will go to any other beneficiaries named, according to their respective interest. There are no 20 restrictions on the BENEFICIARY'S use of the proceeds; and/or 2. If no BENEFICIARY survives the ANNUITANT, the proceeds will be paid to the CONTRACTOWNER or to his/her estate, as applicable. JOINT/CONTINGENT OWNERSHIP If joint owners are named in the application, the joint owners shall be treated as having equal undivided interests in the contract. Either owner, independently of the other, may exercise any ownership rights in this contract. Only the spouse can be a joint owner on Multi-Fund-Registered Trademark- 4, flexible premium deferred annuity contracts. A contingent owner may exercise ownership rights in this contract only after the CONTRACTOWNER dies. DEATH OF CONTRACTOWNER If the CONTRACTOWNER of a nonqualified contract dies before the ANNUITY COMMENCEMENT DATE, then, in compliance with the tax code, the cash surrender value (CONTRACT VALUE less any applicable charges, fees, and taxes) of the contract will be paid as follows: 1. Upon the death of a NON-ANNUITANT CONTRACTOWNER, the proceeds shall be paid to any surviving joint or contingent owner(s). If no joint or contingent owner has been named, then the cash surrender value shall be paid to the ANNUITANT named in the contract; and 2. Upon the death of a CONTRACTOWNER, who is also the ANNUITANT, the death will be treated as death of the ANNUITANT and the provisions of this contract regarding death of ANNUITANT will control. If the recipient of the proceeds is the surviving spouse of the CONTRACTOWNER, the contract may be continued in the name of that spouse as the new CONTRACTOWNER. If you are a non-spouse beneficiary, the tax code requires that any distribution be paid within five years of the death of the CONTRACTOWNER 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 period certain not exceeding the BENEFICIARY's life expectancy. SURRENDERS AND WITHDRAWALS Before the ANNUITY COMMENCEMENT DATE, we will allow the surrender of the CONTRACT or a withdrawal of the CONTRACT VALUE upon your written request on an approved LINCOLN LIFE Financial Transaction Request Form, subject to the rules below. A surrender/withdrawal after the ANNUITY COMMENCEMENT DATE depends upon the annuity option selected. The amount available upon surrender/withdrawal is the cash surrender value at the end of the VALUATION PERIOD during which the written request for surrender/withdrawal is received at the home office. Unless a request for withdrawal specifies otherwise, withdrawals will be made from all SUBACCOUNTS within the VAA and from the general account in the same proportion that the amount of withdrawal bears to the total CONTRACT VALUE. The minimum amount which can be withdrawn is $100. Where permitted by contract, 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. You may specify that the charges be deducted from the amount you request withdrawn or from the remaining CONTRACT VALUE. There are charges associated with surrender of a contract or withdrawal of CONTRACT VALUE before the ANNUITY COMMENCEMENT DATE. See Charges and other deductions. The tax consequences of a surrender/withdrawal are discussed later in this booklet. See Federal tax matters. Special restrictions on surrenders/withdrawals apply if your contract is purchased as part of a retirement plan of a public school system or Section 501(c)(3) organization under Section 403(b) of the tax code. Beginning January 1, 1989, in order for a contract to retain its tax-qualified status, Section 403(b) prohibits a withdrawal from a Section 403(b) contract of post-1988 contributions (and earnings on those contributions) pursuant to a salary reduction agreement. However, this restriction does not apply if the ANNUITANT attains age (a) 59 1/2 (b) separates from service, (c) dies, (d) becomes totally and permanently disabled and/or (e) experiences financial hardship (in which event the income attributable to those contributions may not be withdrawn). Pre-1989 contributions and earnings through December 31, 1988, are not subject to the previously stated restriction. LINCOLN LIFE reserves the right to surrender this contract if any withdrawal reduces the total CONTRACT VALUE to a level at which this contract may be surrendered in accordance with applicable law for individual deferred annuities. 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 21 of the surrender/withdrawal, and the repurchase must be of a contract covered by this Prospectus. In the case of a qualified contract, a representation must be made that the proceeds being used to make the purchase have retained their tax-favored status under an arrangement for which the contracts offered by this Prospectus are designed. The number of ACCUMULATION UNITS which will be credited when the proceeds are reinvested will be based on the value of the ACCUMULATION UNIT(S) on the next VALUATION DATE. This computation will occur following receipt of the proceeds and request for reinvestment at the home office. You may utilize the reinvestment privilege only once. For tax reporting purposes, we will treat a surrender/withdrawal and a subsequent reinvestment purchase as separate transactions. You should consult a tax advisor before you request a surrender/withdrawal or subsequent reinvestment purchase. AMENDMENT OF CONTRACT We reserve the right to amend the contract to meet the requirements of the 1940 Act or other applicable federal or state laws or regulations. You will be notified in writing of any changes, modifications or waivers. COMMISSIONS For the flexible premium deferred annuity Multi-Fund-Registered Trademark- 2 and 3 contracts, the maximum commission which could be paid to dealers is equal to 5.25% on each PURCHASE PAYMENT; plus up to 0.10% of the value of PURCHASE PAYMENTS in the VARIABLE ANNUITY ACCOUNT while the EGMDB is in effect. For flexible premium deferred annuity Multi-Fund-Registered Trademark- 4 contracts, the maximum commission which could be paid to dealers is equal to 4.50% on each PURCHASE PAYMENT; plus an annual continuing commission up to .40% of the value of the contract PURCHASE PAYMENTS invested for at least 15 months; plus up to 0.10% of the value of PURCHASE PAYMENTS in the VARIABLE ANNUITY ACCOUNT while the EGMDB is in effect. For the periodic premium deferred annuity contract, the maximum commission which could be paid to dealers is 9% on the total PURCHASE PAYMENTS received during the first CONTRACT YEAR and 5.25% on each PURCHASE PAYMENT in renewal CONTRACT YEARS (or an equivalent schedule). OWNERSHIP As CONTRACTOWNER, you have all rights under the contract. According to Indiana law, the assets of the VAA are held for the exclusive benefit of all CONTRACTOWNERS and their designated BENEFICIARIES. The assets of the VAA are not chargeable with liabilities arising from any other business that we may conduct. Contracts used for qualified plans 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. We assume no responsibility for the validity or effect of any assignment. Consult your tax advisor about the tax consequences of an assignment. CONTRACTOWNER QUESTIONS The obligations to purchasers under the contracts are those of LINCOLN LIFE. Your questions and concerns should be directed to us at 1-800-4LINCOLN (454-6265). ANNUITY PAYOUTS When you apply for a contract, you may select any ANNUITY COMMENCEMENT DATE permitted by law. (PLEASE NOTE THE FOLLOWING EXCEPTION: Contracts issued under qualified employee pension and profit-sharing trusts [described in 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 in the plan.) The contract provides that all or part of the CONTRACT VALUE may be used to purchase an annuity. Optional forms of payout of annuities (annuity options) are available, each of which is payable on a variable basis, a fixed basis or a combination of both. We may choose to make other annuity options available in the future. You may elect ANNUITY PAYOUTS in monthly, quarterly, semiannual or annual installments. If the payouts from any SUBACCOUNT would be or become less than $50, we have the right to reduce their frequency until the payouts are at least $50 each. Following are explanations of the annuity options available. ANNUITY OPTIONS LIFE ANNUITY. This option offers a periodic payout during the lifetime of the ANNUITANT and ends with the last payout before the death of the ANNUITANT. This option offers the highest periodic payout since there is no guarantee of a minimum number of payouts or provision for a DEATH BENEFIT for BENEFICIARIES. HOWEVER, THERE IS THE RISK UNDER THIS OPTION THAT THE ANNUITANT WOULD RECEIVE NO PAYOUTS IF DEATH OCCURS BEFORE THE DATE SET FOR THE FIRST PAYOUT; ONLY ONE PAYOUT IF DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYOUT, AND SO ON. LIFE INCOME ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic payouts during a guaranteed period, usually 10 or 20 years, and then continues throughout the lifetime of the ANNUITANT. The guaranteed period is selected by the CONTRACTOWNER. JOINT LIFE ANNUITY. This option offers a periodic payout during the joint lifetime of the annuitant and a designated joint annuitant. The payouts continue during the lifetime of the survivor. 22 JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic payouts during a guaranteed period, usually 10 or 20 years, and continues during the joint lifetime of the ANNUITANT and a designated joint annuitant. The payouts continue during the lifetime of the survivor. The guaranteed period is selected by the CONTRACTOWNER. JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY. This option provides a periodic payout during the joint lifetime of the ANNUITANT and a designated joint ANNUITANT. When one of the joint ANNUITANTS dies, the survivor receives two-thirds of the periodic payout made when both were alive. JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY WITH GUARANTEED PERIOD. This option provides a periodic payout during the joint lifetime of the ANNUITANT and a joint ANNUITANT. When one of the joint ANNUITANTS dies, the survivor receives two-thirds of the periodic payout made when both were alive. This option further provides that should one or both of the ANNUITANTS die during the elected guaranteed period, usually 10 or 20 years, full benefit payment will continue for the rest of the guaranteed period. UNIT REFUND LIFE ANNUITY. This option offers a periodic payout during the lifetime of the ANNUITANT with the guarantee that upon death a payout will be made of the value of the number of ANNUITY UNITS (see Variable annuity payouts) equal to the excess, if any, of: (a) the total amount applied under this option divided by the ANNUITY UNIT value for the date payouts begin, divided by (b) the ANNUITY UNITS represented by each payout to the ANNUITANT multiplied by the number of payouts paid before death. The value of the number of ANNUITY UNITS is computed on the date the death claim is approved for payment by the home office. GENERAL INFORMATION Under the options listed above, you may not make withdrawals. Other options may be made available by us. Options are only available to the extent they are consistent with the requirements of the contract and Section 72(s) of the tax code, if applicable. The mortality and expense risk charge will be assessed on all variable ANNUITY PAYOUTS, including options that do not have a life contingency and therefore no mortality risk. The ANNUITY COMMENCEMENT DATE is usually on or before the ANNUITANT'S 85th birthday; however you may change the ANNUITY COMMENCEMENT DATE, change the annuity option, or change the allocation of the investment among SUBACCOUNTS up to 30 days before the scheduled ANNUITY COMMENCEMENT DATE, upon written notice to the home office. You must give us at least 30 days notice before the date on which you want payouts to begin. If proceeds become available to a BENEFICIARY in a lump sum, the BENEFICIARY may choose any ANNUITY PAYOUT option. Unless you select another option, the contract automatically provides for a life with a 10 year guaranteed period annuity (on a fixed, variable or combination fixed and variable basis, in proportion to the account allocation at the time of annuitization), except when a joint life payout is required by law. Under any option providing for guaranteed payouts, the number of payouts which remain unpaid at the date of the ANNUITANT'S death (or surviving ANNUITANT'S death in the case of a joint life annuity) will be paid to your BENEFICIARY as payouts become due. The contract contains no provision under which an ANNUITANT or a BENEFICIARY may surrender their contract or make a withdrawal and receive a lump-sum settlement once ANNUITY PAYOUTS have begun. See Surrenders and withdrawals. Options are only available to the extent they are consistent with the requirements of Section 72(s) of the tax code, if applicable. 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 month thereafter. We assume an investment return of 5% per year, as applied to the applicable mortality table. The amount of each payout after the initial payout will depend upon how the underlying fund(s) and series perform, relative to the 5% assumed rate. If the actual net investment rate (annualized) excceds 5%, the annuity payout will increase at a rate proportional to the amount of such excess. Conversely, if the actual rate is less than 5% annuity payments will decrease. There is a more complete explanation of this calculation in the SAI. FEDERAL TAX MATTERS INTRODUCTION The Federal income tax treatment of the CONTRACT is complex and sometimes uncertain. The Federal income tax rules may vary with your particular circumstances. This discussion DOES NOT include all the Federal income tax 23 rules that may affect you and your contract. This discussion also DOES NOT address other Federal tax consequences, or state or local tax consequences, associated with the contract. As a result, you should always consult a tax adviser about the application of tax rules to your individual situation. TAXATION OF NONQUALIFIED ANNUITIES This part of the discussion describes some of the Federal income tax rules applicable to nonqualified annuities. A nonqualified annuity is a contract not issued in connection with a qualified retirement plan receiving special tax treatment under the tax code, such as an IRA or a section 403(b) plan. TAX DEFERRAL ON EARNINGS The Federal income tax law generally does not tax any increase in your CONTRACT VALUE until you receive a contract distribution. However, for this general rule to apply, certain 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 AN INDIVIDUAL If a contract is owned by an entity (rather than an individual) the tax code generally does not treat it as an annuity contract for Federal income tax purposes. This means that the entity owning the contract pays tax currently on the excess of the CONTRACT VALUE over the purchase payments for the contract. Examples of contracts where the owner pays current tax on the contract's earnings are contracts issued to a corporation or a trust. Exceptions to this rule exist. For example, the tax code treats a contract as owned by an individual if the named owner is a trust or other entity that holds the contract as an agent for an individual. However, this exception does not apply in the case of any employer that owns a contract to provide deferred compensation for its employees. INVESTMENTS IN THE VAA MUST BE DIVERSIFIED For a contract to be treated as an annuity for Federal income tax purposes, the investments of the VAA must be "adequately diversified." IRS regulations define standards for determining whether the investments of the VAA are adequately diversified. If the VAA fails to comply with these diversification standards, you could be required to pay tax currently on the excess of the CONTRACT VALUE over the contract purchase payments. Although WE do not control the investments of the underlying investment options, we expect that the underlying investment options will comply with the IRS regulations so that the VAA will be considered "adequately diversified." RESTRICTIONS ON INVESTMENT OPTIONS Federal income tax law limits your right to choose particular options offered through the contract. Because the I.R.S. 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 I.R.S. 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 an annuity contract provide for amortization, through ANNUITY PAYOUTS, of the contract's PURCHASE PAYMENTS and earnings. If ANNUITY PAYOUTS under the contract begin or are scheduled to begin on a date past the ANNUITANT'S 85th birthday, it is possible that the tax law will not treat the contract as an annuity for Federal income tax purposes. In that event, you would be currently taxable on the excess of the CONTRACT VALUE over the purchase payments of the contract. TAX TREATMENT OF PAYMENTS We make no guarantees regarding the tax treatment of any contract or of any transaction involving a contract. However, the rest of this discussion assumes that your contract will be treated as an annuity for Federal income tax purposes and that the tax law will not tax any increase in your CONTRACT VALUE until there is a distribution from your contract. TAXATION OF WITHDRAWALS AND SURRENDERS You will pay tax on withdrawals to the extent your CONTRACT VALUE exceeds your purchase payments in the contract. This income (and all other income from your contract) is considered ordinary income. A higher rate of tax is paid on ordinary income than on capital gains. You will pay tax on a surrender to the extent the amount you receive exceeds your purchase payments. In certain circumstances your purchase payments are reduced by amounts received from your contract that were not included in income. 24 TAXATION OF ANNUITY PAYOUTS The tax code imposes tax on a portion of each ANNUITY PAYOUT (at ordinary income tax rates) and treats a portion as a nontaxable return of your purchase payments in the contract. WE will notify you annually of the taxable amount of your ANNUITY PAYOUT. Once you have recovered the total amount of the purchase payment in the contract, you will pay tax on the full amount of your ANNUITY PAYOUTS. If ANNUITY PAYOUTS end because of the ANNUITANT'S death and before the total amount of the purchase payments in the contract has been received, the amount not received generally will be deductible. TAXATION OF DEATH BENEFITS WE may distribute amounts from your contract because of the death of a CONTRACTOWNER or an ANNUITANT. The tax treatment of these amounts depends on whether you or the ANNUITANT dies before or after the ANNUITY COMMENCEMENT DATE. - - Death prior to the ANNUITY COMMENCEMENT DATE-- - If the beneficiary receives DEATH BENEFITS under an ANNUITY PAYOUT OPTION, they are taxed in the same manner as annuity payouts. - If the beneficiary does not receive DEATH BENEFITS under an ANNUITY PAYOUT OPTION, they are taxed in the same manner as a withdrawal. - - Death after the ANNUITY COMMENCEMENT DATE-- - If death benefits are received in accordance with the existing ANNUITY PAYOUT OPTION, they are excludible from income if they do not exceed the purchase payments not yet distributed from the contract. All ANNUITY PAYOUTS in excess of the purchase payments not previously received are includible 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 payments 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 contract which you must include in your gross income. The 10% penalty tax does not apply if one of several exceptions exists. These exceptions include withdrawals, surrenders, or ANNUITY PAYOUTS that: - you receive on or after you reach age 59 1/2, - you receive because you became disabled (as defined in the tax law), - a beneficiary receives on or after your death, or - you receive as a series of substantially equal periodic payments for 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 annuity contracts you own in order to determine the amount of an ANNUITY PAYOUT, a surrender, or a withdrawal that you must include in income. For example, if you purchase two or more deferred annuity contracts from the same life insurance company (or its affiliates) during any calendar year, the tax code treats all such contracts as one contract. Treating two or more contracts as one contract could affect the amount of a surrender, a withdrawal or an ANNUITY PAYOUT that you must include in income and the amount that might be subject to the penalty tax described above. LOANS AND ASSIGNMENTS Except for certain qualified contracts, the tax code treats any amount received as a loan under a contract, and any assignment or pledge (or agreement to assign or pledge) any portion of your CONTRACT VALUE, as a withdrawal of such amount or portion. GIFTING A CONTRACT If you transfer ownership of your contract to a person other than your spouse (or to your former spouse incident to divorce), and receive a payment less than your contract's value, you will pay tax on your CONTRACT VALUE to the extent it exceeds your purchase payments not previously received. The new owner's purchase payments in the contract would then be increased to reflect the amount included in your income. CHARGES FOR A CONTRACT'S DEATH BENEFIT Your contract may have an EGMDB, for which you pay an annual charge, computed daily. It is possible that the tax law may treat all or a portion of the EGMDB charge as a contract withdrawal. LOSS OF INTEREST DEDUCTION After June 8, 1997 if a contract is issued to a taxpayer that is not an individual, or if a contract is held for the benefit of an entity, the entity will lose a portion of its deduction for otherwise deductible interest expenses. This disallowance does not apply if you pay tax on the annual increase in the CONTRACT VALUE. Entities that are considering purchasing a contract, or entities that will benefit from someone else's ownership of a contract, should consult a tax advisor. QUALIFIED RETIREMENT PLANS We also designed the contracts for use in connection with certain types of retirement plans that receive favorable treatment under the tax code. Contracts 25 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 qualified plans: - Individual Retirement Accounts and Annuities ("Traditional IRAs") - Roth IRAs - 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) plans") and qualified annuity plans ("403(a) plans") - Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans") - Deferred compensation plans of state and local governments and tax-exempt organizations ("457 plans"). We may issue a contract for use with other types of qualified plans in the future. We will amend contracts to be used with a qualified plan as generally necessary to conform to tax law requirements for the type of plan. However, the rights of a person to any qualified plan benefits may be subject to the plan's terms and conditions, regardless of the contract's terms and conditions. In addition, we are not bound by the terms and conditions of qualified plans to the extent such terms and conditions contradict the contract, unless we consent. TAX TREATMENT OF QUALIFIED CONTRACTS The Federal income tax rules applicable to qualified plans and qualified contracts vary with the type of plan and contract. For example, - Federal tax rules limit the amount of PURCHASE PAYMENTS that can be made, and the tax deduction or exclusion that may be allowed for the PURCHASE PAYMENTS. These limits vary depending on the type of qualified plan and the plan participant's specific circumstances, E.G., the participant's compensation. - Under most qualified plans, E.G., 403(b) plans and Traditional IRAs, the annuitant must begin receiving payments from the contract in certain minimum amounts by a certain age, typically age 70 1/2. However, these "minimum distribution rules" do not apply to a Roth IRA. - Loans are allowed under certain types of qualified plans, but Federal income tax rules prohibit loans under other types of qualified plans. For example, Federal income tax rules permit loans under some section 403(b) plans, but prohibit loans under Traditional and Roth IRAs. If allowed, loans are subject to a variety of limitations, including restrictions as to the loan amount, the loan's duration, and the manner of repayment. Your contract or plan may not permit loans. TAX TREATMENT OF PAYMENTS Federal income tax rules generally include distributions from a qualified contract in the recipient's income as ordinary income. These taxable distributions will include purchase payments that were deductible or excludible from income. Thus, under many qualified contracts the total amount received is included in income since a deduction or exclusion from income was taken for purchase payments. There are exceptions. For example, you do not include amounts received from a Roth IRA in income if certain conditions are satisfied. Failure to comply with the minimum distribution rules applicable to certain qualified plans, such as Traditional IRAs, will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the qualified plan. FEDERAL PENALTY TAXES PAYABLE ON DISTRIBUTIONS The tax code may impose a 10% penalty tax on the amount received from the qualified contract that must be included in income. The tax code does not impose the penalty tax if one of several exceptions applies. The exceptions vary depending on the type of qualified contract you purchase. For example, in the case of an IRA, exceptions provide that the penalty tax does not apply to a withdrawal, surrender, OR ANNUITY PAYOUT: - received on or after the annuitant reaches age 59 1/2, - received on or after the annuitant's death or because of the annuitant's disability (as defined in the tax law), 26 - received as a series of substantially equal periodic payments for the annuitant's life (or life expectancy), or - received as reimbursement for certain amounts paid for medical care. These exceptions, as well as certain others not described here, generally apply to taxable distributions from other qualified plans. However, the specific requirements of the exception may vary. TRANSFERS AND DIRECT ROLLOVERS In many circumstances, money may be moved between qualified contracts and qualified plans by means of a rollover or a transfer. Special rules apply to such rollovers and transfers. If the applicable rules are not followed, you may suffer adverse Federal income tax consequences, including paying taxes which might not otherwise have had to be paid. A qualified advisor should always be consulted before you move or attempt to move funds between any qualified plan or contract and another qualified plan or contract. The direct rollover rules apply to certain payments (called "eligible rollover distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10 plans, and contracts used in connection with these types of plans. (The direct rollover rules do not apply to distributions from IRAs or section 457 plans). The direct rollover rules require that WE withhold Federal income tax equal to 20% of the eligible rollover distribution from the distribution amount, unless you elect to have the amount directly transferred to certain qualified plans or contracts. Before we send a rollover distribution, we will provide the recipient with a notice explaining these requirements and how the 20% withholding can be avoided by electing a direct rollover. THE EGMDB AND IRAS Pursuant to IRS regulations, IRAs may not invest in life insurance contracts. We do not believe that these regulations prohibit the EGMDB from being provided under the contracts when we issue the contracts as Traditional IRAs or Roth IRAs. However, the law is unclear and it is possible that the presence of the EGMDB under a contract issued as a Traditional or Roth IRA could result in increased taxes to you. 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 the distribution that tax is not to be withheld. In certain circumstances, Federal income tax rules may require us to withhold tax. At the time a withdrawal, surrender, or ANNUITY PAYOUT is requested, we will give the recipient an explanation of the withholding requirements. TAX STATUS OF LINCOLN LIFE Under existing Federal income tax laws, LINCOLN LIFE does not pay tax on investment income and realized capital gains of the VAA. LINCOLN LIFE does not expect that it will incur any Federal income tax liability on the income and gains earned by the VAA. We, therefore, do not impose a charge for Federal income taxes. If Federal income tax law changes and we must pay tax on some or all of the income and gains earned by the VAA, we may impose a charge against the VAA to pay the taxes. CHANGES IN THE LAW The above discussion is based on the tax code, IRS regulations, and interpretations existing on the date of this Prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively. VOTING RIGHTS As required by law, we will vote the fund shares held in the VAA at meetings of shareholders of the funds. The voting will be done according to the instructions of CONTRACTOWNERS that have interests in any SUBACCOUNTS which invest in the funds. If the 1940 Act or any regulation under it should be amended or if present interpretations should change, and if as a result we determine that we are permitted to vote the fund shares in our own right, we may elect to do so. The number of votes which the CONTRACTOWNER has the right to cast will be determined by applying the CONTRACTOWNER'S 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. Shares held in a SUBACCOUNT for which no timely instructions are received will be voted by us in proportion to the voting instructions which are received for all contracts participating in that SUBACCOUNT. Voting instructions to abstain on any item to be voted on will be applied on a pro-rata basis to reduce the number of votes eligible to be cast. Whenever a shareholders meeting is called, we will furnish CONTRACTOWNERS with a voting interest in a SUBACCOUNT with proxy voting materials, reports, and voting instruction forms. Since the funds engage in shared funding, other persons or entities besides LINCOLN LIFE may vote fund shares. DISTRIBUTION OF THE CONTRACTS We are the distributor and principal underwriter of the contracts. They will be sold by registered representatives 27 who have been licensed by state insurance departments. The contracts will also be sold by broker-dealers who generally have been licensed by state insurance departments (or such broker-dealers have made other arrangements to comply with state insurance laws) to represent us and who have selling agreements with us. Included among these broker-dealers is Lincoln Financial Advisors (LFA). LFA is affiliated with us and in addition to selling our contracts may also act as a principal underwriter for certain other contracts issued by us. We are registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers (NASD). LINCOLN LIFE will offer contracts in all states where it is licensed to do business. RETURN PRIVILEGE Within the free-look period after you first 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 2340, 1300 South Clinton Street, Fort Wayne, Indiana, 46801. A contract canceled under this provision will be void. With respect to the fixed side of a contract, we will return PURCHASE PAYMENTS. With respect to the VAA, except as explained in the following paragraph, we will return the CONTRACT VALUE as of the date of receipt of the cancellation, plus any account charge and any premium taxes which had been deducted. No surrender charge will be made. 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 PURCHASE PAYMENT(S). STATE REGULATION As a life insurance company organized and operated under Indiana law, we are subject to provisions governing life insurers and to regulation by the Indiana Commissioner of Insurance. Our books and accounts are subject to review and examination by the Indiana Department of Insurance at all times. A full examination of our operations is conducted by that Department at least once every five years. RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM Title 8, Section 830.105 of the Texas Government Code, consistent with prior interpretations of the Attorney General of the State of Texas, permits participants in the Texas Optional Retirement Program (ORP) to redeem their interest in a VARIABLE ANNUITY CONTRACT issued under the ORP only upon: 1. Termination of employment in all institutions of higher education as defined in Texas law; 2. Retirement; or 3. Death. Accordingly, participants in the ORP will be required to obtain a certificate of termination from their employer(s) before accounts can be redeemed. RECORDS AND REPORTS As presently required by the 1940 Act and applicable regulations, we are responsible for maintaining all records and accounts relating to the VAA. We will mail to you, at your last known address of record at the home office, at least semiannually after the first CONTRACT YEAR, reports containing information required by the 1940 Act or any other applicable law or regulation. We have entered into an agreement with the Delaware Service Company, Inc., 2005 Market Street, Philadelphia, PA 19203, to provide accounting services to the VAA. OTHER INFORMATION A Registration Statement has been filed with the SEC, under the Securities Act of 1933 as amended, for the contracts being offered by this Prospectus. This Prospectus does not contain all the information in the Registration Statement, its amendments and exhibits. Please refer to the Registration Statement for further information about the VAA, LINCOLN LIFE and the contracts offered. Statements in this Prospectus about the content of contracts and other legal instruments are summaries. For the complete text of those contracts and instruments, please refer to those documents as filed with the SEC. Lincoln National Flexible Premium Variable Life Accounts D, G and K, segregated investment accounts of ours registered under the 1940 Act, are authorized to invest assets in the following funds and series: Bond, Growth and Income, Managed, Money Market and Special Opportunities (for Account D); Growth and Income 28 and Special Opportunities (for Account G) and all funds and series for Account K. Through the VAA and the Variable Life Accounts we are the sole shareholder in the eleven funds. However, we are not the sole shareholder of series shares in the Delaware Group Premium Fund, Inc. Collectively, the VAA and the Variable Life Accounts may be referred to in this booklet and in the SAI as the VARIABLE ACCOUNTS. Due to differences in redemption rates, tax treatment or other considerations, the interests of CONTRACTOWNERS under the Variable Life Accounts could conflict with those of CONTRACTOWNERS under the VAA. In those cases where assets from variable life and VARIABLE ANNUITY SEPARATE ACCOUNTS are invested in the same fund or funds or series (i.e., where mixed funding occurs), the Boards of Directors of the funds involved will monitor for any material conflicts and determine what action, if any, should be taken. If it becomes necessary for any separate account to replace shares of any fund or series with another investment, that fund or series may have to liquidate securities on a disadvantageous basis. Refer to the Prospectus for each fund and for the series fund for more information about mixed funding. In the future, we may purchase shares in the funds and series for one or more unregistered segregated investment accounts. ADVERTISEMENTS/SALES LITERATURE In marketing the VARIABLE ANNUITY CONTRACTS, we and our various sales representatives may refer to certain ratings assigned to us under the Rating System of the A.M. Best Co., Oldwick, New Jersey. The objective of Best's Rating System is to evaluate the various factors affecting the overall performance of an insurance company in order to provide Best's opinion about that company's relative financial strength and ability to meet its contractual obligations. The procedure includes both a quantitative and qualitative review of the insurance company. In marketing the contracts and the underlying funds and series, we may at times use data published by other nationally-known independent statistical services. These service organizations provide relative measures of such factors as an insurer's claim-paying ability, the features of particular contracts, and the comparative investment performance of the funds and series with other portfolios having similar objectives. A few such services are: Duff & Phelps, the Lipper Group, Moody's, Morningstar, Standard and Poor's and VARDS. There is more information about each of these services under Advertising and sales literature in the SAI. Marketing materials may employ illustrations of compound interest and dollar-cost averaging; discuss automatic withdrawal services; describe our customer base, assets, and our relative size in the industry. They may also discuss other features of LINCOLN LIFE, the VAA, the funds, the series and their investment management. We are a member of the Insurance Marketplace Standards Association ("IMSA") and may include the IMSA logo and information about IMSA membership in our advertisements. Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and services for individually sold life insurance and annuities. 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 substantial, the cases are in the preliminary stages of litigation, and it is premature to make assessments about potential loss, if any. Management is defending these suits vigorously. The amount of liability, if any, which may ultimately arise as a result of these suits cannot be reasonably determined at this time. 29 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS FOR THE VAA ITEM - -------------------------------------------------- General information and history of Lincoln Life Special terms Services Purchase of securities being offered Underwriters ITEM - -------------------------------------------------- Calculation of investment results Annuity payouts Determination of accumulation and annuity unit value Advertising and sales literature/graphics Financial statements ......................................................................... Please send me a free copy of the current Statement of Additional Information for Lincoln National Variable Annuity Account C (Multi-Fund-Registered Trademark-). (Please Print) Name: __________________________ Social Security No.: _________________________ Address: _______________________________________________________________________ City _______________________________ State _______________ Zip _______________ Mail to Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, Indiana 46801 30 THIS PAGE WAS INTENTIONALLY LEFT BLANK. 31 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C (VAA) (REGISTRANT) LINCOLN NATIONAL LIFE INSURANCE COMPANY (DEPOSITOR) STATEMENT OF ADDITIONAL INFORMATION (SAI) This SAI should be read in conjunction with the Prospectus of the VAA dated May 1, 2000. You may obtain a copy of the VAA Prospectus on request and without charge. Please write the Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, Indiana 46801 or call 1-800-4LINCOLN (454-6265). TABLE OF CONTENTS
PAGE - ---------------------------------------------- GENERAL INFORMATION AND HISTORY OF LINCOLN LIFE B-2 - ---------------------------------------- SPECIAL TERMS B-2 - ---------------------------------------- SERVICES B-2 - ---------------------------------------- PURCHASE OF SECURITIES BEING OFFERED B-2 - ---------------------------------------- UNDERWRITERS B-2 - ---------------------------------------- CALCULATION OF INVESTMENT RESULTS B-2 - ---------------------------------------- PAGE - ---------------------------------------------- ANNUITY PAYOUTS B-5 - ---------------------------------------- DETERMINATION OF ACCUMULATION AND ANNUITY UNIT VALUE B-6 - ---------------------------------------- ADVERTISING AND SALES LITERATURE/GRAPHICS B-6 - ---------------------------------------- FINANCIAL STATEMENTS B-9 - ----------------------------------------
THIS SAI IS NOT A PROSPECTUS. The date of this SAI is May 1, 2000. B-1 GENERAL INFORMATION AND HISTORY OF LINCOLN NATIONAL LIFE INSURANCE CO. (LINCOLN LIFE) The prior Depositor of the ACCOUNT, Lincoln National Pension Insurance Co., was merged into LINCOLN LIFE, effective January 1, 1989. LINCOLN LIFE, organized in 1905, is an Indiana stock insurance corporation, engaged primarily in insurance and financial services. LINCOLN LIFE is owned by LNC, a publicly held insurance holding company domiciled in Indiana. SPECIAL TERMS The special terms used in this SAI are the ones defined in the Prospectus. They are italicized to make this document more understandable. SERVICES INDEPENDENT AUDITORS The financial statements of the 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 which also appear elsewhere in this document and in the Registration Statement. The financial statements audited by Ernst & Young LLP have been included in this document in reliance on their reports given on their authority as experts in accounting and auditing. KEEPER OF RECORDS All accounts, books, records and other documents which are required to be maintained for the VAA are maintained by LINCOLN LIFE. No separate charge against the assets of the VAA is made by LINCOLN LIFE for this service. We have entered into an agreement with Delaware Service Co., 2005 Market Street, Philadelphia, PA 19203, to provide accounting services to the VAA. PRINCIPAL UNDERWRITER LINCOLN LIFE is the principal underwriter for the variable annuity contracts. 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 broker/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 the surrender charges may be waived. There are exchange privileges between SUBACCOUNTS, and between the VAA and LINCOLN LIFE'S General Account (See The Contracts -- Transfer of accumulation units between SUBACCOUNTS in the Prospectus.) No exchanges are permitted between the VAA and other separate accounts. UNDERWRITERS LINCOLN LIFE has contracted with some broker/dealers, and may contract with others, to sell the variable annuity contracts through certain legally authorized persons and organizations. These dealers are compensated under a standard Compensation Schedule. LINCOLN LIFE is the principal underwriter for the variable annuity contracts. We may not offer a contract continuously or in every state. LINCOLN LIFE retains no underwriting commissions from the sale of the variable annuity contracts. CALCULATION OF INVESTMENT RESULTS MONEY MARKET FUND SUBACCOUNTS: 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 7-day Money Market yield reported 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 yield includes all deductions charged to the CONTRACTOWNER'S account, and excludes any realized gains and losses from the sale of securities. The 7-day Money Market yield as of December 31, 1999 was 3.96% (with EGMDB). 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. B-2 Average annual return for each period is determined by finding the average annual compounded rate of return over each period that would equate the initial amount invested to the ending redeemable value for that period, according to the following formula: P(1+T)(n) = ERV Where: P = a hypothetical initial PURCHASE PAYMENT of $1,000 T = average annual total return for the period in question N = number of years ERV = ending redeemable value (as of the end of the period in question) of a hypothetical $1,000 PURCHASE PAYMENT made at the beginning of the 1-year, 5-year, or 10-year period in question (or fractional period thereof) The formula assumes that: (1) all recurring fees have been charged to the contractowner accounts; (2) all applicable non-recurring charges (including any surrender charges) are deducted at the end of the period in question; and (3) there will be a complete redemption upon the anniversary of the 1-year, 5-year, or 10-year period in question.
In accordance with SEC guidelines, we will report standard performance back to the first date that the Fund became available in the VAA. Because standard performance reporting periods of less than one year could be misleading, we may report "N/A's" for standard performance until one year after the option became available in the Separate Account. STANDARD PERFORMANCE DATA AS OF DECEMBER 31, 1999 CONTRACTS WITH EGMDB
10-YEAR/ SUBACCOUNTS 1-YEAR 5-YEAR SINCE INCEPTION COMMENCED - ---------------------------------------------------------------------------------------- Aggressive Growth 29.28% 18.38% 12.63%* 01/03/94 - --------------------------------------- AMT Mid-Cap Growth 38.45* N/A N/A 01/29/99 - --------------------------------------- AMT Partners -4.27* N/A N/A 01/29/99 - --------------------------------------- Aspen Worldwide Growth 40.63* N/A N/A 01/29/99 - --------------------------------------- Bond -12.21 4.83 5.99 12/21/81 - --------------------------------------- Capital Appreciation 32.03 28.01 23.13* 01/03/94 - --------------------------------------- Capital Asset 21.25* N/A N/A 01/29/99 - --------------------------------------- DGPF Global Bond -12.51 0.71* N/A 05/01/96 - --------------------------------------- DGPF Growth & Income -11.95 9.72* N/A 05/01/96 - --------------------------------------- DGPF Trend 54.77 22.39* N/A 05/01/96 - --------------------------------------- Equity-Income -3.55 17.87 15.22* 01/03/94 - --------------------------------------- Global Asset Allocation 1.05 14.12 10.70 08/03/87 - --------------------------------------- Growth and Income 6.68 22.40 15.22 12/21/81 - --------------------------------------- IFT Equity 500 Index 5.19* N/A N/A 01/29/99 - --------------------------------------- IFT Small Cap Index 8.10* N/A N/A 01/29/99 - --------------------------------------- International 6.37 8.82 7.77* 05/01/91 - --------------------------------------- Managed -2.23 14.01 10.37 04/29/83 - --------------------------------------- Money Market -4.93 2.87 3.50 01/07/82 - --------------------------------------- Social Awareness 4.77 25.87 16.91 05/02/88 - --------------------------------------- Special Opportunities -13.31 12.57 11.36 12/21/81 - --------------------------------------- VIP II Contrafund 5.24* N/A N/A 08/27/99 - --------------------------------------- VIP Growth 9.23* N/A N/A 08/27/99 - --------------------------------------- AVP Growth N/A N/A N/A ** - --------------------------------------- AVP Technology N/A N/A N/A ** - --------------------------------------- AFIS Growth N/A N/A N/A ** - --------------------------------------- AFIS International N/A N/A N/A ** - --------------------------------------- DGPF Real Estate (REIT) N/A N/A N/A ** - ---------------------------------------
B-3 * The lifetime of the SUBACCOUNT is less than the complete time period indicated. ** The anticipated SUBACCOUNT commencement date is 05/19/00. The above table reflects the cost of the Enhanced Guaranteed Minimum Death Benefit rider. If CONTRACTOWNERS had chosen to eliminate the Enhanced Minimum Death Benefit their returns would have been higher. B-4 NONSTANDARDIZED 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. B-5 NONSTANDARDIZED PERFORMANCE DATA AS OF DECEMBER 31, 1999 CONTRACTS WITH EGMDB
10-YEAR/ AS IF SUBACCOUNTS YTD 1-YEAR 3-YEAR 5-YEAR SINCE INCEPT COMMENCED - -------------------------------------------------------------------------------------------------- Aggressive Growth 40.59% 40.59% 16.51% 19.42% 13.47%* 02/03/94 - --------------------------------------- AMT Mid-Cap Growth 51.88 51.88 51.22* N/A N/A 11/03/97 - --------------------------------------- AMT Partners 5.97 5.97 12.19 19.45 15.95* 03/22/94 - --------------------------------------- Aspen Worldwide Growth 62.31 62.31 35.55 31.87 28.01* 09/13/93 - --------------------------------------- Bond -4.52 -4.52 3.65 5.75 6.07 12/28/81 - --------------------------------------- Capital Appreciation 43.58 43.58 34.20 29.12 24.05* 02/03/94 - --------------------------------------- Capital Asset 34.09 34.09 58.01* N/A N/A 10/01/98 - --------------------------------------- DGPF Global Bond -4.84 -4.84 0.28 3.08* N/A 05/01/96 - --------------------------------------- DGPF Growth & Income -4.23 -4.23 10.83 16.92 10.54 07/28/88 - --------------------------------------- DGPF Trend 68.31 68.31 32.18 28.34 23.11* 12/27/93 - --------------------------------------- Equity-Income 4.89 4.89 14.58 18.9 16.08* 02/03/94 - --------------------------------------- Global Asset Allocation 9.89 9.89 13.20 15.11 10.78 08/03/87 - --------------------------------------- Growth and Income 16.02 16.02 21.17 23.47 15.30 12/28/81 - --------------------------------------- IFT Equity 500 Index 18.93 18.93 20.96* N/A N/A 10/01/97 - --------------------------------------- IFT Small Cap Index 18.60 18.60 7.85* N/A N/A 08/25/97 - --------------------------------------- International 15.68 15.68 11.06 9.77 8.35* 05/01/91 - --------------------------------------- Managed 6.33 6.33 12.42 15.01 10.45 04/27/83 - --------------------------------------- Money Market 3.39 3.39 3.63 3.77 3.57 01/07/82 - --------------------------------------- Social Awareness 13.94 13.94 22.3 26.97 16.99 05/02/88 - --------------------------------------- Special Opportunties -5.71 -5.71 7.91 13.55 11.44 12/28/81 - --------------------------------------- VIP II Contrafund 21.24 21.24 23.96 25.73* N/A 01/03/95 - --------------------------------------- VIP Growth 33.79 33.79 30.86 27.60 18.11 10/09/86 - --------------------------------------- AVP Growth 32.40 32.40 29.03 29.33 28.62* 09/15/94 - --------------------------------------- AVP Technology 73.12 73.12 43.04 33.83* N/A 01/11/96 - --------------------------------------- AFIS Growth 55.24 55.24 38.47 31.22 19.51 02/08/84 - --------------------------------------- AFIS International 73.70 73.70 30.59 23.39 14.98* 05/01/90 - --------------------------------------- DGPF Real Estate (REIT) -3.87 -3.87 -8.19* N/A N/A 05/01/98 - ---------------------------------------
* The lifetime of this SUBACCOUNT is less than the complete period indicated. The above table reflects the cost of the enhanced Guaranteed Minimum Death Benefit (EGMDB) rider. If CONTRACTOWNERS had chosen to eliminate the Enhanced Guaranteed Minimum Death Benefit (EGMDB) their returns would have been higher. ANNUITY PAYOUTS VARIABLE ANNUITY PAYOUTS Variable annuity payouts will be determined on the basis of: (1) the 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 performance of the eligible 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 ANNUITANT 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 variable ANNUITY PAYOUT is determined by applying the total value of the ACCUMULATION B-6 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 date will become the date on which all future ANNUITY PAYOUTS will be paid. Amounts shown in the tables are based on the 1971 Individual Annuity Mortality Tables (modified) for the single premium, periodic premium and flexible premium Multi-Fund-Registered Trademark- 2 and 3 ANNUITY CONTRACTS and the 1983(a) Individual Mortality Table (modified) for flexible premium annuity contract Multi-Fund-Registered Trademark- 4 modified, with an assumed investment return at the rate of 5% 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 CONTRACT VALUE 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 5% interest rate stated above is the measuring point for subsequent annuity payouts. If the actual Net Investment Rate (annualized) exceeds 5%, the payment will increase at a rate equal to the amount of such excess. Conversely, if the actual rate is less than 5%, 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 where not prohibited by law. At an ANNUITY COMMENCEMENT DATE, the ANNUITANT 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 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 eligible FUNDS. The amount of the second and subsequent annuity payouts 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 before the date that payment is due. The value of each SUBACCOUNT ANNUITY UNIT was set initially at $1.00. 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 before the payout 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 PAYOUTS depend. DETERMINATION OF ACCUMULATION AND ANNUITY UNIT VALUE A description of the days on which ACCUMULATION and ANNUITY UNITS will be valued is given in the Prospectus. The New York Stock Exchange's (NYSE) most recent announcement (which is subject to change) states that it will be closed on New Year's Day, Martin Luther King Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. It may also be closed on other days. Since the portfolios of some of the funds and series will consist of securities primarily listed on foreign exchanges or otherwise traded outside the United States, those securities may be traded (and the net asset value of those funds and series and of the VARIABLE ACCOUNT could therefore be significantly affected) on days when the investor has no access to those funds and series. ADVERTISING AND SALES LITERATURE As set forth in the Prospectus, LINCOLN LIFE may refer to the following organizations (and others) in its marketing materials: A.M. BEST'S RATING SYSTEM evaluates 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. B-7 DUFF & PHELPS insurance company claims paying ability (CPA) service provides purchasers of insurance company policies and contracts with analytical and statistical information on the solvency and liquidity of major U.S licensed insurance companies, both mutual and stock. EAFE Index is prepared by MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI). It measures performance of 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 with over 1000 companies across 20 different countries. LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher of statistical data covering the investment company industry in the United States and overseas. Lipper is recognized as the leading source of data on open-end and closed-end funds. Lipper currently tracks the performance of over 5,000 investment companies and publishes numerous specialized reports, including reports on performance and portfolio analysis, fee and expense analysis. MOODY'S insurance claims-paying rating is a system of rating 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 ANNUITY CONTRACTS. STANDARD & POOR'S CORP. insurance claims-paying ability rating is an assessment 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 500 INDEX (S&P 500) -- Broad-based measurement of changes in stock-market conditions based on the average performance of 500 widely held common stocks; commonly known as the 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 Corp., a financial advisory, securities rating and publishing firm. STANDARD & POOR'S INDEX (S&P 400) -- Consists of 400 domestic stocks chosen for market size, liquidity, and industry group representations. NASDAQ-OTC Price Index -- This index is based on the National Association of Securities Dealers Automated Quotations (NASDAQ) and represents all domestic over-the-counter stocks except those traded on exchanges and those having only one market maker, a total of some 3,500 stocks. It is market value-weighted and was introduced with a base of 100.00 on February 5, 1971. DOW JONES INDUSTRIAL AVERAGE (DJIA) -- Price-weighted average of 30 actively traded blue chip stocks, primarily industrials but including American Express Co. and American Telephone and Telegraph Co. Prepared and published by Dow Jones & Co., it is the oldest and most widely quoted of all the market indicators. The average is quoted in points, not dollars. INTERNET -- As an electronic communications network may be used to provide information regarding LINCOLN LIFE performance of the SUBACCOUNTS and advertisement literature. In its advertisements and other sales literature for the VAA and the eligible 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 limitation, the literature may emphasize the potential savings through tax deferral; the potential advantage of the variable account over the fixed side; and the compounding effect when a client makes regular contributions to his or her account. DOLLAR-COST AVERAGING ILLUSTRATIONS. These illustrations will generally discuss the price-leveling effect of making regular purchases in the same SUBACCOUNTS over a period of time, to take advantage of the trends in market prices of the portfolio securities purchased for those SUBACCOUNTS. AUTOMATIC WITHDRAWAL SERVICE. A service provided by LINCOLN LIFE, through which a CONTRACTOWNER may take any distribution allowed by code Section 401(a)(9) in the case of qualified contracts, or permitted under CODE Section 72 in the case of nonqualified contracts, by way of an automatically generated payment. B-7 EARNINGS SWEEP. A service provided by LINCOLN LIFE which allows a client to designate one of the variable SUBACCOUNTS or the fixed side as a holding account, and to transfer earnings from that side to any other variable SUBACCOUNT. The CONTRACTOWNER chooses a specific fund as the holding account. At specific intervals, account value in the holding account fund that exceeds a certain designated baseline amount is automatically transferred to another specified fund(s). The minimum account value required for the Earnings Sweep feature is $10,000. LINCOLN FINANCIAL GROUP. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln Financial Group has consolidated assets of over $103 billion and annual consolidated revenues of $6.8 billion. Through its wealth accumulation and protection businesses, the company provides annuities, life insurance, 401(k) plans, life-health reinsurance, mutual funds, institutional investment management and financial planning and advisory services. LINCOLN LIFE'S CUSTOMERS. Sales literature for the VAA, the funds and series may refer to the number of employers and the number of individual annuity clients which LINCOLN LIFE serves. As of the date of this SAI, LINCOLN LIFE was serving over 15,000 organizations and more than 1.5 million individual clients. LINCOLN LIFE'S ASSETS, SIZE. LINCOLN LIFE may discuss its general financial condition (see, for example, the reference to A.M. Best Co., 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 subclassification of those companies, based upon recognized evaluation criteria. For example, at year-end 1999, LINCOLN LIFE had statutory admitted assets of over $79 billion. Sales literature may reference the Multi-Fund-Registered Trademark- newsletter which is a newsletter distributed quarterly to clients of the VAA. The contents of the newsletter will be a commentary on general economic conditions and, on some occasions, referencing matters in connection with the Multi-Fund-Registered Trademark- annuity. Sales literature and advertisements may reference these and other similar reports from Best's or other similar publications which report on the insurance and financial services industries. The graphs below compare accumulations attributable to contributions to conventional savings vehicles such as savings accounts at a bank or credit union, nonqualified contracts purchased with after tax contributions, and qualified contracts purchased with pre-tax contributions under tax-favored retirement programs. THE POWER OF TAX DEFERRED GROWTH The hypothetical chart below compares the results of contributing $1,200 per year ($100 per month) during the time periods illustrated. Each graph assumes a 28% tax rate and an 8% fixed rate of return (before fees EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CONVENTIONAL NONQUALIFIED TAX DEFERRED SAVINGS ANNUITY CONTRACTS ANNUITY WITH TAX DEFERRED RETIREMENT GROWTH PROGRAM 10 YEARS $16,049 $18,013 $25,017 15 YEARS $28,143 $33,761 $46,890 20 YEARS $44,145 $56,900 $79,028 10 YEARS $16,193 $17,012 15 YEARS $29,340 $33,761 20 YEARS $47,688 $56,900
and charges). For tax deferred annuities (TDA), the results are based on contributing $1,666.66 ($138.88 per month) during the time periods illustrated. The additional $38.88 per month is the amount of federal taxes paid by those contributing to the conventional savings accounts or nonqualified contracts. In this example, it has been invested by the contributors to the qualified contracts. The deduction of fees and charges is also indicated in the graph. The dotted lines represent the amount remaining after deducting any taxes due and all fees (including SURRENDER CHARGES). See Charges and other deductions in the Prospectus for discussion of charges. Additionally, a 10% tax penalty (not included here) may apply to withdrawals before age 59 1/2. The contributions and interest earnings on conventional savings accounts are usually taxed currently. For nonqualified contracts contributions are usually taxed currently, while earnings are not usually subject to income tax until withdrawn. However, contributions to and earnings on qualified plans are ordinarily not subject to income tax until withdrawn. Therefore, having greater amounts re-invested in a qualified or nonqualified plan increases the accumulation power of savings over time. B-8 As you can see, a tax deferred plan can provide a much higher account value over a long period of time. Therefore, tax deferral is an important component of a retirement plan or other long-term financial goals. (The above chart is for illustrative purposes and should not be construed as representative of actual results, which may be more or less). TAX BENEFITS TODAY When you put a portion of your salary in a tax deferred retirement plan, your contributions don't appear as taxable income on your W-2 form at the end of the calendar year. So while you are contributing, you can reduce your taxes and increase your income after savings and taxes, as compared to saving the same amount in a plan that is not tax-deferred. Here's an example: Let's assume you are single, your taxable income is $50,000, and you are in the 28% tax bracket.
TRADITIONAL SAVINGS OF SAVINGS PLAN PRE-TAX DOLLARS - --------------------------------------------------------- Your income $50,000 $50,000 Tax-deferred savings -0- 2,400 Taxable income 50,000 47,600 *Estimated federal income taxes 10,481 9,809 Income after taxes 39,519 37,791 After-tax savings 2,400 -0- Remaining income after savings and taxes 37,119 37,791
With a tax-deferred plan, you have $672 more spendable income each year because you are paying less taxes currently. *The above chart assumes a 28% marginal federal tax rate on conventional contributions. TDA contributions are generally taxed as ordinary income when withdrawn. Federal tax penalties generally apply to distributions before age 59 1/2. For illustrative purposes only. FINANCIAL STATEMENTS Financial statements of the VAA and the statutory-basis financial statements of LINCOLN LIFE appear on the following pages. B-9 THIS PAGE WAS INTENTIONALLY LEFT BLANK. C-1 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITY DECEMBER 31, 1999
LINCOLN NATIONAL LINCOLN NATIONAL AGGRESSIVE LINCOLN NATIONAL CAPITAL GROWTH BOND APPRECIATION COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $13,084,273,208 $ 391,899,766 $ 299,941,713 $ 1,840,135,585 - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) 320,760,186 -- -- -- - --------------------------------------- -------------- ---------------- ---------------- ---------------- - --------------------------------------- TOTAL ASSETS 13,405,033,394 391,899,766 299,941,713 1,840,135,585 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 368,100 10,640 8,299 50,555 - --------------------------------------- -------------- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $13,404,665,294 $ 391,889,126 $ 299,933,414 $ 1,840,085,030 - --------------------------------------- ============== ================ ================ ================ - --------------------------------------- PERCENTAGE OF NET ASSETS 100.00% 2.92% 2.24% 13.73% - --------------------------------------- ============== ================ ================ ================ - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period 175,375,232 61,153,697 486,392,137 - --------------------------------------- - Annuity reserves units 330,037 160,260 1,553,958 - --------------------------------------- - Unit value $ 2.21 $ 4.81 $ 3.71 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 387,458,903 294,262,077 1,802,604,486 - --------------------------------------- - Annuity reserves 729,155 771,148 5,759,079 - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period 1,657,816 1,022,335 8,524,638 - --------------------------------------- - Unit value $ 2.19 $ 4.78 $ 3.68 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 3,635,002 4,882,266 31,355,023 - --------------------------------------- eAnnuity - Units in accumulation period 29,720 3,701 98,271 - --------------------------------------- - Annuity reserves units -- -- -- - --------------------------------------- - Unit value $ 2.22 $ 4.84 $ 3.73 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 66,066 17,923 366,442 - --------------------------------------- - Annuity reserves -- -- -- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $ 391,889,126 $ 299,933,414 $ 1,840,085,030 ================ ================ ================ - ---------------------------------------
LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL AMERICAN MONEY SOCIAL SPECIAL CENTURY MARKET AWARENESS OPPORTUNITIES VP INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $ 178,274,136 $ 1,868,238,589 $ 627,247,954 $ -- - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) -- -- -- 3,613 - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- TOTAL ASSETS 178,274,136 1,868,238,589 627,247,954 3,613 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 4,937 51,386 17,139 - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $ 178,269,199 $ 1,868,187,203 $ 627,230,815 $ 3,613 - --------------------------------------- ================ ================ ================ ================ - --------------------------------------- PERCENTAGE OF NET ASSETS 1.33% 13.93% 4.68% 0.00% - --------------------------------------- ================ ================ ================ ================ - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period 66,318,967 272,682,501 75,094,275 -- - --------------------------------------- - Annuity reserves units 85,154 879,570 143,255 -- - --------------------------------------- - Unit value $ 2.61 $ 6.71 $ 8.25 -- - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 173,091,643 1,830,926,133 619,340,778 -- - --------------------------------------- - Annuity reserves 222,250 5,905,868 1,181,500 -- - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period 1,836,508 4,696,813 818,870 -- - --------------------------------------- - Unit value $ 2.59 $ 6.66 $ 8.19 -- - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 4,757,090 31,298,463 6,702,697 -- - --------------------------------------- eAnnuity - Units in accumulation period 75,481 8,398 704 2,329 - --------------------------------------- - Annuity reserves units -- -- -- -- - --------------------------------------- - Unit value $ 2.63 $ 6.76 $ 8.30 $ 1.55 - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 198,216 56,739 5,840 3,613 - --------------------------------------- - Annuity reserves -- -- -- -- - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $ 178,269,199 $ 1,868,187,203 $ 627,230,815 $ 3,613 - --------------------------------------- ================ ================ ================ ================ - ---------------------------------------
See accompanying notes. C-2
DELAWARE DELAWARE LINCOLN NATIONAL LINCOLN NATIONAL DELAWARE GROWTH GLOBAL EQUITY- GLOBAL ASSET TREND AND INCOME BOND INCOME ALLOCATION SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $325,657,104 $117,748,834 $14,380,526 $ 956,997,134 $ 480,902,873 - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) -- -- -- -- -- - --------------------------------------- ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- TOTAL ASSETS 325,657,104 117,748,834 14,380,526 956,997,134 480,902,873 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 8,790 3,255 399 26,231 13,207 - --------------------------------------- ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- NET ASSETS $325,648,314 $117,745,579 $14,380,127 $ 956,970,903 $ 480,889,666 - --------------------------------------- ============ ============ =========== ================ ================ - --------------------------------------- PERCENTAGE OF NET ASSETS 2.43% 0.88% 0.11% 7.14% 3.59% - --------------------------------------- ============ ============ =========== ================ ================ - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period 138,130,035 72,068,626 12,254,866 371,756,833 140,172,654 - --------------------------------------- - Annuity reserves units 151,852 712,597 66,439 1,624,078 860,132 - --------------------------------------- - Unit value $ 2.31 $ 1.55 $ 1.13 $ 2.52 $ 3.37 ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 319,057,588 111,489,353 13,847,956 938,303,117 472,214,876 - --------------------------------------- - Annuity reserves 350,753 1,102,380 75,075 4,099,123 2,897,621 - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period 2,693,313 3,351,154 405,781 5,811,748 1,696,586 - --------------------------------------- - Unit value $ 2.29 $ 1.54 $ 1.12 $ 2.50 $ 3.34 ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 6,175,116 5,145,087 455,071 14,558,081 5,672,387 - --------------------------------------- eAnnuity - Units in accumulation period 27,917 5,628 1,781 4,167 1,338 - --------------------------------------- - Annuity reserves units -- -- -- -- 29,576 - --------------------------------------- - Unit value $ 2.32 $ 1.56 $ 1.14 $ 2.54 $ 3.39 ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 64,857 8,759 2,025 10,582 4,535 - --------------------------------------- - Annuity reserves -- -- -- -- 100,247 ------------ ------------ ----------- ---------------- ---------------- - --------------------------------------- NET ASSETS $325,648,314 $117,745,579 $14,380,127 $ 956,970,903 $ 480,889,666 ============ ============ =========== ================ ================ - --------------------------------------- LINCOLN NATIONAL GROWTH AND LINCOLN NATIONAL LINCOLN NATIONAL INCOME INTERNATIONAL MANAGED SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $ 4,555,742,279 $ 515,801,508 $ 911,303,158 - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) -- -- -- - --------------------------------------- ---------------- ---------------- ---------------- - --------------------------------------- TOTAL ASSETS 4,555,742,279 515,801,508 911,303,158 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 125,262 14,178 25,070 - --------------------------------------- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $ 4,555,617,017 $ 515,787,330 $ 911,278,088 - --------------------------------------- ================ ================ ================ - --------------------------------------- PERCENTAGE OF NET ASSETS 33.98% 3.85% 6.80% - --------------------------------------- ================ ================ ================ - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period 333,803,071 247,685,485 160,214,813 - --------------------------------------- - Annuity reserves units 4,204,627 464,213 570,359 - --------------------------------------- - Unit value $ 13.38 $ 2.06 $ 5.61 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 4,466,001,825 509,530,537 898,850,367 - --------------------------------------- - Annuity reserves 56,254,343 954,965 3,199,874 - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period 2,509,728 2,589,188 1,652,446 - --------------------------------------- - Unit value $ 13.28 $ 2.04 $ 5.57 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 33,323,736 5,286,276 9,200,663 - --------------------------------------- eAnnuity - Units in accumulation period 2,758 7,514 4,816 - --------------------------------------- - Annuity reserves units -- -- -- - --------------------------------------- - Unit value $ 13.46 $ 2.07 $ 5.64 ---------------- ---------------- ---------------- - --------------------------------------- - Value in accumulation period 37,113 15,552 27,184 - --------------------------------------- - Annuity reserves -- -- -- ---------------- ---------------- ---------------- - --------------------------------------- NET ASSETS $ 4,555,617,017 $ 515,787,330 $ 911,278,088 ================ ================ ================ - ---------------------------------------
BT BT DELAWARE EQUITY 500 SMALL CAP BARON FIDELITY VIP SMALL CAP VALUE INDEX INDEX CAPITAL ASSET GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $ 2,049 $ -- $ -- $ -- $ -- - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) -- 52,900,929 4,102,164 9,553,520 55,157,100 - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- TOTAL ASSETS 2,049 52,900,929 4,102,164 9,553,520 55,157,100 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 1,447 108 266 1,520 - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- NET ASSETS $ 2,049 $ 52,899,482 $ 4,102,056 $ 9,553,254 $ 55,155,580 - --------------------------------------- =============== =============== ============== =============== =============== - --------------------------------------- PERCENTAGE OF NET ASSETS 0.00% 0.39% 0.03% 0.07% 0.41% - --------------------------------------- =============== =============== ============== =============== =============== - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period -- 46,984,052 3,065,895 7,228,569 44,655,728 - --------------------------------------- - Annuity reserves units -- 151,082 27,063 0 107,432 - --------------------------------------- - Unit value -- $ 1.09 $ 1.16 $ 1.21 $ 1.19 - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- - Value in accumulation period -- 51,176,298 3,568,586 8,720,950 53,085,113 - --------------------------------------- - Annuity reserves -- 164,563 31,500 -- 127,711 - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period -- 1,319,893 141,266 658,684 1,635,955 - --------------------------------------- - Unit value -- $ 1.09 $ 1.16 $ 1.21 $ 1.19 - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- - Value in accumulation period -- 1,436,290 164,256 793,850 1,942,756 - --------------------------------------- eAnnuity - Units in accumulation period 2,080 15,090 154,689 28,950 -- - --------------------------------------- - Annuity reserves units -- 91,113 130,559 -- -- - --------------------------------------- - Unit value $ 0.98 $ 1.15 $ 1.18 $ 1.33 -- - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- - Value in accumulation period 2,049 17,383 183,150 38,454 -- - --------------------------------------- - Annuity reserves -- 104,948 154,564 -- -- - --------------------------------------- --------------- --------------- -------------- --------------- --------------- - --------------------------------------- NET ASSETS $ 2,049 $ 52,899,482 $ 4,102,056 $ 9,553,254 $ 55,155,580 - --------------------------------------- =============== =============== ============== =============== =============== - --------------------------------------- JANUS ASPEN AMT FIDELITY VIP II WORLDWIDE AMT MID-CAP CONTRAFUND GROWTH PARTNERS GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------- ASSETS: - Investments at Market - Affiliated (cost $8,663,921,685) $ -- $ -- $ -- $ -- - --------------------------------------- - Investments at Market - Unaffiliated (cost $272,049,768) 26,189,792 146,931,530 3,128,730 22,792,808 - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- TOTAL ASSETS 26,189,792 146,931,530 3,128,730 22,792,808 - --------------------------------------- - Liability - Payable to The Lincoln National Life Insurance Company 725 3,984 89 613 - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- NET ASSETS $ 26,189,067 $ 146,927,546 $ 3,128,641 $ 22,792,195 - --------------------------------------- =============== ============= =========== ============ - --------------------------------------- PERCENTAGE OF NET ASSETS 0.20% 1.10% 0.02% 0.17% - --------------------------------------- =============== ============= =========== ============ - --------------------------------------- NET ASSETS ARE REPRESENTED BY: Multifund without GMDB Rider - Units in accumulation period 21,303,355 99,942,030 2,629,473 15,335,744 - --------------------------------------- - Annuity reserves units 89,289 214,122 12,084 0 - --------------------------------------- - Unit value $ 1.15 $ 1.44 $ 1.01 $ 1.46 - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- - Value in accumulation period 24,399,100 143,507,545 2,659,658 22,453,334 - --------------------------------------- - Annuity reserves 102,264 307,460 12,222 -- - --------------------------------------- Multifund with GMDB Rider - Units in accumulation period 1,475,097 1,912,083 448,914 216,008 - --------------------------------------- - Unit value $ 1.14 $ 1.43 $ 1.01 $ 1.46 - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- - Value in accumulation period 1,687,703 2,742,730 453,596 315,934 - --------------------------------------- eAnnuity - Units in accumulation period -- 240,176 3,020 15,122 - --------------------------------------- - Annuity reserves units -- -- -- -- - --------------------------------------- - Unit value -- $ 1.54 $ 1.05 $ 1.52 - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- - Value in accumulation period -- 369,811 3,165 22,927 - --------------------------------------- - Annuity reserves -- -- -- -- - --------------------------------------- --------------- ------------- ----------- ------------ - --------------------------------------- NET ASSETS $ 26,189,067 $ 146,927,546 $ 3,128,641 $ 22,792,195 - --------------------------------------- =============== ============= =========== ============ - ---------------------------------------
See accompanying notes. C-3 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999
LINCOLN NATIONAL LINCOLN NATIONAL AGGRESSIVE LINCOLN NATIONAL CAPITAL GROWTH BOND APPRECIATION COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------ Net Investment Income (Loss): - Dividends from investment income $ 158,354,665 $ 28,785 $ 21,956,116 $ -- - --------------------------------------- - Dividends from net realized gains on investments 550,190,641 -- -- 7,140,107 - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider (119,875,865) (3,044,251) (3,297,140) (11,989,055) - --------------------------------------- Multifund with GMDB Rider (1,929,152) (37,081) (73,092) (258,335) - --------------------------------------- eAnnuity (6,278) (96) (73) (985) - --------------------------------------- ------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) 586,734,011 (3,052,643) 18,585,811 (5,108,268) - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments 324,489,276 5,423,560 498,828 1,715,312 - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments 905,837,058 111,770,714 (33,717,275) 492,291,917 - --------------------------------------- ------------- ---------------- ---------------- ---------------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,230,326,334 117,194,274 (33,218,447) 494,007,229 - --------------------------------------- ------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,817,060,345 $ 114,141,631 $ (14,632,636) $ 488,898,961 - --------------------------------------- ============= ================ ================ ================ - ---------------------------------------
LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL AMERICAN MONEY SOCIAL SPECIAL CENTURY MARKET AWARENESS OPPORTUNITIES VP INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss): - Dividends from investment income $ 7,045,729 $ 12,864,130 $ 8,511,316 $ -- - --------------------------------------- - Dividends from net realized gains on investments -- 73,867,336 81,519,258 -- - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider (1,483,713) (17,827,206) (7,212,380) -- - --------------------------------------- Multifund with GMDB Rider (38,170) (414,938) (94,828) -- - --------------------------------------- eAnnuity (1,414) (339) (25) (11) - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) 5,522,432 68,488,983 82,723,341 (11) - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments -- 85,211,142 26,077,310 -- - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments -- 86,292,911 (155,496,460) 1,230 - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- 171,504,053 (129,419,150) 1,230 - --------------------------------------- ---------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,522,432 $ 239,993,036 $ (46,695,809) $ 1,219 - --------------------------------------- ================ ================ ================ ================ - ---------------------------------------
See accompanying notes. C-4
DELAWARE DELAWARE LINCOLN NATIONAL LINCOLN NATIONAL DELAWARE GROWTH GLOBAL EQUITY- GLOBAL ASSET TREND AND INCOME BOND INCOME ALLOCATION SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss): - Dividends from investment income $ 9,249 $ 2,775,895 $ 775,728 $ 7,657,878 $ 7,939,089 - --------------------------------------- - Dividends from net realized gains on investments -- 11,760,427 92,847 39,187,617 13,076,502 - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider (1,440,489) (1,376,835) (150,399) (9,780,222) (4,732,441) - --------------------------------------- Multifund with GMDB Rider (38,913) (88,259) (6,237) (206,017) (76,982) - --------------------------------------- eAnnuity (130) (43) (11) (34) (518) - --------------------------------------- ------------- ------------- ------------ ---------------- ---------------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) (1,470,283) 13,071,185 711,928 36,859,222 16,205,650 - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments 1,068,429 166,488 (96,041) 26,424,234 11,688,807 - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments 102,528,148 (18,455,277) (1,337,031) (16,625,475) 18,169,135 - --------------------------------------- ------------- ------------- ------------ ---------------- ---------------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 103,596,577 (18,288,789) (1,433,072) 9,798,759 29,857,942 - --------------------------------------- ------------- ------------- ------------ ---------------- ---------------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 102,126,294 $ (5,217,604) $ (721,144) $ 46,657,981 $ 46,063,592 - --------------------------------------- ============= ============= ============ ================ ================ - --------------------------------------- LINCOLN NATIONAL GROWTH AND LINCOLN NATIONAL LINCOLN NATIONAL INCOME INTERNATIONAL MANAGED SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------- Net Investment Income (Loss): - Dividends from investment income $ 44,283,310 $ 17,391,602 $ 26,746,892 - --------------------------------------- - Dividends from net realized gains on investments 171,825,386 107,582,975 43,870,798 - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider (42,911,795) (5,030,733) (9,165,136) - --------------------------------------- Multifund with GMDB Rider (388,236) (62,418) (126,280) - --------------------------------------- eAnnuity (94) (58) (59) - --------------------------------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) 172,808,571 119,881,368 61,326,215 - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments 132,079,312 9,385,470 24,756,791 - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments 353,017,078 (54,003,384) (27,308,300) - --------------------------------------- ---------------- ---------------- ---------------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 485,096,390 (44,617,914) (2,551,509) - --------------------------------------- ---------------- ---------------- ---------------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 657,904,961 $ 75,263,454 $ 58,774,706 - --------------------------------------- ================ ================ ================ - ---------------------------------------
BT BT DELAWARE EQUITY 500 SMALL CAP BARON FIDELITY VIP FIDELITY VIP II SMALL CAP VALUE INDEX INDEX CAPITAL ASSET GROWTH CONTRAFUND SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss): - Dividends from investment income $ 26 $ 329,405 $ 39,076 $ 14 $ -- $ -- - --------------------------------------- - Dividends from net realized gains on investments 10 154,904 111,864 523 -- -- - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider -- (94,411) (5,689) (13,819) (75,334) (37,716) - --------------------------------------- Multifund with GMDB Rider -- (2,642) (267) (2,491) (3,816) (3,781) - --------------------------------------- eAnnuity (10) (370) (1,000) (116) -- -- - --------------------------------------- --------------- --------------- ---------- ------------- ------------ --------------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) 26 386,886 143,984 (15,889) (79,150) (41,497) - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments -- 3,155 5,374 7,131 344 130 - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments (61) 4,076,999 350,000 1,440,979 6,950,425 2,861,396 - --------------------------------------- --------------- --------------- ---------- ------------- ------------ --------------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (61) 4,080,154 355,374 1,448,110 6,950,769 2,861,526 - --------------------------------------- --------------- --------------- ---------- ------------- ------------ --------------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (35) $ 4,467,040 $ 499,358 $ 1,432,221 $ 6,871,619 $ 2,820,029 - --------------------------------------- =============== =============== ========== ============= ============ =============== - --------------------------------------- JANUS ASPEN AMT WORLDWIDE AMT MID-CAP GROWTH PARTNERS GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------- Net Investment Income (Loss): - Dividends from investment income $ 402 $ 23 $ -- - --------------------------------------- - Dividends from net realized gains on investments -- 40 47 - --------------------------------------- - Mortality and expense guarantees: Multifund without GMDB Rider (177,319) (5,112) (24,670) - --------------------------------------- Multifund with GMDB Rider (4,092) (1,804) (473) - --------------------------------------- eAnnuity (836) (12) (44) - --------------------------------------- ------------- ---------- ---------- - --------------------------------------- NET INVESTMENT INCOME (LOSS) (181,845) (6,865) (25,140) - --------------------------------------- Net Realized and Unrealized Gain (Loss) on Investments: - Net realized gain (loss) on investments 9,846 35,446 28,208 - --------------------------------------- - Net change in unrealized appreciation or depreciation on investments 28,562,462 175,774 4,291,153 - --------------------------------------- ------------- ---------- ---------- - --------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 28,572,308 211,220 4,319,361 - --------------------------------------- ------------- ---------- ---------- - --------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 28,390,463 $ 204,355 $4,294,221 - --------------------------------------- ============= ========== ========== - ---------------------------------------
See accompanying notes. C-5 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C STATEMENT OF CHANGES IN NET ASSETS YEARS ENDED DECEMBER 31, 1998 AND 1999
LINCOLN NATIONAL LINCOLN NATIONAL AGGRESSIVE LINCOLN NATIONAL CAPITAL GROWTH BOND APPRECIATION COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT - ---------------------------------------------------------------------------------------------------- NET ASSETS JANUARY 1, 1998 $9,426,807,141 $ 336,529,141 $ 278,721,201 $ 442,449,775 - ------------------------------ Changes From Operations: - Net investment income 744,104,140 41,935,398 28,916,577 42,397,629 - ------------------------------ - Net realized gain (loss) on investments 120,104,936 1,928,124 1,075,607 1,916,291 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 613,207,528 (69,642,626) (4,990,556) 139,176,089 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,477,416,604 (25,779,104) 25,001,628 183,490,009 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 3,097,926,661 105,566,490 173,651,601 239,073,049 - ------------------------------ - Terminated contracts & transfers to annuity reserves (2,472,732,748) (92,755,811) (118,474,365) (118,928,687) - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ 625,193,913 12,810,679 55,177,236 120,144,362 Annuity Reserves: - Transfer from accumulation units & between accounts 12,803,225 350,018 295,541 1,011,628 - ------------------------------ - Annuity Payments (6,362,862) (111,570) (66,581) (215,049) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment (49,352) (74) 1,828 (3,187) - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ 6,391,011 238,374 230,788 793,392 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 631,584,924 13,049,053 55,408,024 120,937,754 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS 2,109,001,528 (12,730,051) 80,409,652 304,427,763 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 11,535,808,669 323,799,090 359,130,853 746,877,538 - ------------------------------ Changes From Operations: - Net investment income (loss) 586,734,011 (3,052,643) 18,585,811 (5,108,268) - ------------------------------ - Net realized gain (loss) on investments 324,489,276 5,423,560 498,828 1,715,312 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 905,837,058 111,770,714 (33,717,275) 492,291,917 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,817,060,345 114,141,631 (14,632,636) 488,898,961 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 4,031,602,338 79,369,638 103,853,425 1,006,577,563 - ------------------------------ - Terminated contracts & transfers to annuity reserves (3,984,899,955) (125,302,224) (148,509,116) (404,300,360) - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ 46,702,383 (45,932,586) (44,655,691) 602,277,203 Annuity Reserves: - Transfer from accumulation units & between accounts 13,695,335 5,211 180,951 2,609,328 - ------------------------------ - Annuity Payments (8,452,725) (124,675) (91,107) (567,970) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment (148,713) 455 1,044 (10,030) - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ 5,093,897 (119,009) 90,888 2,031,328 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 51,796,280 (46,051,595) (44,564,803) 604,308,531 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 1,868,856,625 68,090,036 (59,197,439) 1,093,207,492 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $13,404,665,294 $ 391,889,126 $ 299,933,414 $ 1,840,085,030 - ------------------------------ ============== ================ ================ ================ - ------------------------------
See accompanying notes. C-6
DELAWARE DELAWARE LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL DELAWARE GROWTH GLOBAL EQUITY- GLOBAL ASSET GROWTH AND TREND AND INCOME BOND INCOME ALLOCATION INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS JANUARY 1, 1998 $55,454,713 $ 94,235,368 $12,405,258 $ 800,317,384 $ 435,490,107 $ 3,491,513,034 - ------------------------------ Changes From Operations: - Net investment income 489,960 6,640,801 645,968 27,749,902 45,633,831 268,901,661 - ------------------------------ - Net realized gain (loss) on investments 741,866 60,877 (7,472) 8,109,113 4,771,427 55,304,330 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 9,589,306 4,477,834 295,306 58,105,437 1,778,860 334,917,754 - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 10,821,132 11,179,512 933,802 93,964,452 52,184,118 659,123,745 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 55,720,878 90,243,467 8,321,486 256,506,361 89,524,793 696,928,591 - ------------------------------ - Terminated contracts & transfers to annuity reserves (33,204,931) (41,860,904) (5,970,687) (184,405,391) (95,521,824) (709,130,485) - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ 22,515,947 48,382,563 2,350,799 72,100,970 (5,997,031) (12,201,894) Annuity Reserves: - Transfer from accumulation units & between accounts 48,418 506,606 31,917 686,673 490,958 6,311,160 - ------------------------------ - Annuity Payments (7,936) (108,990) (7,766) (479,908) (179,454) (3,840,740) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment -- (448) 78 3,201 (14,716) 55,053 - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ 40,482 397,168 24,229 209,966 296,788 2,525,473 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 22,556,429 48,779,731 2,375,028 72,310,936 (5,700,243) (9,676,421) - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS 33,377,561 59,959,243 3,308,830 166,275,388 46,483,875 649,447,324 - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 88,832,274 154,194,611 15,714,088 966,592,772 481,973,982 4,140,960,358 - ------------------------------ Changes From Operations: - Net investment income (loss) (1,470,283) 13,071,185 711,928 36,859,222 16,205,650 172,808,571 - ------------------------------ - Net realized gain (loss) on investments 1,068,429 166,488 (96,041) 26,424,234 11,688,807 132,079,312 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 102,528,148 (18,455,277) (1,337,031) (16,625,475) 18,169,135 353,017,078 - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 102,126,294 (5,217,604) (721,144) 46,657,981 46,063,592 657,904,961 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 215,228,368 40,264,328 5,375,055 229,184,806 75,016,170 746,492,736 - ------------------------------ - Terminated contracts & transfers to annuity reserves (80,756,572) (71,511,116) (6,031,258) (286,133,549) (122,893,414) (989,819,625) - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ 134,471,796 (31,246,788) (656,203) (56,948,743) (47,877,244) (243,326,889) Annuity Reserves: - Transfer from accumulation units & between accounts 235,417 178,082 55,542 1,327,758 1,095,474 5,170,679 - ------------------------------ - Annuity Payments (16,883) (162,863) (12,232) (657,877) (299,258) (4,945,413) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment (584) 141 76 (988) (66,880) (146,679) - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ 217,950 15,360 43,386 668,893 729,336 78,587 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 134,689,746 (31,231,428) (612,817) (56,279,850) (47,147,908) (243,248,302) - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 236,816,040 (36,449,032) (1,333,961) (9,621,869) (1,084,316) 414,656,659 - ------------------------------ ----------- ------------ ----------- ---------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $325,648,314 $117,745,579 $14,380,127 $ 956,970,903 $ 480,889,666 $ 4,555,617,017 - ------------------------------ =========== ============ =========== ================ =============== =============== - ------------------------------ LINCOLN NATIONAL LINCOLN NATIONAL INTERNATIONAL MANAGED SUBACCOUNT SUBACCOUNT - ------------------------------ NET ASSETS JANUARY 1, 1998 $ 461,096,276 $ 847,194,482 - ------------------------------ Changes From Operations: - Net investment income 18,736,768 106,628,928 - ------------------------------ - Net realized gain (loss) on investments 13,148,742 6,891,535 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 26,816,729 (15,219,767) - ------------------------------ --------------- ----------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 58,702,239 98,300,696 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 159,551,094 162,637,864 - ------------------------------ - Terminated contracts & transfers to annuity reserves (185,524,256) (155,726,195) - ------------------------------ --------------- ----------------- - ------------------------------ (25,973,162) 6,911,669 Annuity Reserves: - Transfer from accumulation units & between accounts 160,319 605,334 - ------------------------------ - Annuity Payments (133,802) (408,409) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment (14,795) (25,649) - ------------------------------ --------------- ----------------- - ------------------------------ 11,722 171,276 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (25,961,440) 7,082,945 - ------------------------------ --------------- ----------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS 32,740,799 105,383,641 - ------------------------------ --------------- ----------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 493,837,075 952,578,123 - ------------------------------ Changes From Operations: - Net investment income (loss) 119,881,368 61,326,215 - ------------------------------ - Net realized gain (loss) on investments 9,385,470 24,756,791 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments (54,003,384) (27,308,300) - ------------------------------ --------------- ----------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 75,263,454 58,774,706 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 206,951,775 118,914,778 - ------------------------------ - Terminated contracts & transfers to annuity reserves (260,185,570) (219,107,295) - ------------------------------ --------------- ----------------- - ------------------------------ (53,233,795) (100,192,517) Annuity Reserves: - Transfer from accumulation units & between accounts 51,788 535,385 - ------------------------------ - Annuity Payments (150,827) (433,896) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment 19,635 16,287 - ------------------------------ --------------- ----------------- - ------------------------------ (79,404) 117,776 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (53,313,199) (100,074,741) - ------------------------------ --------------- ----------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 21,950,255 (41,300,035) - ------------------------------ --------------- ----------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $ 515,787,330 $ 911,278,088 - ------------------------------ =============== ================= - ------------------------------
See accompanying notes. C-7 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) YEARS ENDED DECEMBER 31, 1998 AND 1999
LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL AMERICAN MONEY SOCIAL SPECIAL CENTURY MARKET AWARENESS OPPORTUNITIES VP INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ---------------------------------------------------------------------------------------------------------- NET ASSETS JANUARY 1, 1998 $ 87,465,884 $ 1,245,772,271 $ 838,162,247 $ -- - ------------------------------ Changes From Operations: - Net investment income 4,102,249 65,719,879 85,604,589 -- - ------------------------------ - Net realized gain (loss) on investments -- 11,779,014 14,385,482 -- - ------------------------------ - Net change in unrealized appreciation or depreciation on investments -- 179,689,808 (51,786,646) -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,102,249 257,188,701 48,203,425 -- - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 204,102,322 669,312,601 186,786,064 -- - ------------------------------ - Terminated contracts & transfers to annuity reserves (176,371,981) (351,797,764) (203,059,467) -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ 27,730,341 317,514,837 (16,273,403) -- Annuity Reserves: - Transfer from accumulation units & between accounts 62,528 1,857,256 384,869 -- - ------------------------------ - Annuity Payments (50,178) (558,894) (193,585) -- - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment 1,044 (25,388) (26,299) -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ 13,394 1,272,974 164,985 -- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 27,743,735 318,787,811 (16,108,418) -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS 31,845,984 575,976,512 32,095,007 -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 119,311,868 1,821,748,783 870,257,254 -- - ------------------------------ Changes From Operations: - Net investment income (loss) 5,522,432 68,488,983 82,723,341 (11) - ------------------------------ - Net realized gain (loss) on investments -- 85,211,142 26,077,310 -- - ------------------------------ - Net change in unrealized appreciation or depreciation on investments -- 86,292,911 (155,496,460) 1,230 - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,522,432 239,993,036 (46,695,809) 1,219 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 302,648,002 447,789,509 139,945,983 2,394 - ------------------------------ - Terminated contracts & transfers to annuity reserves (249,268,452) (642,066,963) (336,167,020) -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ 53,379,550 (194,277,454) (196,221,037) 2,394 Annuity Reserves: - Transfer from accumulation units & between accounts 89,561 1,392,420 114,215 -- - ------------------------------ - Annuity Payments (58,064) (679,764) (227,230) -- - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment 23,852 10,182 3,422 -- - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ 55,349 722,838 (109,593) -- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 53,434,899 (193,554,616) (196,330,630) 2,394 - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 58,957,331 46,438,420 (243,026,439) 3,613 - ------------------------------ ----------------- ----------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $ 178,269,199 $ 1,868,187,203 $ 627,230,815 $ 3,613 - ------------------------------ ================= ================= =============== =============== - ------------------------------
See accompanying notes. C-8
BT BT DELAWARE EQUITY 500 SMALL CAP BARON FIDELITY VIP SMALL CAP VALUE INDEX INDEX CAPITAL ASSET GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS JANUARY 1, 1998 $ -- $ -- $ -- $ -- $ -- - ------------------------------ Changes From Operations: - Net investment income -- -- -- -- -- - ------------------------------ - Net realized gain (loss) on investments -- -- -- -- -- - ------------------------------ - Net change in unrealized appreciation or depreciation on investments -- -- -- -- -- - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS -- -- -- -- -- - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases -- -- -- -- -- - ------------------------------ - Terminated contracts & transfers to annuity reserves -- -- -- -- -- - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ -- -- -- -- -- Annuity Reserves: - Transfer from accumulation units & between accounts -- -- -- -- -- - ------------------------------ - Annuity Payments -- -- -- -- -- - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment -- -- -- -- -- - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ -- -- -- -- -- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS -- -- -- -- -- - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS -- -- -- -- -- - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 -- -- -- -- -- - ------------------------------ Changes From Operations: - Net investment income (loss) 26 386,886 143,984 (15,889) (79,150) - ------------------------------ - Net realized gain (loss) on investments -- 3,155 5,374 7,131 344 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments (61) 4,076,999 350,000 1,440,979 6,950,425 - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (35) 4,467,040 499,358 1,432,221 6,871,619 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 2,084 55,129,061 4,350,077 9,772,806 55,106,803 - ------------------------------ - Terminated contracts & transfers to annuity reserves -- (6,850,603) (776,038) (1,651,773) (6,935,056) - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ 2,084 48,278,458 3,574,039 8,121,033 48,171,747 Annuity Reserves: - Transfer from accumulation units & between accounts -- 157,204 28,959 -- 114,909 - ------------------------------ - Annuity Payments -- (3,940) (685) -- (2,272) - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment -- 720 385 -- (423) - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ -- 153,984 28,659 -- 112,214 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 2,084 48,432,442 3,602,698 8,121,033 48,283,961 - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 2,049 52,899,482 4,102,056 9,553,254 55,155,580 - ------------------------------ --------------- --------------- ----------------- ----------------- ----------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $ 2,049 $ 52,899,482 $ 4,102,056 $ 9,553,254 $ 55,155,580 - ------------------------------ =============== =============== ================= ================= ================= - ------------------------------ JANUS ASPEN AMT FIDELITY VIP II WORLDWIDE AMT MID-CAP CONTRAFUND GROWTH PARTNERS GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------ NET ASSETS JANUARY 1, 1998 $ -- $ -- $ -- $ -- - ------------------------------ Changes From Operations: - Net investment income -- -- -- -- - ------------------------------ - Net realized gain (loss) on investments -- -- -- -- - ------------------------------ - Net change in unrealized appreciation or depreciation on investments -- -- -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS -- -- -- -- - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases -- -- -- -- - ------------------------------ - Terminated contracts & transfers to annuity reserves -- -- -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ -- -- -- -- Annuity Reserves: - Transfer from accumulation units & between accounts -- -- -- -- - ------------------------------ - Annuity Payments -- -- -- -- - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment -- -- -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ -- -- -- -- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS -- -- -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ TOTAL INCREASE IN NET ASSETS -- -- -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1998 -- -- -- -- - ------------------------------ Changes From Operations: - Net investment income (loss) (41,497) (181,845) (6,865) (25,140) - ------------------------------ - Net realized gain (loss) on investments 130 9,846 35,446 28,208 - ------------------------------ - Net change in unrealized appreciation or depreciation on investments 2,861,396 28,562,462 175,774 4,291,153 - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,820,029 28,390,463 204,355 4,294,221 - ------------------------------ Change From Unit Transactions: Accumulation Units: - Contract purchases 26,650,738 136,061,158 4,070,627 22,844,454 - ------------------------------ - Terminated contracts & transfers to annuity reserves (3,372,134) (17,756,939) (1,158,398) (4,346,480) - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ 23,278,604 118,304,219 2,912,229 18,497,974 Annuity Reserves: - Transfer from accumulation units & between accounts 92,347 247,986 12,119 -- - ------------------------------ - Annuity Payments (2,010) (15,697) (62) -- - ------------------------------ - Receipt (reimbursement) of mortality guarantee adjustment 97 575 -- -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ 90,434 232,864 12,057 -- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 23,369,038 118,537,083 2,924,286 18,497,974 - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 26,189,067 146,927,546 3,128,641 22,792,195 - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ NET ASSETS AT DECEMBER 31, 1999 $ 26,189,067 $ 146,927,546 $ 3,128,641 $ 22,792,195 - ------------------------------ =============== =============== =============== =============== - ------------------------------
See accompanying notes. C-9 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES & ACCOUNT INFORMATION THE VARIABLE ACCOUNT: Lincoln National Variable Annuity Account C (Variable Account) is a segregated investment account of the Lincoln National Life Insurance Company (the Company) and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as a unit investment trust. The Variable Account consists of two products, Multifund and eAnnuity. The Multifund product is an annuity contract offering a guaranteed minimum death benefit (GMBD) rider option. Effective August 20, 1998, the eAnnuity product became available to clients of the Company. The eAnnuity product is an annuity contract that is sold through the internet. 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 prepared in accordance with accounting principles generally accepted in the United States for unit investment trusts. INVESTMENTS: The assets of the Variable Accounts are divided into variable sub-accounts each of which is invested in shares of twenty four portfolios (the Funds) of nine diviersified open-end management investment companies, each portfolio with its own investment objective. The Funds are: Lincoln National Lincoln National Aggressive Growth Fund Lincoln National Bond Fund Lincoln National Capital Appreciation Fund Lincoln National Equity-Income Fund Lincoln National Global Asset Allocation Fund Lincoln National Growth and Income Fund Lincoln National International Fund Lincoln National Managed Fund Lincoln National Money Market Fund Lincoln National Social Awareness Fund Lincoln National Special Opportunities Fund Delaware Group Premium Fund, Inc. Global Bond Series Growth and Income Series Trend Series Small Cap Value Series American Century Variable Portfolios, Inc. VP International BT Insurance Funds Trust Equity 500 Index Fund Small Cap Index Fund Baron Capital Asset Fund Trust Fidelity Variable Insurance Product Fund Service Class Growth Portfolio Fidelity Variable Insurance Product Fund II Service Class Contrafund Portfolio Janus Aspen Series, Worldwide Growth Fund Neuberger Berman Advisors Management Trust (AMT) AMT Partners Fund AMT Mid-Cap Growth Fund 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 5%. Reserves on contracts involving life contingencies are calculated using a modification of the 1971 Individual Annuitant Mortality Table and an assumed investment rate of 5%. 2. MORTALITY AND EXPENSE GUARANTEES & OTHER TRANSACTIONS WITH AFFILIATE Amounts are paid to the Company for mortality and expense guarantees at a percentage of the current value of the Variable Account each day. The rates are C-10 as follows for the two contract types and the corresponding rider options within the Variable Account: - Multifund at a daily rate of .00274525% (1.002% on an annual basis). - Multifund with GMDB rider at a daily rate of .00356712328% (1.302% on an annual basis). - eAnnuity at a daily rate of .001506849% (.55% on an annual basis). In addition, amounts retained by the Company from the proceeds of the sales of annuity contracts for contract charges and surrender charges were as follows during 1999: ---------------------------------------------------- Lincoln National Aggressive Growth Subaccount $ 116,828 --------------------------------------- Lincoln National Bond Subaccount 1,593,037 --------------------------------------- Lincoln National Capital Appreciation Subaccount 500,263 --------------------------------------- Delaware Trend Subaccount 54,577 --------------------------------------- Delaware Growth and Income Subaccount 81,940 --------------------------------------- Delaware Global Bond Subaccount 5,049 --------------------------------------- Lincoln National Equity-Income Subaccount 462,699 --------------------------------------- Lincoln National Global Asset Allocation Subaccount 639,027 --------------------------------------- Lincoln National Growth and Income Subaccount 5,623,955 --------------------------------------- Lincoln National International Subaccount 705,420 --------------------------------------- Lincoln National Managed Subaccount 1,189,797 --------------------------------------- Lincoln National Money Market Subaccount 1,358,215 --------------------------------------- Lincoln National Social Awareness Subaccount 2,743,498 --------------------------------------- Lincoln National Special Opportunities Subaccount 1,132,653 --------------------------------------- American Century VP International Subaccount -- --------------------------------------- Delaware Small Cap Value Subaccount -- --------------------------------------- BT Equity 500 Index Subaccount 1,193 --------------------------------------- BT Small Cap Index Subaccount 26 --------------------------------------- Baron Capital Asset Subaccount 46 --------------------------------------- Fidelity VIP Growth Subaccount 870 --------------------------------------- Fidelity VIP II Contrafund Subaccount 160 --------------------------------------- Janus Aspen Worldwide Growth Subaccount 3,740 --------------------------------------- AMT Partners Subaccount 8 --------------------------------------- AMT Mid-Cap Growth Subaccount 73 --------------------------------------- ----------- --------------------------------------- $16,213,074 ===========
Accordingly, the Company is responsible for all sales, general and administrative expenses applicable to the Variable Account. C-11 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS CONTINUED 3. NET ASSETS The following is a summary of net assets owned at December 31, 1999.
LINCOLN NATIONAL LINCOLN NATIONAL AGGRESSIVE LINCOLN NATIONAL CAPITAL GROWTH BOND APPRECIATION COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT - ---------------------------------------------------------------------------------------------------- Unit Transactions: Accumulation units $5,715,479,238 $ 194,780,574 $ 149,041,322 $ 1,039,817,677 - ------------------------------ Annuity Reserves 36,082,815 407,421 626,395 3,474,851 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ 5,751,562,053 195,187,995 149,667,717 1,043,292,528 Accumulated net investment income (loss) 2,637,154,895 47,549,811 165,644,358 50,311,547 - ------------------------------ Accumulated net realized gain (loss) on investments 546,886,405 10,806,107 1,331,899 4,896,762 - ------------------------------ Net unrealized appreciation or depreciation on investments 4,469,061,941 138,345,213 (16,710,560) 741,584,193 - ------------------------------ -------------- ---------------- ---------------- ---------------- - ------------------------------ $13,404,665,294 $ 391,889,126 $ 299,933,414 $ 1,840,085,030 ============== ================ ================ ================
LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL AMERICAN MONEY SOCIAL SPECIAL CENTURY MARKET AWARENESS OPPORTUNITIES VP INTERNATIONAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------- Unit Transactions: Accumulation units $ 113,146,268 $ 871,634,600 $ 170,516,407 $ 2,394 - ------------------------------ Annuity Reserves 170,949 3,739,360 664,867 -- - ------------------------------ ----------------- ----------------- --------------- ----------------- - ------------------------------ 113,317,217 875,373,960 171,181,274 2,394 Accumulated net investment income (loss) 64,951,982 206,496,251 349,004,215 (11) - ------------------------------ Accumulated net realized gain (loss) on investments -- 101,467,641 78,460,450 -- - ------------------------------ Net unrealized appreciation or depreciation on investments -- 684,849,351 28,584,876 1,230 - ------------------------------ ----------------- ----------------- --------------- ----------------- - ------------------------------ $ 178,269,199 $ 1,868,187,203 $ 627,230,815 $ 3,613 ================= ================= =============== =================
C-12
DELAWARE DELAWARE LINCOLN NATIONAL LINCOLN NATIONAL LINCOLN NATIONAL DELAWARE GROWTH GLOBAL EQUITY- GLOBAL ASSET GROWTH AND TREND AND INCOME BOND INCOME ALLOCATION INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------------------------- Unit Transactions: Accumulation units $205,902,218 $ 99,862,464 $13,460,514 $ 551,099,047 $ 197,997,456 $ 1,296,479,207 - ------------------------------ Annuity Reserves 258,432 988,451 76,165 2,545,529 1,865,171 18,553,024 - ------------------------------ ------------ ------------ ----------- ---------------- --------------- --------------- - ------------------------------ 206,160,650 100,850,915 13,536,679 553,644,576 199,862,627 1,315,032,231 Accumulated net investment income (loss) (1,048,083) 21,573,274 1,886,111 80,901,144 142,907,158 946,181,079 - ------------------------------ Accumulated net realized gain (loss) on investments 2,143,442 349,294 (16,761) 35,771,977 19,507,108 214,260,030 - ------------------------------ Net unrealized appreciation or depreciation on investments 118,392,305 (5,027,904) (1,025,902) 286,653,206 118,612,773 2,080,143,677 - ------------------------------ ------------ ------------ ----------- ---------------- --------------- --------------- - ------------------------------ $325,648,314 $117,745,579 $14,380,127 $ 956,970,903 $ 480,889,666 $ 4,555,617,017 ============ ============ =========== ================ =============== =============== LINCOLN NATIONAL LINCOLN NATIONAL INTERNATIONAL MANAGED SUBACCOUNT SUBACCOUNT - ------------------------------ Unit Transactions: Accumulation units $ 275,027,477 $ 265,571,226 - ------------------------------ Annuity Reserves 524,126 1,557,862 - ------------------------------ --------------- ----------------- - ------------------------------ 275,551,603 267,129,088 Accumulated net investment income (loss) 166,245,199 394,370,350 - ------------------------------ Accumulated net realized gain (loss) on investments 34,745,155 43,073,667 - ------------------------------ Net unrealized appreciation or depreciation on investments 39,245,373 206,704,983 - ------------------------------ --------------- ----------------- - ------------------------------ $ 515,787,330 $ 911,278,088 =============== =================
BT BT DELAWARE EQUITY 500 SMALL CAP BARON FIDELITY VIP SMALL CAP VALUE INDEX INDEX CAPITAL ASSET GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------------------------- Unit Transactions: Accumulation units $ 2,084 $ 48,278,458 $ 3,574,039 $ 8,121,033 $ 48,171,747 - ------------------------------ Annuity Reserves -- 153,984 28,659 -- 112,214 - ------------------------------ --------------- --------------- --------------- --------------- --------------- - ------------------------------ 2,084 48,432,442 3,602,698 8,121,033 48,283,961 Accumulated net investment income (loss) 26 386,886 143,984 (15,889) (79,150) - ------------------------------ Accumulated net realized gain (loss) on investments -- 3,155 5,374 7,131 344 - ------------------------------ Net unrealized appreciation or depreciation on investments (61) 4,076,999 350,000 1,440,979 6,950,425 - ------------------------------ --------------- --------------- --------------- --------------- --------------- - ------------------------------ $ 2,049 $ 52,899,482 $ 4,102,056 $ 9,553,254 $ 55,155,580 =============== =============== =============== =============== =============== JANUS ASPEN AMT FIDELITY VIP II WORLDWIDE AMT MID-CAP CONTRAFUND GROWTH PARTNERS GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------ Unit Transactions: Accumulation units $ 23,278,604 $ 118,304,219 $ 2,912,229 $ 18,497,974 - ------------------------------ Annuity Reserves 90,434 232,864 12,057 -- - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ 23,369,038 118,537,083 2,924,286 18,497,974 Accumulated net investment income (loss) (41,497) (181,845) (6,865) (25,140) - ------------------------------ Accumulated net realized gain (loss) on investments 130 9,846 35,446 28,208 - ------------------------------ Net unrealized appreciation or depreciation on investments 2,861,396 28,562,462 175,774 4,291,153 - ------------------------------ --------------- --------------- --------------- --------------- - ------------------------------ $ 26,189,067 $ 146,927,546 $ 3,128,641 $ 22,792,195 =============== =============== =============== ===============
C-13 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS CONTINUED 4. PURCHASES AND SALES OF INVESTMENTS The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 1999.
AGGREGATE AGGREGATE COST OF PROCEEDS PURCHASES FROM SALES - ----------------------------------------------------------------------- Lincoln National Aggressive Growth Fund $ 6,028,519 $ 55,130,756 - --------------------------------------- Lincoln National Bond Fund 38,500,775 64,481,373 - --------------------------------------- Lincoln National Capital Appreciation Fund 604,186,996 4,956,478 - --------------------------------------- Delaware Trend Fund 138,128,850 4,903,001 - --------------------------------------- Delaware Growth and Income Fund 20,360,413 38,521,681 - --------------------------------------- Delaware Global Bond Fund 3,576,548 3,477,470 - --------------------------------------- Lincoln National Equity-Income Fund 72,996,722 92,417,669 - --------------------------------------- Lincoln National Global Asset Allocation Fund 27,030,783 57,973,067 - --------------------------------------- Lincoln National Growth and Income Fund 241,550,485 311,978,507 - --------------------------------------- Lincoln National International Fund 195,449,997 128,881,216 - --------------------------------------- Lincoln National Managed Fund 73,874,151 112,623,748 - --------------------------------------- Lincoln National Money Market Fund 130,925,728 71,966,965 - --------------------------------------- Lincoln National Social Awareness Fund 144,863,310 269,927,268 - --------------------------------------- Lincoln National Special Opportunities Fund 121,061,001 234,674,606 - --------------------------------------- American Century VP International Fund 2,388 5 - --------------------------------------- Delaware Small Cap Value Fund 2,116 6 - --------------------------------------- BT Equity 500 Index Fund 48,872,301 51,526 - --------------------------------------- BT Small Cap Index Fund 3,842,907 96,117 - --------------------------------------- Baron Capital Asset Fund 8,202,972 97,562 - --------------------------------------- Fidelity VIP Growth Fund 48,208,799 2,468 - --------------------------------------- Fidelity VIP II Contrafund Fund 23,329,429 1,163 - --------------------------------------- Janus Aspen Worldwide Growth Fund 118,404,561 45,339 - --------------------------------------- AMT Partners Fund 3,510,852 593,342 - --------------------------------------- AMT Mid-Cap Growth Fund 18,770,338 296,891 - --------------------------------------- -------------- -------------- - --------------------------------------- $2,091,680,941 $1,453,098,224 ============== ==============
C-14 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS CONTINUED 5. INVESTMENTS The following is a summary of investments owned at December 31, 1999.
NET SHARES ASSET VALUE OF COST OF OUTSTANDING VALUE SHARES SHARES - --------------------------------------------------------------------------------------------- Lincoln National Aggressive Growth Fund 20,584,360 $19.04 $ 391,899,766 $ 253,554,553 - --------------------------------------- Lincoln National Bond Fund 26,228,769 11.44 299,941,713 316,652,273 - --------------------------------------- Lincoln National Capital Appreciation Fund 58,481,206 31.47 1,840,135,585 1,098,551,392 - --------------------------------------- Delaware Trend Fund 9,674,899 33.66 325,657,104 207,264,799 - --------------------------------------- Delaware Growth and Income Fund 6,918,263 17.02 117,748,834 122,776,738 - --------------------------------------- Delaware Global Bond Fund 1,477,956 9.73 14,380,526 15,406,428 - --------------------------------------- Lincoln National Equity-Income Fund 43,408,197 22.05 956,997,134 670,343,928 - --------------------------------------- Lincoln National Global Asset Allocation Fund 28,636,521 16.79 480,902,873 362,290,100 - --------------------------------------- Lincoln National Growth and Income Fund 88,101,926 51.71 4,555,742,279 2,475,598,602 - --------------------------------------- Lincoln National International Fund 35,882,754 14.37 515,801,508 476,556,135 - --------------------------------------- Lincoln National Managed Fund 48,192,378 18.91 911,303,158 704,598,175 - --------------------------------------- Lincoln National Money Market Fund 17,827,413 10.00 178,274,136 178,274,136 - --------------------------------------- Lincoln National Social Awareness Fund 42,180,254 44.29 1,868,238,589 1,183,389,238 - --------------------------------------- Lincoln National Special Opportunities Fund 22,223,274 28.22 627,247,954 598,663,078 - --------------------------------------- American Century VP International Fund 289 12.50 3,613 2,383 - --------------------------------------- Delaware Small Cap Value Fund 133 15.36 2,049 2,110 - --------------------------------------- BT Equity 500 Index Fund 3,484,910 15.18 52,900,929 48,823,930 - --------------------------------------- BT Small Cap Index Fund 353,331 11.61 4,102,164 3,752,164 - --------------------------------------- Baron Capital Asset Fund 537,621 17.77 9,553,520 8,112,541 - --------------------------------------- Fidelity VIP Growth Fund 1,006,516 54.80 55,157,100 48,206,675 - --------------------------------------- Fidelity VIP II Contrafund Fund 899,993 29.10 26,189,792 23,328,396 - --------------------------------------- Janus Aspen Worldwide Growth Fund 3,077,100 47.75 146,931,530 118,369,068 - --------------------------------------- AMT Partners Fund 159,305 19.64 3,128,730 2,952,956 - --------------------------------------- AMT Mid-Cap Growth Fund 937,975 24.30 22,792,808 18,501,655 --------------- -------------- - --------------------------------------- $13,405,033,394 $8,935,971,453 --------------- --------------
6. NEW INVESTMENT FUNDS AND FUND NAME CHANGES During 1999, the Delaware Small Cap Value Series, American Century VP International, BT Equity 500 Index Fund, BT Small Cap Index Fund, Baron Capital Asset Fund, Fidelity VIP Growth Portfolio, Fidelity VIP II Contrafund Portfolio, Janus Aspen Worldwide Growth Fund, AMT Partners Fund and AMT Mid-Cap Growth Fund became available as investment options for Variable Account contract owners. During 1999 the Delaware Decatur Total Return Series changed its name to the Delaware Growth and Income Series. C-15 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors of The Lincoln National Life Insurance Company and Contract Owners of Lincoln National Variable Annuity Account C We have audited the accompanying statement of assets and liability of Lincoln National Variable Annuity Account C ("Variable Account") (comprised of the Lincoln National Aggressive Growth, Lincoln National Bond, Lincoln National Capital Appreciation, Delaware Trend, Delaware Growth and Income, Delaware Global Bond, Lincoln National Equity-Income, Lincoln National Global Asset Allocation, Lincoln National Growth and Income, Lincoln National International, Lincoln National Managed, Lincoln National Money Market, Lincoln National Social Awareness, Lincoln National Special Opportunities, American Century VP International, Delaware Small Cap Value, Banker's Trust Equity 500 Index, Banker's Trust Small Cap Index, Baron Capital Asset, Fidelity VIP Growth, Fidelity VIP II Contrafund, Janus Aspen Worldwide Growth, Nueberger Berman Advisers Management Trust (AMT) Partners, and Nueberger Berman Advisers Management Trust (AMT) Mid-Cap Growth subaccounts), as of December 31, 1999, and the related statement of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements based on our 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. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting the Lincoln National Variable Annuity Account C at December 31, 1999, the results of their operations for the year then ended, and changes in their net assets for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States. [/S/ ERNST & YOUNG LLP] Fort Wayne, Indiana March 24, 2000 C-16 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY BALANCE SHEETS -- STATUTORY BASIS
DECEMBER 31 1999 1998 --------- --------- (IN MILLIONS) --------------------- 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 - ------------------------------------------------------------ ========= =========
See accompanying notes. S-1 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- STATUTORY BASIS
YEAR ENDED DECEMBER 31 1999 1998 1997 --------- --------- -------- (IN MILLIONS) -------------------------------- 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 - ------------------------------------------------------------ ========= ========= ========
See accompanying notes. S-2 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
YEAR ENDED DECEMBER 31 1999 1998 1997 -------- -------- -------- (IN MILLIONS) ------------------------------ 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 - ------------------------------------------------------------ ======== ======== ========
See accompanying notes. S-3 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
YEAR ENDED DECEMBER 31 1999 1998 1997 --------- ---------- --------- (IN MILLIONS) ---------------------------------- 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 - ------------------------------------------------------------ ========= ========== =========
See accompanying notes. S-4 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 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 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:
CAPITAL AND SURPLUS NET INCOME (LOSS) ---------------------------------------------------------------------- DECEMBER 31 YEAR ENDED DECEMBER 31 1999 1998 1999 1998 1997 ---------------------------------------------------------------------- (IN MILLIONS) ---------------------------------------------------------------------- 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 ----------------------------------------- ========= ========= ========= ========= ======
S-7 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 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 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 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:
YEAR ENDED DECEMBER 31 1999 1998 1997 -------------------------------------- (IN MILLIONS) -------------------------------------- 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 ------------------------------------------------------------ ======== ======== ========
S-11 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:
COST OR GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------------------------------------------------------- (IN MILLIONS) ----------------------------------------------------------- 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 ========= ======== ====== =========
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:
COST OR AMORTIZED FAIR COST VALUE ------------------------- (IN MILLIONS) ------------------------- 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 ------------------------------------------------------------ ========= =========
S-12 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:
COST OR GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ----------------------------------------- (IN MILLIONS) ----------------------------------------- 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 ----------------------------------------
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 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:
DECEMBER 31 1999 1998 ------------------- (IN MILLIONS) ------------------- 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 ------------------------------------------------------------ ====== ======
Net realized capital gains are reported net of federal income taxes and amounts transferred to the IMR as follows:
1999 1998 1997 -------------------------------- (IN MILLIONS) -------------------------------- 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 ------------------------------------------------------------ ====== ====== ======
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 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):
DECEMBER 31, 1999 ---------------------------------- FIRST PENN LNH&C LNRAC LNY ---------------------------------- 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 --------------------------------------------------------- ======== ====== ====== ========
YEAR ENDED DECEMBER 31, 1999 ----------------------------------------------- FIRST PENN LNH&C LNRAC LNY ----------------------------------------------- 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 ----------------------------------------------------------- ====== ====== ====== ========
DECEMBER 31, 1998 ---------------------------------- FIRST PENN LNH&C LNRAC LNY ---------------------------------- 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 ---------------------------------------------------------- ======== ====== ====== ========
S-15 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED) 4. SUBSIDIARIES (CONTINUED)
YEAR ENDED DECEMBER 31, 1998 --------------------------------- FIRST PENN LNH&C LNRAC LNY --------------------------------- 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) ----------------------------------------------------------- ====== ======= ====== ========
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 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:
DECEMBER 31 1999 1998 ----------------------- (IN MILLIONS) ----------------------- Insurance ceded $5,340.0 $4,081.8 ------------------------------------------------------------ Amounts recoverable from other insurers 81.2 79.9 ------------------------------------------------------------
Reinsurance transactions, excluding assumption reinsurance, included in the income statement caption, "Premiums and deposits," are as follows:
YEAR ENDED DECEMBER 31 1999 1998 1997 ------------------------------------ (IN MILLIONS) ------------------------------------ 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 ------------------------------------------------------------ ======== ======== ======
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:
DECEMBER 31 1999 1998 ------------------------- (IN MILLIONS) ------------------------- 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 ========= =========
S-17 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:
DECEMBER 31, 1999 --------------------------------- NET OF GROSS LOADING LOADING --------------------------------- (IN MILLIONS) --------------------------------- 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 ===== ===== =====
DECEMBER 31, 1998 --------------------------------- NET OF GROSS LOADING LOADING --------------------------------- (IN MILLIONS) --------------------------------- 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) ===== ===== =====
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:
AMOUNT PERCENT ----------------------- (IN MILLIONS) ----------------------- 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 ------------------------------------------------------------ =========
S-18 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):
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 ----------- -------------- -------------- ------------- ----------- --------------- January 5, 1998 $ 500.0 $ 500.0 $ 32.8 $ 65.1 $ -- ------------------------------- December 18, 1998 750.0 750.0 46.7 46.7 -- -------------------------------
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 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 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): 2000 $ 28.7 -------------------------------- 2001 28.8 -------------------------------- 2002 27.5 -------------------------------- 2003 26.2 -------------------------------- 2004 26.5 -------------------------------- Thereafter 123.5 -------------------------------- ------ $261.2 ======
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 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 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 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:
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) ----------------------------------------------------- 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 ======== ======== ===== ====== ===== =====
S-24 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:
INTEREST RATE CAPS SWAPTIONS ----------------------------------------------------- 1999 1998 1999 1998 ----------------------------------------------------- (IN MILLIONS) ----------------------------------------------------- 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 ------------------------------------------------------- ======== ======== ======== ========
INTEREST RATE SWAPS ----------------------- 1999 1998 ----------------------- 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 ------------------------------------------------------------ ======= =========
COMMODITY PUT OPTIONS SWAPS ---------------------------------------- 1999 1998 1999 1998 ---------------------------------------- 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 ------------------------------------------------------------ ===== ===== ===== ====
FOREIGN CURRENCY DERIVATIVES (FOREIGN INVESTMENTS) ------------------------------------------- FOREIGN CURRENCY SWAPS FOREIGN EXCHANGE ------------------------------------------- FORWARD CONTRACTS 1999 1998 1999 1998 ------------------------------------------- (IN MILLIONS) ------------------------------------------- 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 ------------------------------------------------------------ ===== ======= ===== =====
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 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 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 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 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:
DECEMBER 31 ------------------------------------------------------------- 1999 1998 ------------------------------------------------------------- CARRYING CARRYING ASSETS (LIABILITIES) VALUE FAIR VALUE VALUE FAIR VALUE -------------------------------------------------------------------------------------------------------------- (IN MILLIONS) ------------------------------------------------------------- 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) -----------------------------------------------
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 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:
YEAR ENDED DECEMBER 31 1999 1998 1997 ------------------------ (IN MILLIONS) ------------------------ Insurance assumed $ 19.7 $ 13.7 $ 11.9 ---------------------- Insurance ceded 777.6 290.1 100.3
The balance sheets include reinsurance balances with affiliated companies as follows:
DECEMBER 31 1999 1998 ----------------------- (IN MILLIONS) ----------------------- 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 ------------------------
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 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:
YEAR ENDED DECEMBER 31 1999 1998 1997 ----------------------------------- (IN MILLIONS) ----------------------------------- 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 ------------------------------------------------------------ ========= ========= =========
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 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. /s/ Ernst & Young LLP January 31, 2000 S-32 Part C - Other Information Item 24. FINANCIAL STATEMENTS AND EXHIBITS (a) List of Financial Statements 1. Part A. The Table of Condensed Financial Information is included in Part A of this Registration Statement. 2. Part B. The following financial statements for the Variable Account are included in Part B of this Registration Statement: Statement of Assets and Liability - December 31, 1999 Statement of Operations - Year ended December 31, 1999 Statements of Changes in Net Assets - Years ended December 31, 1999 and 1998 Notes to Financial Statements - December 31, 1999 Report of Ernst & Young LLP, Independent Auditors 3. Part B. The following statutory-basis financial statements of The Lincoln National Life Insurance Company are included in Part B of this Registration Statement: Balance Sheets - Statutory-Basis - Years ended December 31, 1999 and 1998 Statements of Operations - Statutory Basis - Years ended December 31, 1999, 1998, and 1997 Statements of Changes in Capital and Surplus - Statutory Basis - Years ended December 31, 1999, 1998 and 1997 Statements of Cash Flows - Statutory Basis - Years ended December 31, 1999, 1998 and 1997 Notes to Statutory-basis Financial Statements - December 31, 1999 Report of Ernst & Young LLP, Independent Auditors 24 (b) LIST OF EXHIBITS (1) Resolution establishing separate accounts /3/ (2) N/A (3) (a) Selling group agreement for Lincoln Financial Advisors /4/ (b) Amendment dated November 22, 1999 to selling group agreement (c) Amendment dated February 14, 2000 to selling group agreement. (4) Variable Annuity Contract/3/ (a) Multi Fund - Single premium contract/3/ (b) Multi Fund 1 - Periodic/3/ (c) Multi Fund 2 - Flexible/3/ (d) Multi Fund 3 - Flexible/3/ (e) Multi Fund 4 - Flexible /2/ (f) Contract Rider - Multi Fund 2 & Multi Fund 3 /1/ (g) Contract Rider - Multi Fund 4 /1/ (5) (a) Deferred Annuity Application /2/ (b) 403(b) Annuity Application /2/ (6) (a) Articles of Incorporation of The Lincoln National Life Insurance Company are hereby incorporated by reference to the Registration Statement on Form S-6 (333-40745) filed on November 21, 1997. (b) By-Laws of The Lincoln National Life Insurance Company are hereby incorporated by reference to the Posteffective Amendment No. 1 to the Registration Statement on Form N-4 (333-40937) filed on November 9, 1998. (7) N/A (8) (a) Services Agreement between Delaware Management Holdings, Inc., Delaware Service Company, Inc. and Lincoln National Life Insurance Company is incorporated herein by reference to the Registration Statement on Form N-1A (2-80741), Amendment No. 21 filed on April 10, 2000. (b) Participation Agreement/Amendments for Delaware Group Premium Fund. (c) Participation Agreement/Amendments for Lincoln National Aggressive Growth Fund, Inc. (d) Participation Agreement/Amendments for Lincoln National Capital Appreciation Fund, Inc. (e) Participation Agreement/Amendments for Lincoln National Global Asset Allocation Fund, Inc. (f) Participation Agreement/Amendments for Lincoln National International Fund, Inc. (g) Participation Agreement/Amendments for Lincoln National Money Market Fund, Inc. (h) Participation Agreement/Amendments for Lincoln National Special Opportunities Fund, Inc. (i) Participation Agreement/Amendments for Lincoln National Bond Fund, Inc. (j) Participation Agreement/Amendments for Lincoln National Equity-Income Fund, Inc. (k) Participation Agreement/Amendments for Lincoln National Growth and Income Fund, Inc. (l) Participation Agreement/Amendments for Lincoln National Managed Fund, Inc. (m) Participation Agreement/Amendments for Lincoln National Social Awareness Fund, Inc. (n) Fund Participation Agreement/Amendments for Bankers Trust (BT) (o) Fund Participation Agreement/Amendments for Baron Capital (p) Fund Participation Agreement/Amendments for Fidelity Variable Insurance Trusts (q) Fund Participation Agreement/Amendments for Janus (r) Fund Participation Agreement/Amendments for Neuberger Berman (s) Form of Fund Participation Agreement/Amendments for Alliance (t) Fund Participation Agreement/Amendments for American Funds (9) Opinion and Consent of Jeremy Sachs, Senior Counsel /2/ (10) Consent of Ernst & Young LLP, Independent Auditors (11) N/A (12) N/A (13) Schedule of Computation. /1/ (14) N/A (15) (a) Organizational Chart of Lincoln National Life Insurance Holding Company System (b) Memorandum Concerning Books and Records (16) Powers of Attorney (a) Todd Stephenson (b) Lawrence Rowland /4/ (c) Keith Ryan (d) H. Thomas McMeekin /4/ (e) Richard Vaughan /4/ (f) Jon Boscia /1/ Incorporated herein by reference to the Registration Statement on Form N-4 (File No. 33-25990) filed on February 28, 1997. /2/ Incorporated herein by reference to the Registration Statement on Form N-4 (File No. 33-25990) filed on April 24, 1997. /3/ Incorporated herein by reference to the Registration Statement on Form N-4 (File No. 33-25990) filed on April 22, 1998. /4/ Incorporated herein by reference to the Registration Statement on Form N-4 (File No. 33-25990) filed on April 22, 1999. Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR Name Positions and Offices Jon A. Boscia ** President and Director John H. Gotta **** Chief Executive Officer of Life Insurance, Senior Vice President, and Director Stephen H. Lewis * Interim Chief Executive Officer of Annuities, Senior Vice President, and Director H. Thomas McMeekin ***** Director Cynthia A. Rose * Secretary and Assistant Vice President Lawrence T. Rowland *** Executive Vice President and Director Keith J. Ryan * Vice President, Controller and Chief Accounting Officer Todd R. Stephenson * Senior Vice President, Chief Financial Officer and Assistant Treasurer Eldon J. Summers * Second Vice President and Treasurer Richard C. Vaughan ** Director Roy V. Washington * Vice President and Chief Compliance Officer * Principal business address is 1300 South Clinton Street, Fort Wayne, IN 46802-3506 ** Principal business address is Center Square West Tower, 1500 Market Street - Suite 3900, Philadelphia, PA 19102-2112 *** Principal business address is One Reinsurance Place,1700 Magnavox Way, Fort Wayne, IN 46804-1538 **** Principal business address is 350 Church Street, Hartford, CT 06103 ***** Principal business address is One Commerce Square, 2005 Market Street 39th floor, Philadelphia, PA 19103 Item 26. - -------- PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT See Exhibit 15(a): The Organizational Chart of The Lincoln National Insurance Holding Company System. Item 27. - -------- NUMBER OF CONTRACT OWNERS As of February 29, 2000, there were 538,217 Contract Owners under Lincoln National Variable Annuity Account C. Item 28. - -------- INDEMNIFICATION--UNDERTAKING (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 rights 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. Item 29. - -------- PRINCIPAL UNDERWRITER (a) Lincoln National Variable Annuity Fund A (Group); Lincoln National Variable Annuity Fund A (Individual); 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 Flexible Premium Variable Life Account M; Lincoln Life Variable Annuity Account N; Lincoln Life Variable Annuity Account Q; Lincoln Life Flexible Premium Variable Life Account R; Lincoln Life Flexible Premium Variable Life Account S; Lincoln National Variable Annuity Account 53. (b) See Item 25. (c) Commissions and Other Compensation Received by Lincoln National Life Insurance Company from Lincoln National Variable Annuity Account C during the fiscal year which ended December 31, 1999:
(1) (2) (3) (4) (5) Net Underwriting Name of Principal Discounts and Compensation Brokerage Underwriter Commissions on Redemption Commissions Compensation - ----------------- ---------------- ------------- ----------- ------------ The Lincoln National Life Insurance Company None $16,213,074(a) None $121,811,295(b)
Notes: (a) These figures represent compensation received by Lincoln National Life Insurance Company for surrender, withdrawal and contract charges. See Charges and other deductions, in the Prospectus. (b) These figures represent compensation received by Lincoln National Life Insurance Company for mortality and expense guarantees. See Charges and other deductions, in the Prospectus. Item 30. - -------- LOCATION OF ACCOUNTS AND RECORDS Exhibit 15(b) is hereby expressly incorporated herein by this reference. Item 31. Management Services - -------- Not Applicable. Item 32. Undertakings - -------- (a) Registrant undertakes that it will file a post-effective amendment to this registration statement 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 (1) as part of any application to purchase a Certificate or an Individual Contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post cared or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information. (c) Registrant undertakes to deliver any Statement of Additional Information and any financial statement required to be made available under this Form promptly upon written or oral request to Lincoln Life at the address or phone number listed in the Prospectus. (d) The Lincoln National Life Insurance company hereby represents that the fees and charges deducted under the contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by The Lincoln National Life Insurance Company. Item 33. - -------- 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 plan 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. Item 34. - -------- For Contracts sold in connection with the Texas Option Retirement Program, Registrant is relying on Rule 6c-7 and represents that paragraphs (a) through (d) of that rule have been complied with. 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 13th day of April, 2000. LINCOLN NATIONAL VARIABLE ANNUITY Account C - Multi-Fund (Registrant) By: /s/ KELLY D. CLEVENGER ------------------------------------ Kelly D. Clevenger 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 1993, this Amendment to the Registration Statement has been signed for the Depositors by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- ** President and Director April 13, 2000 - ----------------------- (Principal Executive Officer) Jon A. Boscia * Executive Vice President April 13, 2000 - ----------------------- and Director Lawrence T. Rowland ** Vice President, and Controller April 13, 2000 - ----------------------- Principal Accounting Officer Keith J. Ryan ** Senior Vice President, Chief April 13, 2000 - ----------------------- Financial Officer and Assistant Todd R. Stephenson Treasurer (Principal Financial Officer) Chief Executive Officer of April __, 2000 - ----------------------- Life Insurance, Senior Vice John H. Gotta President and Director /s/ STEPHEN H. LEWIS Interim Chief Executive Officer April 13, 2000 - ----------------------- of Annuities, Senior Vice Stephen H. Lewis President and Director * Director April 13, 2000 - ----------------------- H. Thomas McMeekin * Director April 13, 2000 - ----------------------- Richard C. Vaughan * By /s/ STEVEN M. KLUEVER Pursuant to a Power of Attorney filed with ----------------------- Post-Effective Amendment No. 16 to the Steven M. Kluever Registration Statement ** By /s/ STEVEN M. KLUEVER Pursuant to a Power of Attorney filed with ----------------------- this Registration Statement Steven M. Kluever EX-99.3(B) 2 EXHIBIT-99.3(B) Amendment to Schedule A To the Selling Group Agreement Between The Company and The Broker Effective November 22, 1999 The following is a list of Contracts that Broker has been granted authority by the Company to sell: 1. Lincoln National Life Insurance Company Multi-Fund-Registered Trademark- Variable Annuity Contracts (Lincoln National Variable Annuity Account C) 2. Lincoln National Life Insurance Company Variable Universal Life III Contracts (Lincoln Life Flexible Premium Variable Life Account G) 3. Lincoln National Life Insurance Company Multi-Fund-Registered Trademark- Variable Life (Lincoln Life Flexible Premium Variable Life Account K) 4. Lincoln National Life Insurance Company VUL I (Lincoln Life Flexible Premium Variable Life Account M) 5. Lincoln National Life Insurance Company Delaware-Lincoln ChoicePlus Delaware-Lincoln ChoicePlus XL (Lincoln Life Variable Annuity Account N) 6. Lincoln National Life Insurance Company Group Multi-Fund-Registered Trademark- (Lincoln Life Variable Annuity Account Q) 7. Lincoln National Life Insurance Company SVUL (Lincoln Life Flexible Premium Variable Life Account R) 8. Lincoln National Life Insurance Company eAnnuity-TM- Variable Annuity Contracts (Lincoln National Variable Annuity Account C) IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf by its duly authorized officer specified below. THE LINCOLN NATIONAL LIFE LINCOLN FINANCIAL INSURANCE COMPANY [COMPANY] ADVISORS, INC. [BROKER] By: /s/ Kelly D. Clevenger By: /s/ Richard C. Boyles --------------------------- -------------------------- Kelly D. Clevenger Richard C. Boyles Vice President 2nd Vice President & Controller EX-99.3(C) 3 EXHIBIT-99.3(C) 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 -Registered Trademark- Variable Annuity Contracts (Lincoln National Variable Annuity Account C) 2. Lincoln National Life Insurance Company Variable Universal Life III Contracts (Lincoln Life Flexible Premium Variable Life Account G) 3. Lincoln National Life Insurance Company Multi-Fund -Registered Trademark- Variable Life (Lincoln Life Flexible Premium Variable Life Account K) 4. Lincoln National Life Insurance Company VUL I (Lincoln Life Flexible Premium Variable Life Account M) 5. Lincoln National Life Insurance Company Delaware-Lincoln ChoicePlus Delaware-Lincoln ChoicePlus XL (Lincoln Life Variable Annuity Account N) 6. Lincoln National Life Insurance Company Group Multi-Fund -Registered Trademark- (Lincoln Life Variable Annuity Account Q) 7. Lincoln National Life Insurance Company SVUL (Lincoln Life Flexible Premium Variable Life Account R) 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 EX-99.1 4 EX-99.1 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 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 (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 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 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 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 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 (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 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 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 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 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 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 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 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 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 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: 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: EX-99.2 5 EX-99.2 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 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 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 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 (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 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. 6 (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. 7 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 8 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. 9 (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. 10 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 11 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: 12 (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 13 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 14 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 15 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 16 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 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 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 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 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 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 EX-99.3 6 EX-99.3 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 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: EX-99.4 7 EX-99.4 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 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: -------------------- ----------------------------- EX-99.5 8 EX-99.5 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 -------------------------------- -------------------------------- 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 EX-99.1 9 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Aggressive Growth Fund, Inc. a corporation organized under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE CO., an Indiana insurance corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule 1 to this Agreement as in effect at the time this Agreement is executed and such other separate accounts that may be added to Schedule 1 from time to time in accordance with the provisions of Article XI of this Agreement (each such account referred to as the "Account"; collectively, the "Accounts"). WHEREAS, the Fund is engaged in business as an open-end management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively referred to as "Variable Insurance Products," the owners of such products being referred to as "Product owners") to be offered by insurance companies which have entered into participation agreements with the Fund ("Participating Insurance Companies"); and WHEREAS, the Fund filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Fund Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Fund Prospectus") on Form N-lA to register itself as an open-end management investment company (File No. 811-3212) under the Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has filed a registration statement with the SEC to register under the 1933 Act (unless exempt therefrom) certain variable annuity contracts and/or variable life insurance policies described in Schedule 2 to this Agreement as in effect at the time this Agreement is executed and such other variable annuity contracts and variable life insurance policies which may be added to Schedule 2 from time to time in accordance with Article XI of this Agreement (such policies and contracts shall be referred to herein collectively as the "Contracts," each such registration statement for a class or classes of contracts listed on Schedule 2 being referred to as the "Contracts Registration Statement" and the prospectus for each such class or classes being referred to herein as the "Contracts Prospectus," and the owners of the such contracts, as distinguished from all Product Owners, being referred to as "Contract Owners"); and 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 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 any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 4 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 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 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 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 required by applicable securities laws of the various states. 6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Fund shares are sold the continuous offering of Fund shares as described in the then currently effective Fund Prospectus. The Fund shall register and qualify Fund shares for sale to the extentrequired by applicable securities laws of the various states. 6.4. The Company shall be responsible for assuring that any prospectus offering a Contract that is a life insurance contract where it is reasonably possible that such Contract would be deemed a "modified endowment contract," as that term is defined in Section 7702A of the Code, will describe the circumstances under which a Contract could be treated as a modified endowment contract (or policy). 6.5. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 6.6. (a) When appropriate in order to inform the Fund of any applicable state-mandated investment restrictions with which the Fund must comply, the Company shall arrange with the Fund to amend Schedule 3, pursuant to the requirements of Article XI. (b) Should the Fund become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. ARTICLE VlI. POTENTIAL CONFLICTS 7.1. The Company agrees to report to the Board of Directors of the Fund (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Fund, and to assist the Board in carrying out its responsibilities under Section 6e-3(T) of the 1940 Act, by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company 9 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 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 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 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 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 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 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 (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund will, at the option of the Company, continue to make available additional Fund shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. (b) If Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except for Section 10.1(a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. (c) The parties agree that this Section 10.3 shall not apply to any termination made pursuant to Article VII, and the effect of such Article VII termination shall be governed by the provisions set forth or incorporated by reference therein. ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts and to add new classes of variable annuity contracts and variable life insurance policies to be issued by the Company through new or existing Separate Accounts investing in the Fund. The provisions of this Agreement shall be equally applicable to each such separate account and each such class of contracts or policies, unless the context otherwise requires. Any such amendment must be signed by the parties and must bear an effective date for that amendment. ARTICLE XII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party(ies) at the address of such party(ies) set forth below or at such other address as such party(ies) may from time to time specify in writing to the other party. If to the Fund: Lincoln National Aggressive Growth Fund, Inc. 17 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 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC. Signature: -------------------------------------------- Name: Kelly D. Clevenger ------------------------------------------------- Title: President ------------------------------------------------ LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Signature: -------------------------------------------- Name: Stephen H. Lewis ------------------------------------------------- Title: Senior Vice President, Lincoln National Life Insurance Company ------------------------------------------------ #73844 19 SCHEDULE 1 Lincoln National Aggressive Growth Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of July 1, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 VARIOUS NON-REGISTERED SEPARATE ACCOUNTS 20 SCHEDULE 2 Lincoln National Aggressive Growth Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 1, 1998 MULTI FUND VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GVA I, II, III GROUP MULTI FUND MULTI FUND - NON-REGISTERED DIRECTOR 21 SCHEDULE 3 Lincoln National Aggressive Growth Fund, Inc. State-mandated Investment Restrictions Applicable to the Fund As of July 1, 1998 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: BORROWING. The borrowing limit for any FUND is 331/3 percent of total assets. Entering into a reverse repurchase agreement shall be considered "borrowing" as that term is used herein. FOREIGN INVESTMENTS - DIVERSIFICATION The diversification guidelines to be followed by international and global FUNDS are as follows: a. An international FUND or a global FUND is sufficiently diversified if it is invested in a minimum of three different countries at all times, and has invested no more than 50 percent of total assets in any one second-tier country and no more than 25 percent of total assets in any one third-tier country. First-tier countries are: Germany, the United Kingdom, Japan, the United States, France, Canada, and Australia. Second-tier countries are all countries not in the first or third tier. Third-tier countries are countries identified as "emerging" or "developing" by the International Bank for Reconstruction and Development ("World Bank") or International Finance Corporation. b. A regional FUND is sufficiently diversified if it is invested in a minimum of three countries. The name of the fund must accurately describe the FUND. c. The name of the single country FUND must accurately describe the FUND. d. An index FUND must substantially mirror the index. 22 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Aggressive Growth Fund, Inc. is hereby amended as follows: Page 2, the second paragraph is replaced in its entirety with the following: "WHEREAS, the Company has registered or will have registered each Account with the SEC (unless exempt therefrom) as a unit investment trust under the 1940 Act before any Contracts are issued by that Account; and" Page 5, Article 2.1 is replaced in its entirety with the following: "The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof (unless exempt therefrom), (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding." IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the Fund Participation Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC. Date: By: ------------------------ ---------------------------------- Name: Kelly D. Clevenger -------------------------------- Title: President ------------------------------- LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ------------------------ ---------------------------------- Name: Stephen H. Lewis -------------------------------- Title: Senior Vice President ------------------------------- 91945/1YY104!.DOC EX-99.1 10 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL CAPITAL APPRECIATION FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Capital Appreciation 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 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 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 any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 4 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 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 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 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 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 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 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 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 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 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 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 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 (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 Capital Appreciation Fund, Inc. 17 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 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 CAPITAL APPRECIATION FUND, INC. Signature: _____________________________________________ Name: Kelly D. Clevenger -------------------------------------------------- Title: President ------------------------------------------------- LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Signature: _____________________________________________ Name: Stephen H. Lewis -------------------------------------------------- Title: Senior Vice President, Lincoln National Life Insurance Company ------------------------------------------------- #73844 19 20 SCHEDULE 1 Lincoln National Capital Appreciation Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of July 1, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 21 SCHEDULE 2 Lincoln National Capital Appreciation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 1, 1998 MULTI FUND VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND MULTI FUND - NON-REGISTERED 22 SCHEDULE 3 Lincoln National Capital Appreciation Fund, Inc. State-mandated Investment Restrictions Applicable to the Fund As of July 1, 1998 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets. Entering into a reverse repurchase agreement shall be considered "borrowing" as that term is used herein. FOREIGN INVESTMENTS - DIVERSIFICATION The diversification guidelines to be followed by international and global FUNDS are as follows: a. An international FUND or a global FUND is sufficiently diversified if it is invested in a minimum of three different countries at all times, and has invested no more than 50 percent of total assets in any one second-tier country and no more than 25 percent of total assets in any one third-tier country. First-tier countries are: Germany, the United Kingdom, Japan, the United States, France, Canada, and Australia. Second-tier countries are all countries not in the first or third tier. Third-tier countries are countries identified as "emerging" or "developing" by the International Bank for Reconstruction and Development ("World Bank") or International Finance Corporation. b. A regional FUND is sufficiently diversified if it is invested in a minimum of three countries. The name of the fund must accurately describe the FUND. c. The name of the single country FUND must accurately describe the FUND. d. An index FUND must substantially mirror the index. 23 Amendment to SCHEDULE 1 Lincoln National Capital Appreciation Fund, Inc. 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 Q LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 Amendment to SCHEDULE 2 Lincoln National Capital Appreciation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2000 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN VUL-DB- LINCOLN SVUL LINCOLN SVUL II LINCOLN CVUL LINCOLN CVUL SERIES III MULTI FUND - NON-REGISTERED 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. LINCOLN NATIONAL CAPITAL APPRECIATION FUND, INC. Date: By: ------------------------- -------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ------------------------- -------------------------- Steven M. Kluever Second Vice President Amendment to SCHEDULE 2 Lincoln National Capital Appreciation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 15, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL LINCOLN C MULTI FUND - NON-REGISTERED LINCOLN VUL-DB- 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 CAPITAL APPRECIATION FUND, INC. Date: By: ------------------------- -------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ------------------------- -------------------------- Stephen H. Lewis Senior Vice President Amendment to SCHEDULE 1 Lincoln National Capital Appreciation Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 1999 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 Amendment to SCHEDULE 2 Lincoln National Capital Appreciation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL LINCOLN C MULTI FUND - NON-REGISTERED 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 CAPITAL APPRECIATION FUND, INC. Date: By: ------------------------- -------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ------------------------- -------------------------- Stephen H. Lewis Senior Vice President The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Capital Appreciation 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 CAPITAL APPRECIATION 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 ------------------------- EX-99.1 11 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Global Asset Allocation 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 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 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 any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 4 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 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 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 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 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 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 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 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 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 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 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 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 (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 Global Asset Allocation Fund, Inc. 17 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 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 GLOBAL ASSET ALLOCATION 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 #73844 20 SCHEDULE 1 Lincoln National Global Asset Allocation Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of July 1, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 21 SCHEDULE 2 Lincoln National Global Asset Allocation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 1, 1998 MULTI FUND VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND MULTI FUND - NON-REGISTERED 22 SCHEDULE 3 Lincoln National Global Asset Allocation 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. 23 AMENDMENT TO SCHEDULE 2 Lincoln National Global Asset Allocation Fund, Inc Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 15, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL MULTI FUND - NON-REGISTERED DB LINCOLN VUL 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 GLOBAL ASSET ALLOCATION FUND, INC. Date: By: ----------------------- ----------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ----------------------- ----------------------------- Stephen H. Lewis Senior Vice President AMENDMENT TO SCHEDULE 1 Lincoln National Global Asset Allocation Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 1999 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 AMENDMENT TO SCHEDULE 2 Lincoln National Global Asset Allocation Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL MULTI FUND - NON REGISTERED 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 GLOBAL ASSET ALLOCATION FUND, INC. Date: By: ----------------------- ----------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ----------------------- ----------------------------- Stephen H. Lewis Senior Vice President The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Global Asset Allocation 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 GLOBAL ASSET ALLOCATION 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 ----------------------------- EX-99.2 12 EXHIBIT 99.2 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Global Asset Allocation 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 GLOBAL ASSET ALLOCATION FUND, INC. Date: 9/8/99 By: /s/ Kelly D. Clevenger ------------------- ------------------------------- Name: Kelly D. Clevenger --------------------------- Title: President --------------------------- LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 9/8/99 By: /s/ Stephen H. Lewis ------------------- ------------------------------- Name: Stephen H. Lewis --------------------------- Title: Senior Vice President --------------------------- EX-99.1 13 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL INTERNATIONAL FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National International 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 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 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 any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 4 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 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 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 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 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 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 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 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 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 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 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 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 (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 International Fund, Inc. 17 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 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 INTERNATIONAL FUND, INC. Signature: ------------------------------------------------------------ Name: Kelly D. Clevenger ----------------------------------------------------------------- Title: President ---------------------------------------------------------------- LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Signature: ------------------------------------------------------------ Name: Stephen H. Lewis ----------------------------------------------------------------- Title: Senior Vice President, Lincoln National Life Insurance Company ---------------------------------------------------------------- #73844 19 SCHEDULE 1 Lincoln National International Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of July 1, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 VARIOUS NON-REGISTERED SEPARATE ACCOUNTS 20 SCHEDULE 2 Lincoln National International Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 1, 1998 MULTI FUND VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE ACCRU CHOICEPLUS GROUP MULTI FUND MULTI FUND - NON-REGISTERED DIRECTOR 21 SCHEDULE 3 Lincoln National International Fund, Inc. State-mandated Investment Restrictions Applicable to the Fund As of July 1, 1998 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets. Entering into a reverse repurchase agreement shall be considered "borrowing" as that term is used herein. FOREIGN INVESTMENTS - DIVERSIFICATION The diversification guidelines to be followed by international and global FUNDS are as follows: a. An international FUND or a global FUND is sufficiently diversified if it is invested in a minimum of three different countries at all times, and has invested no more than 50 percent of total assets in any one second-tier country and no more than 25 percent of total assets in any one third-tier country. First-tier countries are: Germany, the United Kingdom, Japan, the United States, France, Canada, and Australia. Second-tier countries are all countries not in the first or third tier. Third-tier countries are countries identified as "emerging" or "developing" by the International Bank for Reconstruction and Development ("World Bank") or International Finance Corporation. b. A regional FUND is sufficiently diversified if it is invested in a minimum of three countries. The name of the fund must accurately describe the FUND. c. The name of the single country FUND must accurately describe the FUND. d. An index FUND must substantially mirror the index. 22 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National International 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 INTERNATIONAL 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 ------------------------------ EX-99.1 14 EXHIBIT 99.1 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 (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 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 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 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 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 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 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- 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 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 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 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 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 ----------------------- EX-99.2 15 EXHIBIT 99.2 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 ------------------------------------ EX-99.1 16 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL SPECIAL OPPORTUNITIES FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Special Opportunities 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 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 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 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 4 validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund shares are sold. The Fund further represents and warrants that it is a corporation duly organized and in good standing under the laws of Maryland. 2.3. The Fund represents and warrants that it currently qualifies as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund further represents and warrants that it will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Fund represents and warrants that it will comply with Section 817(h) of the Code, and all regulations issued thereunder. 2.5. The Company represents that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Fund immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.6. The Fund represents that the Fund's investment policies, fees and expenses, and operations are and shall at all times remain in material compliance with the laws of the state of Maryland, to the extent required to perform this Agreement; and with any state- mandated investment restrictions set forth on Schedule 3, as amended from time to time by the Company in accordance with Section 6.6. The Fund, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance law and applicable to the Fund. 2.7. The Fund represents and warrants that it has and maintains a fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. 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 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 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 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 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 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 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 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 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 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 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 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 (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 Special Opportunities Fund, Inc. 17 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 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 SPECIAL OPPORTUNITIES 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 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Special Opportunity 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, (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 unti 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 registration for so long as any Contracts issued under them are outstanding." IN WITNESS WHEREOF, each of the parties hereto has cause 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 SPECIAL OPPORTUNITIES 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 ----------------------- EX-99.1 17 EXHIBIT 99.1 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 (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 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 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 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 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 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 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 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 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 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- 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 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 EX-99.1 18 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL EQUITY-INCOME FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Equity-Income 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 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 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 any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 4 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 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 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 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 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 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 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 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 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 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 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 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 (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 Equity-Income Fund, Inc. 17 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 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 EQUITY-INCOME 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 SCHEDULE 1 Lincoln National Equity-Income Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of July 1, 1998 Lincoln National Variable Annuity Account C - ------------------------------------------- Lincoln Life Flexible Premium Variable Life Account K - ----------------------------------------------------- Lincoln Life Variable Annuity Account Q - --------------------------------------- Lincoln National Variable Annuity Account 53 - -------------------------------------------- 20 SCHEDULE 2 Lincoln National Equity-Income Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 1, 1998 Multi Fund Variable Annuity - --------------------------- eAnnuity - -------- Multi Fund Variable Life - ------------------------ Group Multi Fund - ---------------- Multi Fund - Non-registered - --------------------------- 21 SCHEDULE 3 Lincoln National Equity-Income 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 Amendment to Schedule 2 ---------- Lincoln National Equity-Income Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 15, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL LINCOLN CVUL MULTI FUND - NON-REGISTERED DB LINCOLN VUL 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 EQUITY-INCOME FUND, INC. Date: By: ----------------------- ----------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ----------------------- ----------------------------- Stephen H. Lewis Senior Vice President Amendment to Schedule 1 ---------- Lincoln National Equity-Income Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 1999 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 Amendment to Schedule 2 ---------- Lincoln National Equity-Income Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GROUP MULTI FUND LINCOLN VUL LINCOLN SVUL LINCOLN CVUL MULTI FUND - NON-REGISTERED 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 EQUITY-INCOME FUND, INC. Date: By: ----------------------- ----------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ----------------------- ----------------------------- Stephen H. Lewis Senior Vice President The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Equity-Income 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 EQUITY-INCOME 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 ----------------------------- EX-99.1 19 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL GROWTH AND INCOME FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Growth and Income 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 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 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 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 4 validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund shares are sold. The Fund further represents and warrants that it is a corporation duly organized and in good standing under the laws of Maryland. 2.3. The Fund represents and warrants that it currently qualifies as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund further represents and warrants that it will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Fund represents and warrants that it will comply with Section 817(h) of the Code, and all regulations issued thereunder. 2.5. The Company represents that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Fund immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.6. The Fund represents that the Fund's investment policies, fees and expenses, and operations are and shall at all times remain in material compliance with the laws of the state of Maryland, to the extent required to perform this Agreement; and with any state- mandated investment restrictions set forth on Schedule 3, as amended from time to time by the Company in accordance with Section 6.6. The Fund, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance law and applicable to the Fund. 2.7. The Fund represents and warrants that it has and maintains a fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. 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 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 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 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 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 VII. POTENTIAL CONFLICTS 7.1. The Company agrees to report to the Board of Directors of the Fund (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Fund, and to assist the Board in carrying out its responsibilities under Section 6e-3(T) of the 1940 Act, by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all 9 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 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 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 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 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 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 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 (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 Growth and Income Fund, Inc. 17 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 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 GROWTH AND INCOME 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 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Growth & Income, 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 GROWTH & INCOME FUND, INC. Date: By: ------------------- ----------------------------------- Name: Kelly D. Clevenger --------------------------------- Title: President --------------------------------- LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ------------------- ----------------------------------- Name: Stephen H. Lewis --------------------------------- Title: Senior Vice President -------------------------------- 91945/1YY107!.DOC EX-99.1 20 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL MANAGED FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Managed 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 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 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 3 the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.7. The Fund shall use its best efforts to make the net asset value per share available to the Company by 7:00 p.m., E.S.T. each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share is calculated, and shall calculate such net asset value in accordance with the then currently effective Fund Prospectus. The Fund shall not be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund. 1.8. (a) The Company may withdraw the Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Fund (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.9. The Fund agrees that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered 4 and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund shares are sold. The Fund further represents and warrants that it is a corporation duly organized and in good standing under the laws of Maryland. 2.3. The Fund represents and warrants that it currently qualifies as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund further represents and warrants that it will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Fund represents and warrants that it will comply with Section 817(h) of the Code, and all regulations issued thereunder. 2.5. The Company represents that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Fund immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.6. The Fund represents that the Fund's investment policies, fees and expenses, and operations are and shall at all times remain in material compliance with the laws of the state of Maryland, to the extent required to perform this Agreement; and with any state- mandated investment restrictions set forth on Schedule 3, as amended from time to time by the Company in accordance with Section 6.6. The Fund, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance law and applicable to the Fund. 2.7. The Fund represents and warrants that it has and maintains a fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. 5 ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER INFORMATION 3.1. The Fund shall provide the Company with as many copies of the current Fund Prospectus as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund at its expense shall provide to the Company a camera-ready copy, and electronic version, of the current Fund Prospectus suitable for printing and other assistance as is reasonably necessary in order for the Company to have a new Contracts Prospectus printed together with the Fund Prospectus in one document. See Article V for a detailed explanation of the responsibility for the cost of printing and distributing Fund prospectuses. 3.2. The Fund Prospectus shall state that the Statement of Additional Information for the Fund is available from the Fund and the Fund shall provide such Statement free of charge to the Company and to any outstanding or prospective Contract owner who requests such Statement. 3.3. (a) The Fund at its expense shall provide to the Company a camera-ready copy of the Fund's shareholder reports and other communications to shareholders (except proxy material), in each case in a form suitable for printing, as determined by the Company. The Fund shall be responsible for the costs of printing and distributing these materials to Contract owners. (b) The Fund at its expense shall be responsible for preparing, printing and distributing its proxy material. The Company will provide the appropriate Contractowner names and addresses to the Fund for this purpose. 3.4. The Company shall furnish to the Fund, prior to its use, each piece of sales literature or other promotional material in which the Fund is named. No such material shall be used, except with the prior written permission of the Fund. The Fund agrees to respond to any request for approval on a prompt and timely basis. Failure of the Fund to respond within 10 days of the request by the Company shall relieve the Company of the obligation to obtain the prior written permission of the Fund. 3.5. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund other than the information or representations contained in the Fund Registration Statement or Fund Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund, except with the prior written permission of the Fund. The Fund agrees to respond to any request for permission on a prompt and timely basis. If the Fund does not respond within 10 days of a request by the Company, then the Company shall be relieved of the obligation to obtain the prior written permission of the Fund. 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 6 such Registration Statement and Prospectus may be amended or supplemented from time to time, or in published reports of the Account which are in the public domain or approved in writing by the Company for distribution to Contract owners, or in sales literature or other promotional material approved in writing by the Company, except with the prior written permission of the Company. The Company agrees to respond to any request for permission on a prompt and timely basis. If the Company fails to respond within 10 days of a request by the Fund, then the Fund is relieved of the obligation to obtain the prior written permission of the Company. 3.7. The Fund will provide to the Company at least one complete copy of all Fund Registration Statements, Fund Prospectuses, Statements of Additional Information, annual and semi-annual reports and other reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Fund or Fund shares, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.8. The Company will provide to the Fund at least one complete copy of all Contracts Registration Statements, Contracts Prospectuses, Statements of Additional Information, Annual and Semi-annual Reports, sales literature and other promotional materials, and all amendments or supplements to any of the above, that relate to the Contracts, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.9. Each party will provide to the other party copies of draft versions of any registration statements, prospectuses, statements of additional information, reports, proxy statements, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, to the extent that the other party reasonably needs such information for purposes of preparing a report or other filing to be filed with or submitted to a regulatory agency. If a party requests any such information before it has been filed, the other party will provide the requested information if then available and in the version then available at the time of such request. 3.10. For purposes of this Article III, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, computer net site, signs or billboards, motion pictures or other public media), sales literature (I.E., any written communication distributed or made generally available to customers or the public, in print or electronically, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, 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. 7 ARTICLE IV. Voting 4.1 Subject to applicable law and the requirements of Article VII, the Fund shall solicit voting instructions from Contract owners; 4.2 Subject to applicable law and the requirements of Article VII, the Company shall: (a) vote Fund shares attributable to Contract owners in accordance with instructions or proxies received in timely fashion from such Contract owners; (b) vote Fund shares attributable to Contract owners for which no instructions have been received in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion; and (c) vote Fund shares held by the Company on its own behalf or on behalf of the Account that are not attributable to Contract owners in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion. The Company shall be responsible for assuring that voting privileges for the Accounts are calculated in a manner consistent with the provisions set forth above. ARTICLE V. FEES AND EXPENSES All expenses incident to performance by the Fund under this Agreement (including expenses expressly assumed by the Fund pursuant to this Agreement) shall be paid by the Fund to the extent permitted by law. Except as may otherwise be provided in Section 1.4 and Article VII of this Agreement, the Company shall not bear any of the expenses for the cost of registration and qualification of the Fund shares under Federal and any state securities law, preparation and filing of the Fund Prospectus and Fund Registration Statement, the preparation of all statements and notices required by any Federal or state securities law, all taxes on the issuance or transfer of Fund shares, and any expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The Fund is responsible for the cost of printing and distributing Fund Prospectuses and SAIs to existing Contractowners. (If for this purpose the Company decided to print the Fund Prospectuses and SAIs in a booklet or separate booklets containing disclosure for the Contracts and for underlying funds other than those of the Fund, then the Fund shall pay only its proportionate share of the total cost to distribute the booklet to existing Contractowners.) 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. 8 ARTICLE VI. COMPLIANCE UNDERTAKINGS 6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of the Code, and all regulations issued thereunder. 6.2. The Company shall amend the Contracts Registration Statements under the 1933 Act and the Account's Registration Statement under the 1940 Act from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale to the extent required by applicable securities laws of the various states. 6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Fund shares are sold the continuous offering of Fund shares as described in the then currently effective Fund Prospectus. The Fund shall register and qualify Fund shares for sale to the extent required by applicable securities laws of the various states. 6.4. The Company shall be responsible for assuring that any prospectus offering a Contract that is a life insurance contract where it is reasonably possible that such Contract would be deemed a "modified endowment contract," as that term is defined in Section 7702A of the Code, will describe the circumstances under which a Contract could be treated as a modified endowment contract (or policy). 6.5. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 6.6. (a) When appropriate in order to inform the Fund of any applicable state-mandated investment restrictions with which the Fund must comply, the Company shall arrange with the Fund to amend Schedule 3, pursuant to the requirements of Article XI. (b) Should the Fund become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. 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 9 any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company agrees with that determination, the Company shall, at its sole cost and expense, take whatever steps are necessary to remedy the material irreconcilable conflict. These steps could include: (i) withdrawing the assets allocable to some or all of the affected Accounts from the Fund and reinvesting such assets in a different investment vehicle, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractowners and, as appropriate, segregating the assets of any particular group (i.e., variable annuity Contractowners, variable life insurance policyowners, or variable Contractowners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contractowners the option of making such a change; and (ii) establishing a new registered mutual fund or management separate account; or (iii) taking such other action as is necessary to remedy or eliminate the material irreconcilable conflict. (b) If the Company disagrees with the Board's determination, the Company shall file a written protest with the Board, reserving its right to dispute the determination as between just the Company and the Fund and to seek reimbursement from the Fund for the reasonable costs and expenses of resolving the conflict . After reserving that right the Company, although disagreeing with the Board that it (the Company) was responsible for the conflict, shall take the necessary steps, under protest, to remedy the conflict, substantially in accordance with paragraph (a) just above, for the protection of Contractowners. (c) As between the Company and the Fund, if within 45 days after the Board's determination the Company elects to press the dispute, it shall so notify the Board in writing. The parties shall then attempt to resolve the matter amicably through negotiation by individuals from each party who are authorized to settle the matter. If the matter has not been amicably resolved within 60 days from the date 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. 10 If within 45 days of the commencement of the process to select an arbitrator the parties cannot agree upon the arbitrator, then he or she will be selected from the CPR Panels of Neutrals. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort Wayne, Indiana. The Arbitrator is not empowered to award damages in excess of compensatory damages. (d) If the Board shall determine that the Fund or another was responsible for the conflict, then the Board shall notify the Company immediately of that determination. The Fund shall assure the Company that it (the Fund) or that other Participating Insurance Company as applicable, shall, at its sole cost and expense, take whatever steps are necessary to eliminate the conflict. (e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a waiver of any right of action which the Company may have against other Participating Insurance Companies for reimbursement of all or part of the costs and expenses of resolving the conflict. 7.3. If a material irreconcilable conflict arises because of the Company's decision to disregard Contractowner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company shall withdraw (without charge or penalty) the Account's investment in the Fund, if the Fund so elects. 7.4. For purposes of this Article, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable conflict. However, in no event will the Fund be required to establish a new funding medium for any variable contract, nor will the Company be required to establish a new funding medium for any Contract, if in either case an offer to do so has been declined by a vote of a majority of affected Contractowners. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Fund and each person who controls or is associated with the Fund (other than another Participating Insurance Company) within the meaning of such terms under the federal securities 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: 11 (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Fund (or a person authorized in writing to do so on behalf of the Fund) for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact by or on behalf of the Company (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or (d) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (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. 12 This indemnification will be in addition to any liability which the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold harmless the Company and each person who controls or is associated with the Company within the meaning of such terms under the federal securities laws and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid with the prior written consent of the Fund in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Fund for use in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature for the Fund or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Fund (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Distributor or the Fund or persons under their control) or wrongful conduct of the Fund or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (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 13 (d) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) to comply with the diversification requirements specified in Sections 2.4 and 6.1 in Article VI of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the Contracts Prospectuses); or (e) arise out of any material breach by the Fund of this Agreement. This indemnification will be in addition to any liability which the Fund may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to indemnification ("indemnified party") under this Article VIII of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article VIII ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article VIII, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. 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 14 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Indiana, without giving effect to the principles of conflicts of law. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon 120 days advance written notice to the other parties; or (b) at the option of the Company if shares of the Fund are not available to meet the requirements of the Contracts as determined by the Company. Prompt notice of the election to terminate for such cause shall be furnished by the Company. Termination shall be effective ten days after the giving of notice by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of the Account, the administration of the Contracts or the purchase of Fund shares; (d) at the option of the Company upon institution of formal proceedings against the Fund, the investment advisor or any subinvestment advisor, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body; or (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 15 majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any Product owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; or (h) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; or (i) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or (j) at the option of the Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that the Contracts may fail to so qualify; or (k) at the option of the Fund if the Fund shall determine, in its sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Fund; or (l) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that: (1) the Fund shall have suffered a material adverse change in its business or financial condition; or (2) the Fund shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company; or (m) automatically upon the assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Accounts to another insurance company pursuant to an assumption reinsurance agreement) unless the non-assigning party consents thereto or unless this Agreement is assigned to an 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 16 Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be given at least ninety (90) days before the effective date of termination, or sooner if required by law or regulation. 10.3. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund will, at the option of the Company, continue to make available additional Fund shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. (b) If Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except for Section 10.1(a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. (c) The parties agree that this Section 10.3 shall not apply to any termination made pursuant to Article VII, and the effect of such Article VII termination shall be governed by the provisions set forth or incorporated by reference therein. 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 17 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 Managed Fund, Inc. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Kelly D. Clevenger If to the Company: Lincoln National Life Insurance Co. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Steven M. Kluever ARTICLE XIII. MISCELLANEOUS 13.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.2. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 13.4. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 13.5. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party, and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. ARTICLE XIV. PRIOR AGREEMENTS 18 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. 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 MANAGED 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 The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by and among The Lincoln National Life Insurance Company and Lincoln National Managed 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, (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 MANAGED 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 ----------------------- EX-99.1 21 EXHIBIT 99.1 AMENDED AND RESTATED FUND PARTICIPATION AGREEMENT (FORMER TITLE: "AGREEMENT TO PURCHASE SHARES") BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE CO. AND LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC. THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and between Lincoln National Social Awareness Fund, Inc. a corporation organized under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE CO., an Indiana insurance corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule 1 to this Agreement as in effect at the time this Agreement is executed and such other separate accounts that may be added to Schedule 1 from time to time in accordance with the provisions of Article XI of this Agreement (each such account referred to as the "Account"; collectively, the "Accounts"). WHEREAS, the Fund is engaged in business as an open-end management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively referred to as "Variable Insurance Products," the owners of such products being referred to as "Product owners") to be offered by insurance companies which have entered into participation agreements with the Fund ("Participating Insurance Companies"); and WHEREAS, the Fund filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Fund Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Fund Prospectus") on Form N-lA to register itself as an open-end management investment company (File No. 811-3212) under the Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has filed a registration statement with the SEC to register under the 1933 Act (unless exempt therefrom) certain variable annuity contracts and/or variable life insurance policies described in Schedule 2 to this Agreement as in effect at the time this Agreement is executed and such other variable annuity contracts and variable life insurance policies which may be added to Schedule 2 from time to time in accordance with Article XI of this Agreement (such policies and contracts shall be referred to herein collectively as the "Contracts," each such registration statement for a class or classes of contracts listed on Schedule 2 being referred to as the "Contracts Registration Statement" and the prospectus for each such class or classes being referred to herein as the "Contracts Prospectus," and the owners of the such contracts, as distinguished from all Product Owners, being referred to as "Contract Owners"); and WHEREAS, each Account, a validly existing separate account, duly authorized by the Company on the date set forth on Schedule 1, sets aside and invests assets attributable to the Contracts; and WHEREAS, the Company has registered or will have registered each Account with the SEC as a unit investment trust under the 1940 Act before any Contracts are issued by that Account; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares on behalf of each Account to fund its Contracts and the Fund is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; and WHEREAS, pursuant to Articles of Merger approved by the Company in 1988, the Company succeeded to all the legal rights and responsibilities of Lincoln National Pension Insurance Company, the signatory to the original Agreement to Purchase Shares, which this Agreement amends and restates; and NOW, THEREFORE, in consideration of their mutual promises, the Company and the Fund agree as follows: ARTICLE I. SALE OF FUND SHARES 1.1. The Fund agrees to sell to the Company those shares which the Company orders on behalf of the Account, executing such orders on a daily basis in accordance with Section 1.4 of this Agreement. 1.2. The Fund agrees to make shares available for purchase by the Company on behalf of the Account at the then applicable net asset value per share on Business Days as defined in Section 1.4 of this Agreement, and the Fund shall use its best efforts to calculate AND DELIVER such net asset value by 7:00 p.m., E.S.T., on each such Business Day. Notwithstanding any other provision in this Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board") may suspend or terminate the offering of shares, if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Fund Board acting in good faith and in light of its fiduciary duties under Federal and any applicable state laws, suspension or termination is necessary and in the best interests of the shareholders (it being understood that "shareholders" for this purpose shall mean Product owners). 1.3. The Fund agrees to redeem, at the Company's request, any full or fractional shares of the Fund held by the Account or the Company, executing such requests at the net asset value on a daily basis (LL will expect same day redemption wires unless unusual circumstances evolve which cause the Fund to have to redeem securities) in accordance with Section 1.4 of this Agreement, the applicable provisions of the 1940 Act and the then currently effective Fund Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund shares to the 2 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 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 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 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 Company. The Company agrees to respond to any request for permission on a prompt and timely basis. If the Company fails to respond within 10 days of a request by the Fund, then the Fund is relieved of the obligation to obtain the prior written permission of the Company. 3.7. The Fund will provide to the Company at least one complete copy of all Fund Registration Statements, Fund Prospectuses, Statements of Additional Information, annual and semi-annual reports and other reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Fund or Fund shares, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.8. The Company will provide to the Fund at least one complete copy of all Contracts Registration Statements, Contracts Prospectuses, Statements of Additional Information, Annual and Semi-annual Reports, sales literature and other promotional materials, and all amendments or supplements to any of the above, that relate to the Contracts, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.9. Each party will provide to the other party copies of draft versions of any registration statements, prospectuses, statements of additional information, reports, proxy statements, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, to the extent that the other party reasonably needs such information for purposes of preparing a report or other filing to be filed with or submitted to a regulatory agency. If a party requests any such information before it has been filed, the other party will provide the requested information if then available and in the version then available at the time of such request. 3.10. For purposes of this Article III, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, computer net site, signs or billboards, motion pictures or other public media), sales literature (I.E., any written communication distributed or made generally available to customers or the public, in print or electronically, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, Statements of Additional Information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act. ARTICLE IV. Voting 4.1 Subject to applicable law and the requirements of Article VII, the Fund shall 7 solicit voting instructions from Contract owners; 4.2 Subject to applicable law and the requirements of Article VII, the Company shall: (a) vote Fund shares attributable to Contract owners in accordance with instructions or proxies received in timely fashion from such Contract owners; (b) vote Fund shares attributable to Contract owners for which no instructions have been received in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion; and (c) vote Fund shares held by the Company on its own behalf or on behalf of the Account that are not attributable to Contract owners in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion. The Company shall be responsible for assuring that voting privileges for the Accounts are calculated in a manner consistent with the provisions set forth above. ARTICLE V. FEES AND EXPENSES All expenses incident to performance by the Fund under this Agreement (including expenses expressly assumed by the Fund pursuant to this Agreement) shall be paid by the Fund to the extent permitted by law. Except as may otherwise be provided in Section 1.4 and Article VII of this Agreement, the Company shall not bear any of the expenses for the cost of registration and qualification of the Fund shares under Federal and any state securities law, preparation and filing of the Fund Prospectus and Fund Registration Statement, the preparation of all statements and notices required by any Federal or state securities law, all taxes on the issuance or transfer of Fund shares, and any expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The Fund is responsible for the cost of printing and distributing Fund Prospectuses and SAIs to existing Contractowners. (If for this purpose the Company decided to print the Fund Prospectuses and SAIs in a booklet or separate booklets containing disclosure for the Contracts and for underlying funds other than those of the Fund, then the Fund shall pay only its proportionate share of the total cost to distribute the booklet to existing Contractowners.) The Company is responsible for the cost of printing and distributing Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for existing Contractowners. The Company shall have the final decision on choice of printer for all Prospectuses and SAIs. ARTICLE VI. COMPLIANCE UNDERTAKINGS 6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of the 8 Code, and all regulations issued thereunder. 6.2. The Company shall amend the Contracts Registration Statements under the 1933 Act and the Account's Registration Statement under the 1940 Act from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale to the extent required by applicable securities laws of the various states. 6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Fund shares are sold the continuous offering of Fund shares as described in the then currently effective Fund Prospectus. The Fund shall register and qualify Fund shares for sale to the extent required by applicable securities laws of the various states. 6.4. The Company shall be responsible for assuring that any prospectus offering a Contract that is a life insurance contract where it is reasonably possible that such Contract would be deemed a "modified endowment contract," as that term is defined in Section 7702A of the Code, will describe the circumstances under which a Contract could be treated as a modified endowment contract (or policy). 6.5. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 6.6. (a) When appropriate in order to inform the Fund of any applicable state-mandated investment restrictions with which the Fund must comply, the Company shall arrange with the Fund to amend Schedule 3, pursuant to the requirements of Article XI. (b) Should the Fund become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. ARTICLE VlI. POTENTIAL CONFLICTS 7.1. The Company agrees to report to the Board of Directors of the Fund (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Fund, and to assist the Board in carrying out its responsibilities under Section 6e-3(T) of the 1940 Act, by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, 9 determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company agrees with that determination, the Company shall, at its sole cost and expense, take whatever steps are necessary to remedy the material irreconcilable conflict. These steps could include: (i) withdrawing the assets allocable to some or all of the affected Accounts from the Fund and reinvesting such assets in a different investment vehicle, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractowners and, as appropriate, segregating the assets of any particular group (i.e., variable annuity Contractowners, variable life insurance policyowners, or variable Contractowners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contractowners the option of making such a change; and (ii) establishing a new registered mutual fund or management separate account; or (iii) taking such other action as is necessary to remedy or eliminate the material irreconcilable conflict. (b) If the Company disagrees with the Board's determination, the Company shall file a written protest with the Board, reserving its right to dispute the determination as between just the Company and the Fund and to seek reimbursement from the Fund for the reasonable costs and expenses of resolving the conflict . After reserving that right the Company, although disagreeing with the Board that it (the Company) was responsible for the conflict, shall take the necessary steps, under protest, to remedy the conflict, substantially in accordance with paragraph (a) just above, for the protection of Contractowners. (c) As between the Company and the Fund, if within 45 days after the Board's determination the Company elects to press the dispute, it shall so notify the Board in writing. The parties shall then attempt to resolve the matter amicably through negotiation by individuals from each party who are authorized to settle the matter. If the matter has not been amicably resolved within 60 days from the date of the Company's notice of its intent to press the dispute, then before either party shall undertake to litigate the dispute it shall be submitted to non-binding arbitration conducted expeditiously in accordance with the CPR Rules for Non-Administered Arbitration of Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER, that if one party has requested the other party to seek an amicable resolution and the other party has failed to participate, the requesting party may initiate arbitration before expiration of the 60-day period set out just above. If within 45 days of the commencement of the process to select an arbitrator the parties cannot agree upon the arbitrator, then he or she will be selected from the CPR Panels of Neutrals. The arbitration shall be governed by the United States 10 Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort Wayne, Indiana. The Arbitrator is not empowered to award damages in excess of compensatory damages. (d) If the Board shall determine that the Fund or another was responsible for the conflict, then the Board shall notify the Company immediately of that determination. The Fund shall assure the Company that it (the Fund) or that other Participating Insurance Company as applicable, shall, at its sole cost and expense, take whatever steps are necessary to eliminate the conflict. (e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a waiver of any right of action which the Company may have against other Participating Insurance Companies for reimbursement of all or part of the costs and expenses of resolving the conflict. 7.3. If a material irreconcilable conflict arises because of the Company's decision to disregard Contractowner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company shall withdraw (without charge or penalty) the Account's investment in the Fund, if the Fund so elects. 7.4. For purposes of this Article, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable conflict. However, in no event will the Fund be required to establish a new funding medium for any variable contract, nor will the Company be required to establish a new funding medium for any Contract, if in either case an offer to do so has been declined by a vote of a majority of affected Contractowners. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Fund and each person who controls or is associated with the Fund (other than another Participating Insurance Company) within the meaning of such terms under the federal securities laws and any officer, trustee, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid with the prior written consent of the Company in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of 11 the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Fund (or a person authorized in writing to do so on behalf of the Fund) for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact by or on behalf of the Company (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or (d) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (e) arise out of any material breach by the Company of this Agreement, including but not limited to any failure to transmit a request for redemption or purchase of Fund shares on a timely basis in accordance with the procedures set forth in Article I; or (f) arise as a result of the Company's providing the Fund with inaccurate information, which causes the Fund to calculate its Net Asset Values incorrectly. This indemnification will be in addition to any liability which the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 12 8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold harmless the Company and each person who controls or is associated with the Company within the meaning of such terms under the federal securities laws and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid with the prior written consent of the Fund in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Fund for use in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature for the Fund or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Fund (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Distributor or the Fund or persons under their control) or wrongful conduct of the Fund or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Contract's Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Fund to the Company (or a person authorized in writing to do so on behalf of the Fund); or (d) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) 13 to comply with the diversification requirements specified in Sections 2.4 and 6.1 in Article VI of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the Contracts Prospectuses); or (e) arise out of any material breach by the Fund of this Agreement. This indemnification will be in addition to any liability which the Fund may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to indemnification ("indemnified party") under this Article VIII of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article VIII ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article VIII, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VIII shall survive any termination of this Agreement. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Indiana, without giving effect to the principles of conflicts of law. 14 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon 120 days advance written notice to the other parties; or (b) at the option of the Company if shares of the Fund are not available to meet the requirements of the Contracts as determined by the Company. Prompt notice of the election to terminate for such cause shall be furnished by the Company. Termination shall be effective ten days after the giving of notice by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of the Account, the administration of the Contracts or the purchase of Fund shares; (d) at the option of the Company upon institution of formal proceedings against the Fund, the investment advisor or any sub- investment advisor, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body; or (e) upon requisite vote of the Contract owners having an interest in the Fund (unless otherwise required by applicable law) and written approval of the Company, to substitute the shares of another investment company for the corresponding shares of the Fund in accordance with the terms of the Contracts; or (f) at the option of the Fund in the event any of the Contracts are not registered, issued or sold in accordance with applicable Federal and/or state law; or (g) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any Product owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; or 15 (h) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; or (i) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or (j) at the option of the Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that the Contracts may fail to so qualify; or (k) at the option of the Fund if the Fund shall determine, in its sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Fund; or (l) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that: (1) the Fund shall have suffered a material adverse change in its business or financial condition; or (2) the Fund shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company; or (m) automatically upon the assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Accounts to another insurance company pursuant to an assumption reinsurance agreement) unless the non-assigning party consents thereto or unless this Agreement is assigned to an affiliate of the Company or the Fund, as the case may be. 10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to the other party of its intent to terminate, which notice shall set forth the basis for such termination. Furthermore: (a) In the event that any termination is based upon the provisions of Article VII or the provisions of Section 10.1(a) of this Agreement, such prior written notice shall be given in advance of the effective date of termination as required by such provisions; and (b) in the event that any termination is based upon the provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be 16 given at least ninety (90) days before the effective date of termination, or sooner if required by law or regulation. 10.3. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund will, at the option of the Company, continue to make available additional Fund shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. (b) If Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except for Section 10.1(a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. (c) The parties agree that this Section 10.3 shall not apply to any termination made pursuant to Article VII, and the effect of such Article VII termination shall be governed by the provisions set forth or incorporated by reference therein. ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts and to add new classes of variable annuity contracts and variable life insurance policies to be issued by the Company through new or existing Separate Accounts investing in the Fund. The provisions of this Agreement shall be equally applicable to each such separate account and each such class of contracts or policies, unless the context otherwise requires. Any such amendment must be signed by the parties and must bear an effective date for that amendment. ARTICLE XII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party(ies) at the address of such party(ies) set forth below or at such other address as such party(ies) may from time to time specify in writing to the other party. 17 If to the Fund: Lincoln National Social Awareness Fund, Inc. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Kelly D. Clevenger If to the Company: Lincoln National Life Insurance Co. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Steven M. Kluever ARTICLE XIII. MISCELLANEOUS 13.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.2. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 13.4. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 13.5. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party, and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. ARTICLE XIV. PRIOR AGREEMENTS This Amended and Restated Fund Participation Agreement, as of its effective date, hereby supersedes any and all prior agreements to purchase shares between Lincoln Life and the Fund. 18 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC. Signature: ---------------------------------------------------------- Name: Kelly D. Clevenger --------------------------------------------------------------- Title: President -------------------------------------------------------------- LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Signature: ---------------------------------------------------------- Name: Stephen H. Lewis --------------------------------------------------------------- Title: Senior Vice President, Lincoln National Life Insurance Company -------------------------------------------------------------- 19 Amendment to Schedule 2 ---------- Lincoln National Social Awareness Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 15, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GVA I, II, III VUL I LINCOLN VUL GROUP MULTI FUND SVUL I LINCOLN SVUL LINCOLN CVUL MULTI FUND - NON-REGISTERED DIRECTOR LINCOLN VUL-DB- IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC. Date: By: ---------------------- ---------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ---------------------- ---------------------------- Stephen H. Lewis Senior Vice President Amendment to Schedule 1 ---------- Lincoln National Social Awareness Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 1999 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 33 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 Amendment to Schedule 2 ---------- Lincoln National Social Awareness Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 1999 MULTI FUND INDIVIDUAL VARIABLE ANNUITY eANNUITY MULTI FUND VARIABLE LIFE GVA I, II, III VUL I LINCOLN VUL GROUP MULTI FUND SVUL I LINCOLN SVUL LINCOLN CVUL MULTI FUND - NON-REGISTERED DIRECTOR IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules 1 and 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC. Date: By: ---------------------- ---------------------------- Kelly D. Clevenger President and Chairman LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: ---------------------- ---------------------------- Stephen H. Lewis Senior Vice President EX-99.2 22 EXHIBIT 99.2 SCHEDULE 1 Lincoln National Social Awareness Fund, Inc. Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of October 1, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 33 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 1 to be executed in its name and behalf by its duly authorized officer on the date specified below. Date: 10/1/98 Lincoln National Social Awareness Fund, Inc. ---------------------- By: /s/ Kelly D. Clevenger ----------------------------------------- Kelly D. Clevenger, President Date: 10/1/98 The Lincoln National Life Insurance Company ---------------------- By: /s/ Stephen H. Lewis ----------------------------------------- Stephen H. Lewis, Senior Vice President EX-99.3 23 EXHIBIT 99.3 SCHEDULE 2 Lincoln National Social Awareness Fund, Inc. Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 1, 1998 Multi Fund Variable Annuity eAnnuity Multi Fund Variable Life GVA I, II, III Group Multi Fund Multi Fund - Non-registered Director IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf by its duly authorized officer on the date specified below. Date: 10/1/98 Lincoln National Social Awareness Fund, Inc. ---------------------- By: /s/ Kelly D. Clevenger ----------------------------------------- Kelly D. Clevenger, President Date: 10/1/98 The Lincoln National Life Insurance Company ---------------------- By: /s/ Stephen H. Lewis ----------------------------------------- Stephen H. Lewis, Senior Vice President EX-99.4 24 EXHIBIT 99.4 SCHEDULE 3 Lincoln National Social Awareness Fund, Inc. State-mandated Investment Restrictions Applicable to the Fund As of July 1, 1998 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets. Entering into a reverse repurchase agreement shall be considered "borrowing" as that term is used herein. FOREIGN INVESTMENTS - DIVERSIFICATION The diversification guidelines to be followed by international and global FUNDS are as follows: a. An international FUND or a global FUND is sufficiently diversified if it is invested in a minimum of three different countries at all times, and has invested no more than 50 percent of total assets in any one second-tier country and no more than 25 percent of total assets in any one third-tier country. First-tier countries are: Germany, the United Kingdom, Japan, the United States, France, Canada, and Australia. Second-tier countries are all countries not in the first or third tier. Third-tier countries are countries identified as "emerging" or "developing" by the International Bank for Reconstruction and Development (World Bank) or International Finance Corporation. b. A regional FUND is sufficiently diversified if it is invested in a minimum of three countries. The name of the fund must accurately describe the FUND. c. The name of the single country FUND must accurately describe the FUND. d. An index FUND must substantially mirror the index. EX-99.1 25 EXHIBIT 99.1 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 WHEREAS, ADVISER serves as the TRUST's investment adviser; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the aforementioned Variable Contracts and TRUST is authorized to sell such shares to LIFE COMPANY at such shares' net asset value; NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, TRUST, and ADVISER agree as follows: Article 1. SALE OF TRUST SHARES 1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY shares of the selected Portfolios as listed on Appendix B for investment of purchase payments of Variable Contracts allocated to the designated Separate Accounts as provided in TRUST's Registration Statement. 1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the order for the shares of TRUST. For purposes of this Section 1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in writing) of such order by 9:00 a.m. New York time on the next Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which TRUST calculates its net asset value pursuant to the rules of the SEC. 1.3 TRUST agrees to redeem on LIFE COMPANY's request, any -full or fractional shares of TRUST held by LIFE COMPANY, executing such requests on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the request for redemption, in accordance with the provisions of this Agreement and TRUST's Registration Statement (in the event of a conflict between the provisions of this Agreement and the Trust's Registration Statement, the provisions of the Registration Statement shall govern.) For purposes of this Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests for redemption from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the request for redemption by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in 2 writing) of such request for redemption by 9:00 a.m. New York time on the next Business Day. 1.4 TRUST shall furnish, on or before each ex-dividend date, notice to LIFE COMPANY of any income dividends or capital gain distributions payable on the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of the Portfolio. LIFE COMPANY reserves the right to change such election. TRUST shall notify LIFE COMPANY or its designee of the number of shares so issued as payment of such dividends and distributions. 1.5 TRUST shall make the net asset value per share for the selected Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m. New York time. If TRUST provides LIFE COMPANY with materially incorrect share net asset value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts, shall be entitled to an adjustment to the number of shares purchased or redeemed on each day for which such incorrect information was provided to reflect the correct share net asset value. Any material error in the calculation of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. 1.6 At the end of each Business Day, LIFE COMPANY shall use the information described in Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, LIFE COMPANY shall process each such Business Day's Separate Account transactions based on requests and premiums received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount of TRUST shares which shall be purchased or redeemed at that day's closing net asset value per share. The net purchase or redemption orders so determined shall be transmitted to TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the Business Day next following LIFE COMPANY's receipt of such requests and premiums in accordance with the terms of Sections 1.2 and 1.3 hereof. 1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or its designated custodial account by 2:00 pm on the day the order is transmitted by LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption proceeds to LIFE COMPANY by 2:00 pm that day, unless doing so would require TRUST to dispose of Portfolio securities or otherwise incur additional costs. In any event, proceeds shall be wired to LIFE COMPANY within the time period permitted by the '40 Act or the rules, orders or regulations thereunder, and TRUST shall notify the 3 person designated in writing by LIFE COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York Time on the same Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's order requests the application of redemption proceeds from the redemption of shares to the purchase of shares of another Fund advised by ADVISER, TRUST shall so-apply such proceeds on the same Business Day that LIFE COMPANY transmits such order to TRUST. 1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold only to Participating Insurance Companies which have agreed to participate in TRUST to fund their Separate Accounts and/or to Qualified Plans, all in accordance with the requirements of Section 817(h)(4) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the TRUSTs Portfolios will not be sold directly to the general public. 1.9 TRUST may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of the shares of or liquidate any Portfolio of TRUST if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST (the "Board"), acting in good faith and in light of its duties under federal and any applicable state laws, deemed necessary, desirable or appropriate and in the best interests of the shareholders of such Portfolios. 1. 10 Issuance and transfer of Portfolio shares will -be by book entry only. Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts. Shares ordered from Portfolio will be recorded in appropriate book entry titles for the Separate Accounts. Article II. REPRESENTATIONS AND WARRANTIES 2.1 LIFE COMPANY represents and warrants that it is an insurance company duly organized and validly existing under the laws of Indiana and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that LIFE COMPANY, the principal underwriter for the Variable Contracts, is registered as a broker-dealer under. the Securities Exchange Act of 1934 (the ... 34 Act"). 2.2 LIFE COMPANY represents and warrants that it has registered or, prior to any issuance or sale of the Variable Contracts, will register each Separate Account as a unit investment trust ("UIT") in accordance with the provisions of the '40 Act and cause each Separate Account to remain so registered to serve as a segregated asset account for the Variable Contracts, unless an exemption from registration is available. 2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be registered under the Securities Act of 1933 (the "'33 Act") unless an exemption from registration is available prior to any issuance or sale of the Variable Contracts, and that 4 the Variable Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws (including all applicable blue sky laws and further that the sale of the variable contracts shall comply in all material respects with applicable state insurance law suitability requirements). 2.4 LIFE COMPANY represents and warrants that the Variable Contracts are currently and at the time of issuance will be treated as life insurance policies, endowment or annuity contracts under applicable provisions of the Code, that it will maintain such treatment and that it will notify TRUST im mediately Upon having a reasonable basis for believing that the Variable Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5 TRUST represents and warrants that the Fund shares offered and sold pursuant to this Agreement will be registered under the '33 Act and sold in accordance with all applicable federal laws, and TRUST shall be registered under the '40 Act prior to and at the time of any issuance or sale of such shares. TRUST, subject to Section 1.9 above, shall amend its registration statement under the '33 Act and the '40 Act from time to time as required in order to effect the continuous offering of its shares. TRUST shall register and qualify its shares for sale in accorda n with the laws of the various states only if and to the extent deemed advisable by TRUST. 2.6 TRUST and ADVISER each represents and warrants that each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing any Portfolio has ceased to comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance. 2.7 TRUST represents and warrants that each Portfolio invested in by the Separate Account will be treated as a "regulated investment company" under Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. 2.8 ADVISER represents and warrants that it shall perform its obligations hereunder in compliance in all material respects with all applicable state and federal laws. 2.9 TRUST and ADVISER each represents and warrants that all officers, employees and agents of the TRUST having access to securities or funds of any Portfolio shall be covered by a blanket fidelity bond in such minimum amount as the SEC may prescribe under Section 17 (g) of the '40 act. 5 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. 6 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 7 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 8 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.] 9 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: 10 (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement or prospectus or sales literature for the Variable Contracts or contained in the Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY by or on behalf of TRUST for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) untrue statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of TRUST not supplied by LIFE COMPANY, or persons under its control) or (ii) willful misfeasance, bad faith or gross negligence of LIFE COMPANY or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of TRUST or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to TRUST by or on behalf of LIFE COMPANY; or (d) arise as a result of any failure by LIFE COMPANY to provide substantially the services and furnish the materials under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY. 11 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 12 or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to ADVISER I or TRUST by or on behalf of LIFE COMPANY for use in the registration statement or prospectus for TRUST or in sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) untrue statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by ADVISER or TRUST or persons under its control) or (ii) gross negligence, bad faith or willful misfeasance of TRUST or ADVISER or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts, or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY for inclusion therein by or on behalf of TRUST; or (d) arise as a result of (i) a failure by TRUST or ADVISER to provide substantially the services and furnish the materials under the terms of this Agreement; or (ii) a failure by a Portfolio(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code; or (iii) a failure by a Portfolio(s) invested in by the Separate Account to qualify as a regulated investment company" under Subchapter M of the Code; or 13 (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 (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 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 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 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 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 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 Appendix A BT Insurance Funds Trust Portfolios Equity 500 Index Fund Small Cap Index Fund APPENDIX B SEPARATE ACCOUNTS LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT M LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT R EX-99.2 26 EXHIBIT 99.2 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: APPENDIX A (Revised effective May 1, 1999) BT INSURANCE FUNDS TRUST PORTFOLIOS Equity 500 Index Fund Small Cap Index Fund EAFE Equity Index Fund 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) EX-99.3 27 EXHIBIT 99.3 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 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 EX-99.1 28 EXHIBIT 99.1 PARTICIPATION AGREEMENT AMONG THE LINCOLN NATIONAL LIFE INSURANCE CO. AND BARON CAPITAL FUNDS TRUST AND BARON CAPITAL, INC. THIS AGREEMENT, made and entered into this 28' day of August, 1998 by and among Baron Capital Funds Trust (and all series thereof) a business trust organized under the laws of the State of Delaware (the "Fund'), and THE LINCOLN NATIONAL LIFE INSURANCE CO., an Indiana insurance corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule I to this Agreement as in effect at the time this Agreement is executed and such other separate accounts that may be added to Schedule 1 from time to time in accordance with the provisions of Article XI of this Agreement (each such account referred to as the "Account"), and Baron Capital, Inc. (the "Distributor"). WHEREAS, the Fund is engaged in business as an open-end management investment company and has a class of stock (the "Fund Insurance Shares") that has been established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively referred to as "Variable Insurance Products," the owners of such products being referred to as "Product owners") to be offered by insurance companies which have entered into participation agreements with the Fund ("Participating Insurance Companies"); and WHEREAS, the Fund filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Fund Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Fund Prospectus") on Form N-1A to register itself as an open-end management investment company (File No. 33-40839) under the Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund Insurance Shares (File No. 811-85 05) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has filed a registration statement with the SEC to register under the 1933 Act (unless exempt therefrom) certain variable annuity contracts described in Schedule 2 to this Agreement as in effect at the time this Agreement is executed and such other variable annuity contracts and variable life insurance policies which may be added to Schedule 2 from time to time in accordance with Article XI of this Agreement (such policies and contracts shall be referred to herein collectively as the "Contracts," each such registration statement for a class or classes of contracts listed on Schedule 2 being referred to as the "Contracts Registration Statement" and the prospectus for each such class or classes being referred to herein as the "Contracts Prospectus," and the owners of the such contracts, as distinguished from all Product Owners, being referred to as "Contract Owners"); and WHEREAS, each Account, a validly existing separate account, duly authorized by resolution of the Board of Directors of the Company on the date set forth on Schedule 1, sets aside and invests assets attributable to the Contracts; and WHEREAS, the Company has registered or will have registered each Account with the SEC as a unit investment trust under the 1940 Act before any Contracts are issued by that Account; and WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, the Distributor and the Fund have entered into an agreement (the "Fund Distribution Agreement") pursuant to which the Distributor will distribute the Fund Insurance Shares; and WHEREAS, BAMCO, Inc. (the "Investment Manager") is registered as an investment adviser under the 1940 Act and any applicable state securities laws and serves as an investment manager to the Fund pursuant to an agreement; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase Fund Insurance Shares on behalf of each Account to fund its Contracts and the Distributor is authorized to sell such Fund Insurance Shares to unit investment trusts such as the Accounts at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Distributor agree as follows: ARTICLE 1. SALE OF FUND SHARES 1.1. The Distributor agrees to sell to the Company those Fund Insurance Shares, which the Company orders on behalf of each Account, executing such orders on a daily basis in accordance with Section 1.4 of this Agreement. 2 1.2. The Fund agrees to make Fund Insurance Shares available for purchase by the Company on behalf of each Account at the then applicable net asset value per share on Business Days as defined in Section 1.4 of this Agreement, and the Fund shall use its best efforts to calculate and deliver such net asset value by 6:00 p.m., E.S.T., on each such Business Day. Notwithstanding any other provision in this Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board") may suspend or terminate the offering of shares, if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Fund Board acting in good faith and in light of its fiduciary duties under Federal and any applicable state laws, suspension or termination is necessary and in the best interests of the shareholders (it being understood that "shareholders" for this purpose shall mean Product owners). 1.3. The Fund agrees to redeem, at the Company's request, any full' or fractional Fund Insurance Shares held by each Account or the Company, executing such requests at the net asset value on a daily basis (Company will expect same day redemption wires unless unusual circumstances evolve which cause the Fund to have to redeem securities) in accordance with Section 1.4 of this Agreement, the applicable provisions of the 1940 Act and the then currently effective Fund Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund Insurance Shares of any series to the extent permitted by the 1940 Act, any rules, regulations or orders thereunder, or the then currently effective Fund Prospectus. 1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall be the agent of the Fund for the limited purpose of receiving redemption and purchase requests from each Account (but not from the general account of the Company), and receipt on any Business Day by the Company as such limited agent of the Fund prior to the time prescribed in the current Fund Prospectus (which as of the date of execution of this Agreement is 4 p.m., E.S.T.) shall constitute receipt by the Fund on that same Business Day, provided that the Fund, or its designee, receives notice of such redemption or purchase request by 11:00 a.m., E.S.T. on the next following Business Day. For purposes of this Agreement, "Business Day" shall mean any day on which the New York Stock exchange is open for trading. (b) The Company shall pay for the shares on the same day that it places an order with the Fund to purchase those Fund Insurance Shares for an Account. Payment for Fund Insurance Shares will be made by each Account or the Company in Federal Funds transmitted to the Fund by wire to be received by 11:00 a.m., E.S.T. on the day the Fund is properly notified of the purchase order for shares. The Fund will confirm receipt of each trade and these confirmations will be received by the Company via Fax or Email by 1:00 p.m. E.S.T. If Federal Funds are not received on time, such funds will be invested, and shares purchased thereby will be issued, as soon as practicable. 3 (c) Payment for shares redeemed by each Account or the Company will be made in Federal Funds transmitted to the Company by wire on the same day the Fund is notified of the redemption order of shares, except that the Fund reserves the right to delay payment of redemption proceeds, but in no event may such payment be delayed longer than the period permitted under Section 22(e) of the 1940 Act. Neither the Fund nor the Distributor shall bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds if securities must be redeemed; the Company alone shall be responsible for such action. 1.5. Issuance and transfer of Fund Insurance Shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Fund Insurance Shares will be recorded in an appropriate ledger for each Account or the appropriate subaccount of each Account. 1.6. The Fund shall furnish notice as soon as reasonably practicable to the Company of any income dividends or capital gain distributions payable on any shares. The Company, on its behalf and on behalf of each Account, hereby elects to receive all such dividends and distributions as are payable on any Fund Insurance Shares in the form of additional shares. The Company reserves the right, on its behalf and on behalf of each Account, to revoke this election and to receive all such dividends in cash. The Fund shall notify the Company of the number of Fund Insurance Shares so issued as payment of such dividends and distributions. 1.7. The Fund shall use its best efforts to make the net asset value per share available to the Company by 6 p.m., E.S.T. each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share is calculated, and shall calculate such net asset value in accordance with the then currently effective Fund Prospectus. Neither the Fund, any Series, the Distributor, nor the Investment Manager nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund, the Distributor or the Investment Manager. 1.8. (a) The Company may withdraw each Account's investment in the Fund only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the affected Fund to substitute the shares of another investment company for shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. 4 (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund Insurance Shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. (c) The Company shall not, without prior notice to the Distributor (unless otherwise required by applicable law), take any action to operate each Account as a management investment company under the 1940 Act. 1.9. The Fund and the Distributor agree that Fund Insurance Shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund and the Distributor will not sell Fund Insurance Shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund Insurance Shares will be sold to the general public. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account (unless exempt therefrom) as a. unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding. 2.2. The Fund represents and warrants that Fund Insurance Shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund Insurance Shares are sold. The Fund further represents and warrants that it is a business trust duly organized and in good standing under the laws of the State of Delaware. 5 2.3. The Fund represents and warrants that it currently qualifies as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund further represents and warrants that it will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Fund represents and warrants that it will comply with Section 817(h) of the Code, and all regulations issued thereunder. In the event of a breach of this Section 3.6 by the Fund, it will a) immediately notify the Company of the breach and b) to adequately diversify each series so as to achieve compliance with the grace period offered by Regulation 1.817-5. 2.5. The Company represents that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Fund and the Distributor immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.6. The Fund represents that the Fund's investment policies, fees and expenses, and operations are and shall at all times remain in material compliance with the laws of the state of California, to the extent required to perform this Agreement; and with any state-mandated investment restrictions set forth on Schedule 3, as amended from time to time by the Company in accordance with Section 6.6. The Fund, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance law and applicable to the Fund. 2.7. The Distributor represents and warrants that it is duly registered as a broker-dealer under the 1934 Act, a member in good standing of the NASD, and duly registered as a broker dealer under applicable state securities laws; its operations are in compliance with applicable law, and it will distribute the Fund Insurance Shares according to applicable law. 2.8. The Distributor, on behalf of the Investment Manager, represents and warrants that the Investment Manager is registered as an investment adviser under the Investment Advisers Act of 1940 and is in compliance with applicable federal and state securities laws. 2.9. The Fund represents and warrants that it has and maintains a fidelity bond in accordance with Rule l7g-1 under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. 6 ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER INFORMATION 3.1. The Distributor shall provide the Company with as many copies of the current Fund Prospectus as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund at its expense shall provide to the Company a camera-ready copy, and electronic version, of the current Fund Prospectus suitable for printing and other assistance as is reasonably necessary in order for the Company to have a new Contracts Prospectus printed together with the Fund Prospectus in one document. See Article V for a detailed explanation of the responsibility for the cost of printing and distributing Fund prospectuses. 3.2. The Fund Prospectus shall state that the Statement of Additional Information for the Fund is available from the Distributor (or, in the Fund's discretion, the Fund Prospectus shall state that such Statement is available from the Fund), and the Distributor (or the Fund) shall provide such Statement free of charge to the Company and to any outstanding or prospective Contract owner who requests such Statement. 3.3. (a) The Fund at its expense shall provide to the Company a camera-ready copy of the Fund's shareholder reports and other communications to shareholders (except proxy material), in each case in a form suitable for printing, as determined by the Company. The Fund shall be responsible for the costs of printing and distributing these materials to Contract owners. (b) The Fund at its expense shall be responsible for preparing, printing and distributing its proxy material. The Company will provide the appropriate Contractowner names and addresses to the Fund for this purpose. 3.4. The Company shall furnish each piece of sales literature or other promotional material in which the Fund or the Investment Manager is named to the Fund or the Distributor prior to its use. No such material shall be used, except with the prior written permission of the Fund or the Distributor. The Fund and the Distributor agree to respond to any request for approval on a prompt and timely basis. Failure of the Fund to respond within 10 days of the request by the Company shall relieve the Company of the obligation to obtain the prior written permission of the Fund or the Distributor. 3.5. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund other than the information or representations contained in the Fund Registration Statement or Fund Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or by the Distributor, except with the prior written permission of the Fund or the Distributor. The Fund agrees to respond to any request for permission on a prompt and timely basis. If neither the Fund nor the Distributor responds within 10 days of a request by the Company, then the Company shall be relieved of the obligation to obtain the prior written permission of the Fund. 7 3.6. The Fund and the Distributor shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account or the Contracts other than the information or representations contained in the Contracts Registration Statement or Contracts Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in published reports of each Account which are in the public domain or approved in writing by the Company for distribution to Contract owners, or in sales literature or other promotional material approved in writing by the Company, except with the prior written permission of the Company. The Company agrees to respond to any request for permission on a prompt and timely basis. If the Company fails to respond within 10 days of a request by the Fund or the Distributor, then the Fund and the Distributor are relieved of the obligation to obtain the prior written permission of the Company. 3.7. The Fund will provide to the Company at least one complete copy of all Fund Registration Statements, Fund Prospectuses, Statements of Additional Information, annual and semi-annual reports and other reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Fund or Fund Insurance Shares, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.8. The Company will provide to the Fund at least one complete copy of all Contracts Registration Statements, Contracts Prospectuses, Statements of Additional Information, Annual and Semi-annual Reports, sales literature and other promotional materials, and all amendments or supplements to any of the above, that relate to the Contracts, within 20 days after the filing of such document with the SEC or other regulatory authorities. 3.9. Each party will provide to the other party copies of draft versions of any registration statements, prospectuses, and statements of additional information, reports, proxy statements, and solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, to the extent that the other party reasonably needs such information for purposes of preparing a report or other filing to be filed with or submitted to a regulatory agency. If a party requests any such information before it has been filed, the other party will provide the requested information if then available and in the version then available at the time of such request. 3.10. For purposes of this Article III, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, computer net site, signs or billboards, motion pictures or other public media), sales literature (i.e. any written communication distributed or made generally available to customers or the public, in print or electronically, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications 8 distributed or made generally available to some or all agents or employees, registration statements, prospectuses, Statements of Additional Information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act. ARTICLE. IV. Voting 4.1 Subject to applicable law and the order referred to in Article VII, the Fund shall: solicit voting instructions from Contract owners; 4.2 Subject to applicable law and the order referred to in Article VII, the Company shall: (a) vote Fund Insurance Shares attributable to Contract owners in accordance with instructions or proxies received in timely fashion from such Contract owners; (b) vote Fund Insurance Shares attributable to Contract owners for which no instructions have been received in the same proportion as Fund Insurance Shares of such series for which instructions have been received in timely fashion; and (c) vote Fund Insurance Shares held by the Company on its own behalf or on behalf of each Account that are not attributable to Contract owners in the same proportion as Fund Insurance Shares of such series for which instructions have been received in timely fashion. The Company shall be responsible for assuring that voting privileges for the Accounts are calculated in a manner consistent with the provisions set forth above. ARTICLE V. FEES AND EXPENSES All expenses incident to performance by the Fund under this Agreement (including expenses expressly assumed by the Fund pursuant to this Agreement) shall be paid by the Fund to the extent permitted by law. Except as may otherwise be provided in Section 1.4 and Article VII of this Agreement, the Company shall not bear any of the expenses for the cost of registration and qualification of the Fund Insurance Shares under Federal and any state securities law, preparation and filing of the Fund Prospectus and Fund Registration Statement, the preparation of all statements and notices required by any Federal or state securities law, all taxes on the issuance or transfer of Fund Insurance Shares, and any expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any, under Rule l2b-1 under the 1940 Act. 9 The Fund is responsible for the cost of printing and distributing Fund Prospectuses and SAIs to existing Contractowners. (If for this purpose the Company may print the Fund Prospectuses and SAIs in a booklet or separate booklets containing disclosure for the Contracts and for underlying funds other than those of the Fund, then the Fund shall pay only its proportionate share of the total cost to distribute the booklet to existing Contract owners.) The Company is responsible for the cost of printing and distributing Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for existing Contractowners. The Company shall have the final decision on choice of printer for all Prospectuses and SAIs. ARTICLE VI. COMPLIANCE UNDERTAKINGS 6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of the Code, and all regulations issued thereunder. 6.2. The Company shall amend the Contracts Registration Statements under the 1933 Act and each Account's Registration Statement under the 1940 Act from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale to the extent required by applicable securities laws of the various states. 6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Fund Insurance Shares are sold the continuous offering of Fund Insurance Shares as described in the then currently effective Fund Prospectus. The Fund shall register and qualify Fund Insurance Shares for sale to the extent required by applicable securities laws of the various states. 6.4. The Company shall be responsible for assuring that any prospectus offering a Contract that is a life insurance contract where it is reasonably possible that such Contract would be deemed a "modified endowment contract," as that term is defined in Section 7702A of the Code, will describe the circumstances under which a Contract could be treated as a modified endowment contract (or policy). 6.5. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-I to finance distribution expenses. 6.6. (a) The Company shall amend Schedule 3 when appropriate in order to inform the Fund of any applicable state-mandated investment restrictions with which the Fund must comply. 10 (b) Should the Fund or the Distributor become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Company has reviewed a copy of the order (the "Mixed and Shared Funding Order") dated June 16, 1998 of the Securities and Exchange Commission under Section 6c of the Act and, in particular, has reviewed the conditions to the relief set forth in the related Notice. As set forth therein, the Company agrees to report to the Board of Directors of the Fund (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Fund, and to assist the Board in carrying out its responsibilities under the conditions of the Mixed and Shared Funding Order by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company agrees with that determination, the Company shall, at its sole cost and expense, take whatever steps are necessary to remedy the irreconcilable material conflict. These steps could include: (a) withdrawing the assets allocable to some or all of the affected Accounts from the Fund and reinvesting such assets in a different investment vehicle, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractowners and, as appropriate, segregating the assets of any particular group (i.e., variable annuity Contractowners, variable life insurance policyowners, or variable Contractowners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contractowners the option of making such a change; and (b) establishing a new registered mutual fund or management separate account, or taking such other action as is necessary to remedy or eliminate the irreconcilable material conflict. (b) If the Company disagrees with the Board's determination, the Company shall file a written protest with the Board, reserving its right to dispute the determination as between just the Company and the Fund. After reserving that right the Company, although disagreeing with the Board that it (the Company) was responsible for the conflict, shall take the necessary steps, under protest, to remedy the conflict, substantially in accordance with paragraph (a) just above, for the protection of Contractowners. 11 (c) As between the Company and the Fund, if within 45 days after the Board's determination the Company elects to press the dispute, it shall so notify the Board in writing. The parties shall then attempt to resolve the matter amicably through negotiation by individuals from each party who are authorized to settle the matter. If the matter has not been amicably resolved within 60 days from the date of the Company's notice of its intent to press the dispute, then before either party shall undertake to litigate the dispute it shall be submitted to non-binding arbitration conducted expeditiously in accordance with the CPR Rules for Non-Administered Arbitration of Business Disputes, by a sole arbitrator; provided, however, that if one party has requested the other party to seek an amicable resolution and the other party has failed to participate, the requesting party may initiate arbitration before expiration of the 60-day period set out just above. If within 45 days of the commencement of the process to select an arbitrator the parties cannot agree upon the arbitrator, then he or she will be selected from the CPR Panels of Neutrals. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort Wayne, Indiana. The Arbitrator is not empowered to award damages in excess of compensatory damages. (d) If the Board shall determine that the Fund or another insurer was responsible for the conflict, then the Board shall notify the Company immediately of that determination. The Fund shall assure the Company that it (the Fund) or that other insurer, as applicable, shall, at its sole cost and expense, take whatever steps are necessary to eliminate the conflict. 7.3. If a material irreconcilable conflict arises because of the Company's decision to disregard Contractowner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company shall withdraw (without charge or penalty) each Account's investment in the Fund, if the Fund so elects. 7.4. Subject to the terms of Section 7.2 above, the Company shall carry out the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict with a view only to the interests of Contractowners. 7.5. For purposes of this Article, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable conflict, but in no event will the Fund be required to establish a new funding medium for any variable contract, nor will the Company be required to establish a new funding medium for any 12 Contract if in either case an offer to do so has been declined by a vote of a majority of affected Contractowners. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Fund, the Distributor and each person who controls or is associated with the Fund (other than another Participating Insurance Company) or the Distributor within the meaning of such terms under the federal securities laws and any officer, trustee, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information famished in writing to the Company by the Fund or the Distributor (or a person authorized in writing to do so on behalf of the Fund or the Distributor) for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund Insurance Shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact by or on behalf of the Company (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control with respect to the sale or distribution of the Contracts or Fund Insurance Shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or 13 (d) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (e) arise out of any material breach by the Company of this Agreement, including but not limited to any failure to transmit a request for redemption or purchase of Fund Insurance Shares on a timely basis in accordance with the procedures set forth in Article 1; or (f) arise as a result of the Company's providing the Fund with inaccurate information, which causes the Fund to calculate its Net Asset Values incorrectly. This indemnification will be in addition to any liability which the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.2. INDEMNIFICATION BY THE DISTRIBUTOR. THE Distributor agrees to indemnify and hold harmless the Company and each person who controls or is associated with the Company within the meaning of such terms under the federal securities laws and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Fund or the Distributor for use in the Fund 14 Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature for the Fund or otherwise for use in connection with the sale of the Contracts or Fund Insurance Shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Distributor or the Fund (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Distributor or the Fund or persons under their control) or wrongful conduct of the Distributor or persons under its control with respect to the sale or distribution of the Contracts or Fund Insurance Shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Contracts Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Distributor or the Fund to the Company (or a person authorized in writing to do so on behalf of the Fund or the Distributor); or (d) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) to comply with the diversification requirements specified in Article VI of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the Contracts Prospectuses); or (e) arise out of any material breach by the Distributor or the Fund of this Agreement. This indemnification will be in addition to any liability which the Distributor may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.3 INDEMNIFICATION PROCEDURES. AFTER receipt by a party entitled to indemnification ("indemnified party") under this Article VIII of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article VIII ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, 15 provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article VIH, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIH. The indemnification provisions contained in this Article VIII shall survive any termination of this Agreement. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Indiana, without giving effect to the principles of conflicts of laws. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon 120 days advance written notice to the other parties; or 16 (b) at the option of the Company if shares of the Fund are not available to meet the requirements of the Contracts as determined by the Company. Prompt notice of the election to terminate for such cause shall be furnished by the Company. Termination shall be effective ten days after the giving of notice by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of each Account, the administration of the Contracts or the purchase of Fund Insurance Shares, or an expected or anticipated ruling, judgment or outcome which would, in the Fund's reasonable judgment, materially impair the Company's ability to perform the Company's obligations and duties hereunder; or (d) at the option of the Company upon institution of formal proceedings against the Fund, the Distributor, the Investment Manager or any Sub Investment Manager, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body regarding the duties of the Fund or the Distributor under this Agreement, or an expected or anticipated ruling, judgment or outcome which would, in the Company's reasonable judgment, materially impair the Fund's or the Distributor's ability to perform Fund's or Distributor's obligations and duties hereunder; or (e) at the option of the Company upon institution of formal proceedings against the Investment Manager or Sub-investment Manager by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body which would, in the good faith opinion of the Company, result in material harm to the Accounts, the Company, or Contractowners. (f) upon requisite vote of the Contract owners having an interest in the affected Series (unless otherwise required by applicable law) and written approval of the Company, to substitute the shares of another investment company for the corresponding shares of the Fund in accordance with the terms of the Contracts; or (g) at the option of the Fund in the event any of the Contracts are not registered, issued or sold in accordance with applicable Federal and/or state law; o 17 (h) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any Product owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; or (i) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; or (j) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or (k) at the option of the Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that the Contracts may fail to so qualify; or (1) at the option of either the Fund or the Distributor if the Fund or the Distributor, respectively, shall determine, in their sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of either the Fund or the Distributor; or (m) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that either: (1) the Fund and the Distributor, or either of them, shall have suffered a material adverse change in their respective businesses or financial condition; or (2) the Fund or the Distributor, or both of them, shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company; or (n) upon the assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Accounts to another insurance company pursuant to an assumption reinsurance agreement) unless the nonassigning party consents thereto or unless this Agreement is assigned to an affiliate of the Distributor. 10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to all other parties to this Agreement of its intent to terminate which notice shall set forth the basis for such termination. Furthermore: 18 (a) In the event that any termination is based upon the provisions of Article VII or the provisions of Section 10.1 (a) of this Agreement, such prior written notice shall be given in advance of the effective date of termination as required by such provisions; and (b) in the event that any termination is based upon the provisions of Section 10.1 (c) or 10.1 (d) of this Agreement, such prior written notice shall be given at least ninety (90) days before the effective date of termination, or sooner if required by law or regulation. (c) in the event that any termination is based upon the provisions of Section 10.1 (e) of this Agreement, such prior written notice shall all be given at least sixty (60) days before the date of any proposed vote to replace the Fund's shares 10.3. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund and the Distributor will, at the option of the Company, continue to make available additional Fund Insurance Shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund Insurance Shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. (b) In the event of a termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund and the Distributor shall promptly notify the Company whether the Distributor and the Fund will continue to make Fund Insurance Shares available after such termination. If Fund Insurance Shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except for Section 10.1 (a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. (c) The parties agree that this Section 10.3 shall not apply to any termination made pursuant to Article VII or any conditions or undertakings incorporated by reference in Article VII, and the effect of such Article VII termination shall be governed by the provisions set forth or incorporated by reference therein. 19 ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts and to add new classes of variable annuity contracts and variable life insurance policies to be issued by the Company through an Account investing in the Fund. The provisions of this Agreement shall be equally applicable to each such class of contracts or policies, unless the context otherwise requires. ARTICLE XII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party(ies) at the address of such party(ies) set forth below or at such other address as such party(ies) may from time to time specify in writing to the other party. If to the Fund: Baron Capital Funds Trust 767 Fifth Avenue New York, New York, 10153 Attn: David E. Kaplan cc: Linda S. Martinson, Esq. If to the Company: The Lincoln National Life Insurance Co. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Kelly D. Clevenger If to the Distributor: Baron Capital, Inc. 767 Fifth Avenue New York, New York, 10153 Attn: David E. Kaplan cc: Linda S. Martinson, Esq. 20 ARTICLE XIII. MISCELLANEOUS 13.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.2. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 13.4. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 13.5. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party, and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 21 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. Baron Capital Funds Trust Date: Signature: Name: Title: LINCOLN NATIONAL LIFE INSURANCE CO. Date: Signature: Name: Title: Baron Capital, Inc. Date: Signature: Name: Title: 22 SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of August 28, 1998 LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN NATIONAL VARIABLE ANNUITY-ACCOUNT L LINCOLN LIFE VARIABLE ANNUITY ACCOUNT 23 SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of August 28, 1998 MULTI-FUND-REGISTERED TRADEMARK- VARIABLE ANNUITY (INDIVIDUAL AND GROUP ANNUITIES) eANNUITY (INDIVIDUAL ANNUITY) LINCOLN LIFE GROUP VARIABLE ANNUITY - GVA (GROUP VARIABLE ANNUITY) 24 SCHEDULE 3 State-mandated Investment Restrictions Applicable to the Fund As of August 28, 1998 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: BORROWING. Borrowing limits for any variable contract separate account portfolio are (1) 10% of net asset value when borrowing for any general purpose; and (2) 25% of net asset value when borrowing as a temporary measure to facilitate redemptions. Net asset value of a portfolio is the market value of all investments or assets owned less outstanding liabilities of the portfolio at the time that any new or additional borrowing is undertaken. FOREIGN INVESTMENTS - DIVERSIFICATION. 1. A portfolio will be invested in a minimum of five different foreign countries at all times. However, this minimum is reduced to four when foreign investments comprise less than 80% of the portfolio's net asset value; to three when legs than 60% of that value; to two when less than 40%; and to one when less than 20%. 2. Except as set forth in items 3 and 4 below, a Portfolio will have no more than 20% of its net asset value invested in securities of issuers located in any one country. 3. A Portfolio may have an additional 15% of its net asset value invested in securities of issuers located in any one of the following countries: Australia, Canada, France, Japan, the United Kingdom or Germany. 4. A Portfolio's investments in United States issuers are not subject to the foreign country diversification guidelines. 25 EX-99.2 29 EXHIBIT 99.2 The Participation Agreement (the "Agreement"), dated August 28, 1998, by and among Baron Capital Funds Trust (and all series thereof) a business trust organized under the laws of the State of Delaware and The Lincoln National Life Insurance Co., an Indiana insurance corporation, is hereby amended as follows: Schedule 2 of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE 2 Amended as of October 15, 1999 Cumulative Listing of the Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 Amended as of October 15, 1999 Multi Fund Individual Variable Annuity eAnnuity Group Variable Annuity Lincoln VUL Group Multi Fund Variable Annuity Lincoln SVUL Lincoln CVUL Multi Fund - Non-registered - Variable Annuity Lincoln VUL(DB) IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. BARON CAPITAL FUNDS TRUST Date: By: ------------------------------ --------------------------------- Name: ------------------------------- Title: ------------------------------ BARON CAPITAL, INC. Date: By: ------------------------------ --------------------------------- Name: ------------------------------- Title: ------------------------------ LINCOLN NATIONAL LIFE INSURANCE CO. Date: By: ------------------------------ --------------------------------- Name: Steven M. Kluever ------------------------------- Title: Second Vice President ------------------------------ EX-99.3 30 EX-99.3 The Participation Agreement (the "Agreement'), dated August 28, 1998, by and among Baron Capital Funds Trust (and all series thereof) a business trust organized under the laws of the State of Delaware and The Lincoln National Life Insurance Co., an Indiana insurance corporation, is hereby amended as follows: Schedule 1 and Schedule 2 of the Agreement are hereby deleted in their entirety and replaced with the following: SCHEDULE I Cumulative Listing of the Separate Accounts of Lincoln National Life Insurance Company Investing in the Trust Amended As of May 1, 1999 Lincoln National Variable Annuity Account C Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln National Variable Annuity Account 53 SCHEDULE 2 Amended as of May 1, 1999 Cumulative Listing of the Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule I Amended as of May 1, 1999 Multi Fund Individual Variable Annuity eAnnuity Group Variable Annuity Lincoln VUL Group Multi Fund Variable Annuity Lincoln SVUL Lincoln CVUL Multi Fund - Non-registered - Variable Annuity IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules I and 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. BARON CAPITAL FUNDS TRUST Date: By: Name: Title: BARON CAP Date: Name: Title: LINCOLN NATIONAL LIFE INSURANCE CO. Date: By: Name: Title: EX-99.1 31 EX-99.1 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 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly registered as an investment adviser under the federal Investment Advisers Act of 1940 and any applicable state securities law; and WHEREAS, the Company has registered or will register certain variable life insurance and variable annuity contracts under the 1933 Act; and WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid variable annuity contracts; and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and WHEREAS, the Underwriter is registered as a broker dealer with the SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the " 1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios on behalf of each Account to fund certain of the aforesaid variable life and variable annuity contracts and the Underwriter is authorized to sell such shares to unit investment trusts such as each Account at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Underwriter agree as follows: ARTICLE 1. SALE OF FUND SHARES 1.1. The Underwriter agrees to sell to the Company those shares of the Fund which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Fund. For purposes of this Section 1. 1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the 2 Fund receives notice of such order by 9:30 a.m. Boston time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.2. The Fund agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Fund calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Fund shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.3. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Portfolio will be sold to the general public. 1.4. The Fund and the Underwriter will not sell Fund shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles 1, 1111, V, VII and Section 2.5 of Article II of this Agreement is in effect to govern such sales. 1.5. The Fund. agrees to redeem for cash, on the Company's request, any full or fractional shares of the Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the request for redemption. For purposes of this Section 1.5, the Company shall be the designee of the Fund for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such request for redemption on the next following Business Day. 1.6. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus of the Fund shall be made in accordance with the provisions of such prospectus. The Company agrees that all net amounts available under the variable annuity contracts with the form number(s) which are listed on Schedule A attached hereto and incorporated herein by this reference, (as such Schedule A may be amended from time to time hereafter by mutual written agreement of all the parties hereto), (the "Contracts") shall be invested in the Fund, in such other Funds advised by the Adviser as may be mutually agreed to in writing by the parties hereto, or in the Company's general account, provided that such amounts may also be invested in investment companies other than the Fund. The Company shall notify the Fund as to which other investment companies are available as investment options under the Contract not later than the time such investment companies are made available to owners of the 3 Contracts. The investment companies available to Contract owners as of the date of this Agreement are as shown on Schedule C. 1.7. The Company shall pay for Fund shares on the next Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1. 1 hereof. Payment shall be in federal funds transmitted by wire. For purpose of Section 2. 10 and 2.11, upon receipt by the Fund of -the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. 1.8. Issuance and transfer of the Fund's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Fund will be recorded in an appropriate title for each Account or the appropriate subaccount. of each Account. 1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on the Fund's shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Portfolio shares in additional shares of that Portfolio. The Company reserves the light to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.10. The Fund shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset value per share available by 7 p.m. Boston time. ARTICLE 11. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act; that the Contracts will be issued and sold in compliance in all material respects with all applicable Federal and state laws and that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly established each Account, prior to any issuance or sale thereof, as a segregated asset account under Section 27-1-5-1 of the Indiana Insurance Code and has registered or, prior to any issuance or sale of the Contracts, win register each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the State of Indiana and all applicable federal and state securities laws 4 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 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 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 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 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 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 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, 11 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 12 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 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 (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 (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 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 (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 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 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 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 SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Lincoln National Variable Annuity GAC96-1 11 Separate Account L GAC91-101
22 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
Name of Separate Account and Policy Form Numbers of Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- 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
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: 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 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 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 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 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 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 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 EX-99.2 32 EX-99.2 PARTICIPATION AGREEMENT AMONG VARIABLE INSURANCE PRODUCTS FUND II, FIDELITY DISTRIBUTORS CORPORATION AND LINCOLN NATIONAL LIFE INSURANCE COMPANY THIS AGREEMENT, made and entered into as of the Ist day of September, 1996, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY, (hereinafter the "Company"), an Indiana corporation, on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A hereto as may be amended from time to time (each such account hereinafter referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated business trust organized under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a Massachusetts corporation. WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively, the "Variable Insurance Products") to be offered by insurance companies which have entered into participation agreements with the Fund and the Underwriter (hereinafter "Participating Insurance Companies"); and WHEREAS, the beneficial interest in the Fund is divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available under this Agreement, as may be amended from time to time by mutual agreement of the parties hereto (each such series hereinafter referred to as a "Portfolio"); and WHEREAS, the Fund filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form N- 1 A and the SEC has declared effective said registration statement; and WHEREAS, the Fund has obtained an order from the SEC, dated September 17, 1986 (File No. 812-6422), granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the " 1940 1 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly registered as an investment adviser under the federal Investment Advisers Act of 1940 and any applicable state securities law; and WHEREAS, the Company has registered or will register certain variable life insurance and variable annuity contracts under the 1933 Act; and WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid variable annuity contracts; and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and WHEREAS, the Underwriter is registered as a broker dealer with the SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios on behalf of each Account to fund certain of the aforesaid variable life and variable annuity contracts and the Underwriter is authorized to sell such shares to unit investmen trusts such as each Account at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Underwriter agree as follows: ARTICLE 1. SALE OF FUND SHARES 1.1. The Underwriter agrees to sell to the Company those shares of the Fund which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Fund. For purposes of this Section 1. 1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the 2 Fund receives notice of such order by 9:30 a.m. Boston time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.2. The Fund agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Fund calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Fund shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.3. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Portfolio will be sold to the general public. 1.4. The Fund and the Underwriter will not sell Fund shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles 1, 111, V, VII and Section 2.5 of Article II of this Agreement is in effect to govern such sales. 1.5. The Fund agrees to redeem for cash, on the Company's request, any fun or fractional shares of the Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the request for redemption. For purposes of this Section 1.5, the Company shall be the designee of the Fund for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such request for redemption on the next following Business Day. 1.6. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus of the Fund shall be made in accordance with the provisions of such prospectus. The Company agrees that all net amounts available under the variable annuity contracts with the form number(s) which are listed on Schedule A attached hereto and incorporated herein by this reference, (as such Schedule A may be amended from time to time hereafter by mutual written agreement of all the parties hereto), (the "Contracts") shall be invested in the Fund, in such other Funds advised by the Adviser as may be mutually agreed to in writing by the parties hereto, or in the Company's general account, provided that such amounts may also be invested in investment companies other than the Fund. The Company shall notify the Fund as to which other investment companies are available as investment options under the Contract not later than the time such investment companies are made available to owners of the 3 Contracts. The investment companies available to Contract owners as of the date of this Agreement are as shown on Schedule C. 1.7. The Company shall pay for Fund shares on the next Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1. 1 hereof. Payment shall be in federal funds transmitted by wire. For purpose of Section 2. 10 and 2. 11, upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. 1.8. Issuance and transfer of the Fund's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Fund will be recorded in an appropriate tide for each Account or the appropriate subaccount of each Account. 1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on the Fund's shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Portfolio shares in additional shares of that Portfolio. 'Me Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1. 10. The Fund shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset value per share available by 7 p.m. Boston time. ARTICLE 11. REPRESENTATIONS AND WARRANTIES 2. 1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act-, that the Contracts will be issued and sold in compliance in all material respects with all applicable Federal and state, laws and that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. 'Me Company further represents and wan-ants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly established each Account, prior to any issuance or sale thereof, as a segregated asset account under Section 27-1-5-1 of the Indiana Insurance Code and has registered or, prior to any issuance or sale of the Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts. 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the State of Indiana and all applicable federal and state securities laws 4 and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund or the Underwriter. 2.3. The Fund represents that it is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Company represents that the Contracts are currently treated as life insurance policies or annuity insurance contracts, under applicable provisions of the Code and that it will make every effort to maintain such treatment and that it will notify the Fund and the Underwriter immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5. 'Me Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or otherwise, although it may make such payments in the future. The Fund has adopted a "no fee" or "defensive" Rule 12b- 1 Plan under which it makes no payments for distribution expenses. To the extent that it decides to finance distribution expenses pursuant to Rule 12b- 1, the Fund undertakes to have a board of trustees, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b- I to finance distribution expenses. 2.6. The Fund makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states except that the Fund represents that the Fund's investment policies, fees and expenses are and shall at all times remain in compliance with the laws of the State of Indiana and the Fund and the Underwriter represent that their respective operations are and shall at all times remain in material compliance with the laws of the State of Indiana to the extent required to perform this Agreement. 2.7. The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Fund shares in accordance with t he laws of the State of Indiana and all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.8. The Fund represents that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act. 5 2.9. The Underwriter represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for the Fund in compliance in all material respects with the laws of the State of Indiana and any applicable state and federal securities laws. 2.10. The Fund and Underwriter represent and warrant that all of their directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. The Fund and the Underwriter agree to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agree to notify the Company immediately in the event that such coverage no longer applies. 2.11. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are covered by a blanket fidelity bond or similar coverage for the benefit of the Fund, and that said bond is issued by a reputable bonding company, includes coverage for larceny and embezzlement, and is in an amount not less than $5 million. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund and the Underwriter in the event that such coverage no longer applies. ARTICLE Ill. PROSPECTUSES AND PROXY STATEMENTS: VOTING 3.1. The Underwriter shall provide the Company with as many printed copies of the Fund's current prospectus and Statement of Additional Information as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund shall provide cameraready film containing the Fund's prospectus and Statement of Additional Information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or Statement of Additional Information for the Fund is amended during the year) to have the prospectus for the Contracts and the Fund's prospectus printed together in one document, and to have the Statement of Additional Information for the Fund and the Statement of Additional Information for the Contracts printed together in one document. Alternatively, the Company may print the Fund's prospectus and/or its Statement of Additional Information in combination with other fund companies' prospectuses and statements of additional information. Except as provided in the following three sentences, all expenses of printing and distributing Fund prospectuses and Statements of Additional Information shall be the expense of the Company. For prospectuses and Statements of Additional Information provided by the Company to its existing owners of Contracts in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the Company chooses to receive camera-ready film in lieu of receiving printed copies of the Fund's prospectus, the Fund 6 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 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 the Contracts or each Account and their investment in the Fund, within 30 days of the filing of such document with the SEC or other regulatory authorities. 4.7. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, any of the following that refer to the Fund or any affiliate of the Fund: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (IE., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, prospectuses, Statements of Additional Information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act. ARTICLE V. FEES AND EXPENSES 5.1. The Fund and Underwriter shall pay no fee or other compensation to the Company under this agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing and such payments will be made out of existing fees otherwise payable to the Underwriter, past profits of the Underwriter or other resources available to the Underwriter. No such payments shall be made directly by the Fund. Currently, no such payments are contemplated. 5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund's shares. 5.3. The Company shall bear the expenses of distributing the Fund's prospectus, proxy materials and reports to owners of Contracts issued by the Company. ARTICLE VI. DIVERSIFICATION 9 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 10 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, 11 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 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 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 (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 (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 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 (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 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 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 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 SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Lincoln National Variable Annuity GAC96-111 Separate Account L GAC91-101
22 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
Name of Separate Account and Policy Form Numbers of Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- 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
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: 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 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 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 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 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 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 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 EX-99.3 33 EX-99.3 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT
Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class) 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
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: 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: EX-99.4 34 EX-99.4 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE OCTOBER 15, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class) - -------------------------------------- -------------------------------- --------------------- 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
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: ------------------------ EX-99.5 35 EX-99.5 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 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 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 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 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 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 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 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 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 ARTICLE V. FEES AND EXPENSES 5.1. The Fund and Underwriter shall pay no fee or other compensation to the Company under this agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing and such payments will be made out of existing fees otherwise payable to the Underwriter, past profits of the Underwriter or other resources available to the Underwriter. No such payments shall be made directly by the Fund. 5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with -applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund's shares. 5.3. The Company shall bear the expenses of distributing the Fund's prospectus, proxy materials and reports to owners of Contracts issued by the Company. ARTICLE VI. DIVERSIFICATION 6.1. The Fund will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Fund will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. In the event of a breach of this Article VI by the Fund, it will take all reasonable steps (a) to notify Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety 10 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. 11 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. 12 ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY 8.1(a). The Company agrees to indemnify and hold harmless the Fund and each trustee of the Board and officers and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 8. 1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including reasonable legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund's shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement or prospectus for the Contracts or contained in the Contracts or sales literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the Registration Statement or prospectus for the Contracts or in the Contracts or sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of untrue statements or representations (other than statements or representations contained in the Registration Statement, prospectus or sales literature of the Fund not supplied by the Company, or persons under its control) or willful misfeasance, bad faith or gross negligence of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon information furnished to the Fund by or on behalf of the Company; or 13 (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 14 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 15 (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 16 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 17 expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company and the Underwriter agree promptly to notify the Fund of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of either Account, or the sale or acquisition of shares of the Fund. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason by ninety (90) days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio based upon the Company's determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event any of the Portfolio's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or 18 (d) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify; or (e) termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Article VI hereof; or (f) termination by either the Fund or the Underwriter by written notice to the Company, if either one or both of the Fund or the Underwriter respectively, shall determine, in their sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (g) termination by the Company by written notice to the Fund and the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that either the Fund or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (h) termination by the Company by written notice to the Fund and the Underwriter upon the requisite vote of the Contract owners having an interest in a Portfolio (unless otherwise required by applicable law) and written approval of the Company, to substitute shares of another investment company for the corresponding shares of a Portfolio in accordance with the terms of the Contracts; or (i) termination by written notice to the Company at the option of the Fund, upon institution of formal proceedings against the Company and by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of the Account, the administration of the Contracts or the purchase of Fund shares, or an expected or anticipated ruling, judgment or outcome which would, in the Fund's reasonable judgment, materially impair the Company's ability to perform the Company's obligations and duties hereunder; or 19 (j) termination by written notice to the Fund and the Underwriter, at the option of the Company, upon institution of formal proceedings against the Fund, the Underwriter, the Fund's investment adviser or any subadviser, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body regarding the duties of the Fund or the Underwriter under this Agreement, or an expected or anticipated ruling, judgment or outcome which would, in the Company's reasonable judgment, materially impair the Fund's or the Underwriter's ability to perform the Fund's or Underwriter's obligations and duties hereunder; or (k) termination by written notice to the Fund and the Underwriter, at the option of the Company, upon institution of formal proceedings against the Fund's investment adviser of any sub-adviser by the NASD, the SEC, or any state securities or insurance commission or any regulatory body which would, in the good faith opinion of the Company, result in material harm to the Accounts, the Company or Contract Owners. 10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this Agreement, the Fund and the Underwriter shall, at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. 10.3. The Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract Owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption") or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the Fund and the Underwriter the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Fund and the Underwriter) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving the Fund or the Underwriter 90 days notice of its intention to do so. 10.4. Notwithstanding any other provision of this Agreement, one party's obligation under Article VIII to indemnify the other party shall survive termination of this Agreement, to the 20 extent that the events giving rise to the obligation to indemnify the other party occurred prior to the date of termination. ARTICLE XI. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Fund: 82 Devonshire Street Boston, Massachusetts 02109 Attention: Treasurer If to the Company: The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attention: Kelly D. Clevenger If to the Underwriter: 82 Devonshire Street Boston, Massachusetts 02109 Attention: Treasurer ARTICLE XII. MISCELLANEOUS 12.1. All person's dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Fund. 12.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 21 12.4. This Agreement may be executed, simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish any insurance commissioner with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the insurance operations of the Company are being conducted in a manner consistent with the insurance regulations and any other applicable law or regulations of that state. 12.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Underwriter may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Underwriter, if such assignee is duly licensed and registered to perform the obligations of the Underwriter under this Agreement. The Company shall promptly notify the Fund and the Underwriter of any change in control of the Company. 12.9. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee copies of the following reports: (a) the Company's annual statement(prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles ("GAAP"), if any), as soon as practical and in any event within 90 days after the end of each fiscal year; (b) the Company's quarterly statements (statutory) (and GAAP, if any), as soon as practical and in any event within 45 days after the end of each quarterly period: 22 (c) any financial statement, proxy statement, notice or report of the Company sent to stockholders and/or policyholders, as soon as practical after the delivery thereof to stockholders; (d) any registration statement (without exhibits) and financial reports of the Company filed with the SEC or any state insurance regulator, as soon as practical after the filing thereof; (e) any other report submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, as soon as practical after the receipt thereof. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Kelly D. Clevenger Vice President VARIABLE INSURANCE PRODUCTS FUND III By: Robert C. Pozen Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: Kevin J. Kelly Vice President 23 SCHEDULE A SEPARATE ACCOUNTS AND-ASSOCIATED CONTRACTS
Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class) - -------------------------------------- -------------------------- --------------------- Lincoln Life Variable Annuity AN425LL Growth Opportunities - Annuity Account N Initial Class
(November 3, 1997) 24. 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 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 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 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 EX-99.6 36 EX-99.6 Amended Schedule A Separate Accounts and Associated Contracts Effective October 15, 1999
Name of Separate Account and Policy Form Numbers of Contracts Date Established by Board of Directors Funded by Separate Account Fidelity Fund (Class) - -------------------------------------- -------------------------- --------------------- 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
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: ------------------------ EX-99.7 37 EXHIBIT 99.7 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2000 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
Policy Form Numbers of Contracts Name of Separate Account Funded By Separate Account Fidelity Fund (Class) - ------------------------ -------------------------- --------------------- 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
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: ---------------------- EX-99.8 38 EXHIBIT 99.8 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2000 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
Policy Form Numbers of Contracts Name of Separate Account Funded By Separate Account Fidelity Fund (Class) - ------------------------ -------------------------------- ---------------------- 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
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: _______________________ EX-99.9 39 EXHIBIT 99.9 Amended Schedule A Separate Accounts and Associated Contracts Effective May 1, 2000
Policy Form Numbers of Contracts Name of Separate Account Funded By Separate Account Fidelity Fund (Class) - ------------------------ -------------------------- --------------------- 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)
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 EX-99.1 40 EXHIBIT 99.1 JANUS ASPEN SERIES FUND PARTICIPATION AGREEMENT THIS AGREEMENT is made this 15' day of September, 1998, between JANUS ASPEN SERIES, an open-end management investment company organized as. a Delaware business trust (the "Trust"), and The Lincoln National Life Insurance Company, a life insurance company organized under the laws of the State of Indiana (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). WITNESSETH: WHEREAS, the Trust has registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended (the " 1940 Act"), and has registered the offer and sale of its shares under the Securities Act of 1933, as amended (the " 1933 Act"); and WHEREAS, the Trust desires to act as an investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by insurance companies that have entered into participation agreements with the Trust (the "Participating Insurance Companies"); and WHEREAS, the beneficial interest in the Trust is divided into several series of shares, each series representing an interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, the Trust has received an order from the Securities and Exchange Commission granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and certain qualified pension and retirement plans (the "Exemptive Order"); and WHEREAS, the Company has registered or will register (unless registration is not required under applicable law) certain variable life insurance policies and/or variable annuity contracts under the 1933 Act (the "Contracts"); and WHEREAS, the Company has registered or will register (unless registration is not required pursuant to Section 3(v)(ii) of the 1940'Act) each Account as a unit investment trust under the 1940 Act; and -1- WHEREAS, the Company desires to utilize shares of one or more Portfolios as an investment vehicle of the Accounts; NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I SALE OF TRUST SHARES 1.1 The Trust shall make shares of its Portfolios available to the Accounts at the net asset value next computed after receipt of such purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prosp~ctus of the Trust. Shares of a particular Portfolio of the Trust shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.2 The Trust will redeem any full or fractional shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus. of the Trust. The Trust 'shall make payment for such shares in the manner established from time to time by the Trust, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. 1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts. Receipt by the Company shall constitute receipt by the Trust provided that i) such orders are received by the Company in good order prior to the time the net asset value of each Portfolio is priced in accordance with its prospectus and ii) the Trust receives notice of such orders by 10:00 a.m. New York time on the next following Business Day. The Trust will confirm receipt of each trade in a manner mutually agreeable to the Trust and the Company. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.4 Purchase orders that are transmitted to the Trust in accordance with Section 1.3 shall be paid for no later than 2:00 p.m. New York time on the same Business Day that the Trust receives notice of the order. The Trust shall use its best efforts to pay for redemption orders that are transmitted to the Company in accordance with Section 1.2 no later than 2:30 -2- p.m. New York time on the same Business Day that the Trust receives notice of the order. Payments shall be made in federal funds transmitted by wire. 1.5 Issuance and transfer of the Trust's shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount. of each Account. 1.6 The Trust shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on the Trust's shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of that Portfolio.. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends in cash. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.7 The Trust shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6 p.m. New York time. 1.8 The Trust agrees that its shares will be sold only to Participating Insurance Companies and their separate accounts and to certain qualified pension and retirement plans to the extent permitted by the Exemptive Order. No shares of any Portfolio will be sold directly to the general public. The Company agrees that Trust shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.9 The Trust agrees that all Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting (unless exempt therefrom) and conflicts of interest corresponding to those contained in Section 2.8 and Article IV of this Agreement. ARTICLE II OBLIGATIONS OF THE PARTIES 2.1 The Trust shall prepare and be responsible for filing with the Securities and Exchange Commission and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. The Trust shall bear the costs of registration and qualification of its shares, preparation and Ming of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. -3- 2.2 At the option of the Company., the Trust shall either (a) provide the Company (at the Company's expense) with as many copies of the Trust's current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. The Trust shall be responsible for its pro-rated share of the printing costs. The Trust shall provide the Company with a copy of its statement of additional information in a form suitable for duplication by the Company. The Trust (at its expense) shall provide the Company with copies of any Trust-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3 The Company shall bear the costs (unless Janus Capital Corporation or the Trust, pursuant to the terms of the letter to Company dated September 15, 1998, is required to bear the costs) of printing and distributing the Trust's prospectus, statement of additional information, shareholder reports and other shareholder communications to owners of and applicants for policies for which the Trust is serving or is to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. 2.4 The Company agrees and acknowledges that the Trust's adviser, Janus Capital Corporation ("Janus Capital"), is the sole owner of the name and mark "Janus" and that all use of any designation comprised in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus Capital. Except as provided in Section 2.5, the Company shall not use any Janus Mark on its own behalf or on behalf of the Accounts or Contracts in any registration statement, advertisement, sales literature or other materials relating to the Accounts or Contracts without the prior written consent of Janus Capital. Such consent will not be unreasonably withheld and if no written objection is received within 10 business days of receipt, approval will be deemed given. Upon termination of this Agreement for any reason, the Company shall cease all use of any Janus Mark(s) as soon as reasonably practicable. 2.5 (a) The Company shall furnish or cause to be furnished, to the Trust or its designee, a copy of each Contract prospectus or statement of additional information in which the Trust or its investment adviser is named within 20 days of the filing of such document with the Securities and Exchange Commission. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee, each piece of sales literature or other promotional material in which the Trust or its investment adviser is named, at least ten Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within fifteen Business Days after receipt of such material. (b) The Trust shall furnish, or cause to be furnished, to the Company or its designee, a copy of each Trust prospectus or statement of additional information in which the -4- Company is named within 20 days of the filing of such document with the Securities and Exchange Commission. The Trust shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company is named, at least ten Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within fifteen Business Days after receipt of such material. 2.6 The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or its investment adviser in connection with the sale of the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust shares (as such registration statement and prospectus may be amended or supplemented from time to time), reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. Such consent will not be unreasonably withheld and if no written objection is received within 10 business days of receipt, approval will be deemed given. 2.7 The Trust shall not give any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. 2.8 So long as, and to the extent that the Securities and Exchange Commission interprets the 1940 Act to require pass-through voting privileges for variable policyowners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of the Trust. The Trust shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by the Trust. With respect to each Account, the Company will vote shares of the Trust held by the Account and for which no timely voting instructions from policyowners are received as well as shares it owns that are held by that Account, in the same proportion as those shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Trust shares held by Contract owners without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. 2.9 The Company shall notify the Trust of any applicable state insurance laws that restrict the Portfolios' investments or otherwise affect the operation of the Trust and shall notify the Trust of any changes in such laws. -5- ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1 The Company represents and warrants that it is an insurance company duly organized and validly existing under the laws of the State of Indiana and that it has legally and validly established each Account as a segregated asset account under such law on the date set forth in Schedule A. 3.2 The Company represents and warrants that each Account (1) has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust in accordance with the provisions of the 1940 Act or, alternatively (2) has not been registered in proper reliance upon the exclusion from registration under Section 3(c)(ii) of the 1940 Act. 3.3 The Company represents and warrants that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws. 3.4 The Trust represents and warrants that it is duly organized and validly existing under the laws of the State of Delaware. 3.5 The Trust represents and warrants that the Trust shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and the Trust shall be registered under the 1940 Act prior to any issuance or sale of such shares. The Trust shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Trust shall register and qualify its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 3.6 The Trust represents and warrants that the investments of each Portfolio will comply with Subchapter M and the diversification requirements set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended ("Code"), and the rules and regulations thereunder. In the event of a breach of this Section 3.6 by the Trust, it will a) immediately notify the Company of the breach and b) take the necessary steps to adequately diversify each Portfolio so as to achieve compliance within the grace period offered by Regulation 1.817-5. -6- ARTICLE IV POTENTIAL CONFLICTS 4.1 The parties acknowledge that the Trust's shares may be made available for investment to other Participating Insurance Companies. In such event, the Trustees will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f a decision by an insurer to disregard the voting instructions of contract owners. The Trustees shall promptly inform the Company if they determine that an irreconcilable material conflict exists and the implications thereof. 4.2 The Company agrees to promptly report any potential or existing conflicts of which it is aware to the Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Exemptive Order by providing the Trustees with all information reasonably necessary for the Trustees to consider any issues raised including, but not limited to, information as to a decision by the Company to disregard Contract owner voting instructions. 4.3 If it is determined by a majority of the Trustees, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists that affects the interests of Contract owners, the Company shall, in cooperation with other Participating Insurance Companies whose contract owners are also affected, at its expense and to the extent reasonably practicable (as determined by the Trustees) take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, which steps could include: (a) withdrawing the assets allocable to some or all of the Accounts from the Trust or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Trust, or submitting the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract owners the option of making such a change; and (b) establishing a new registered management investment company or managed separate account. 4.4 If a material irreconcilable conflict arises because of a decision by the Company To disregard Contract owner voting instruct9ions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to -7- withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account; provided, however that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice that this provision is being implemented. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders- by the Company for the purchase and redemption of shares of the Trust. 4.5 If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account within six (6) months after the Trustees inform the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested Trustees shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Company be required to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Trustees determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Trust and terminate this Agreement within six (6) months after the Trustees inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 4.7 The Company shall at least annually submit to the Trustees such reports, materials or data as the Trustees may reasonably request so that the Trustees may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trustees. 4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Exemptive Order) on terms and. conditions materially different from those contained in the Exemptive Order, then the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable. -8- ARTICLE V INDEMNIFICATION 5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon-and was accurately derived from written information furnished to the Company by or on behalf of the Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Trust by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement, or -9- (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. (f) arise out of (i) a failure by TRUST to substantially provide the services and furnish the materials under the terms of this Agreement; or (ii) a failure by a Portfolio(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the. Code; or (iii) a failure by a Portfolio(s) invested in by the Separate Account to qualify as a "regulated investment company" under Subchapter M of the code. 5.2 INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and hold harmless the Company and each of its directors, officers, employees and agents and each person, if any, who controls the. Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) or expenses (including. the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Trust (or any amendment or supplement thereto), (collectively, "Trust Documents" for the purposes of this Article V), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Trust by or on behalf of the Company for use -in Trust Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Trust or persons under its control, with respect to the sale -or acquisition of the Contracts or Trust shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary' to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of the Trust; or -10- (d) arise out of or result from any failure by the Trust to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust. 5.3 Neither the Company nor the Trust shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations "or duties under this Agreement. 5.4 Neither the Company nor the Trust shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim shall not relieve that party from any liability which it may have to the Indemnified Party in the absence of Sections 5. 1 and 5.2. 5.5 In case any such action is brought against the Indemnified Parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the parry named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI TERMINATION 6.1 This Agreement may be terminated: (a) by either party for any reason, by ninety (90) days advance written notice delivered to the other party; or -11- (b) at the option of the Company if shares of the Fund are not available to meet the requirements of the Contracts as determined by the Company. Prompt notice of the election to terminate for such cause shall be famished by the Company. Termination shall be effective ten days after the giving of notice by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the, Contracts, the operation of each Account, the administration of the Contracts or the purchase of Fund shares, or an expected ruling, judgment or outcome which would, -in the Fund's reasonable judgment, materially impair the Company's ability to perform the Company's obligations and duties hereunder;, or (d) at the option of the Company upon institution of formal proceedings against the Fund, the Fund's distributor, the Fund's investment manager or any subinvestment manager, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body regarding the duties of the Fund or its distributor under this Agreement, or an expected or anticipated ruling, judgment or outcome which- would, in the Company's reasonable judgment, materially impair the Fund's or the distributor's ability to perform Fund's or distributor's obligations and duties hereunder; or (e) at the option of the Company. upon institution of formal proceedings against the Fund's investment manager or sub-investment manager by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body which would, in the good faith opinion of the Company, result in material harm to the Accounts, the Company, or Contractowners; or (f) upon requisite vote of the Contract owners having an interest in the affected Portfolios (unless otherwise required by applicable law) and written approval of the Company, to substitute the shares of another investment company for the corresponding shares of the Fund in accordance with the terms of the Contracts; or (g) at the option of the Fund in the event any of the Contracts are not registered, issued or sold in accordance with applicable Federal and/or state law; or (h) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any contract owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; or (i) at the. option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, on under any -12- successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; or (j) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or (k) at the option of the Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that the Contracts may fail to so qualify; or (1) at the option of either the Fund or the Distributor if the Fund or the Distributor, respectively, shall determine, in their sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is Rely to have a material adverse impact upon the business and operations of either the Fund or its distributor; or (m) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that either: (1) the Fund and its distributor, or either of them, shall have suffered a material adverse change in their respective businesses or financial condition; or (2) the Fund or its distributor, or both of them, shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company; or (n) upon the assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Accounts to another insurance company pursuant to an assumption reinsurance agreement) unless the non-assigning party consents thereto or unless this Agreement is assigned to an affiliate of the Fund's distributor. 6.2 Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of the Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement, [provided that the Company continues to pay the costs set forth in Section 2.3]. 6.3 The provisions of Article V shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.8 shall survive the termination of this Agreement as long as shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. -13- ARTICLE V11 NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Janus Aspen Series 100 Fillmore Street Denver, Colorado 80206 Attention: General Counsel If to the Company: Lincoln National Life Insurance Co. 1300 S. Clinton Street Fort Wayne, IN 46802 Attention: Kelly D. Clevenger ARTICLE VIII MISCELLANEOUS 8.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 8.2 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 8.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 8.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Colorado. 8.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities. -14- 8.6 Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange Cornmission, the National Association of Securities Dealers, Inc., and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 8.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 8.8 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect. 8.9 Neither this Agreement nor. any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party. 8.10 No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. JANUS ASPEN SERIES By: Name: Title: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Name: Title: -15- SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and Contracts Funded Date Established by Board of Directors By Separate Account -------------------------------------- ------------------- Lincoln National Variable Multi Fund Individual Annuity Account C Variable Annuity and e Annuity (Established June 3, 1981) GVA 1, 11, 111 Lincoln National Variable (non-New York) Annuity Account L GVA 1, 11, 111 Lincoln Life and Annuity (New York only) Variable Annuity Account L Multi Fund Group Lincoln Life Variable Variable Annuity Annuity Account Q (non-New York) Lincoln Life and Annuity Multi Fund Group Variable Annuity Account Q Variable Annuity (New York only) Lincoln National Life Insurance Company Separate Account 34 Director Group Variable Annuity -16- EX-99.2 41 EXHIBIT 99.2 FUND PARTICIPATION AGREEMENT THIS AGREEMENT is made as of the lst day of July, 1994, by and among Janus Capital Corporation, a Colorado corporation ("Janus Capital"), Janus Service Corporation, a Colorado corporation, ("Janus Service") (together "Janus"), and The Lincoln National Life Insurance Company, a life insurance company organized under the laws of the State of Indiana (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be Amended from time to time (the "Accounts"). WITNESSETH: WHEREAS, the Company has established the Accounts to serve as funding vehicles for certain variable group annuity contracts offered by the Company set forth on Schedule A ("Contracts"); and WHEREAS, each Janus Fund set forth on Schedule B hereto (which may be amended from time to time by mutual written consent) ("Fund or Funds") engages in business as an investment company registered under the Investment Company Act of 1940, as amended (" 1940 Act "); and WHEREAS, to the extent permitted by applicable securities and insurance laws and regulations, the Company intends to purchase shares in the Funds on behalf of each Account. NOW, THEREFORE, in consideration of their mutual promises, the Company and Janus agree as follows: ARTICLE I. SALE OF FUND SHARES 1.1. Janus will provide to the Company closing net asset values, dividends, and capital gains information at the close of trading each business day. Orders by the Company will be sent to Janus the morning of the following business day (after receipt by the Company). The Funds will execute orders at the net asset values as determined as of the close of trading on the day of receipt of such orders by the Company, provided that (a) the Company receives such orders prior to the time the net asset values of the Funds are priced in accordance with their prospectuses the day before the order is placed with the Funds, and (b) such orders are received by Janus Capital by 9:00 a.m. Mountain Time the day following their receipt by the Company and payment for such orders is received by Janus Capital no later than 2:00 p.m. Mountain Time that day. Payment for net purchases will be wired to a custodial account designated by Janus to coincide with the order for shares of the 'Funds. Proceeds from net redemptions of Fund shares will be wired from the Fund's custodial account to an account designated by the Company. Dividends and capital gains distributions shall be reinvested in additional shares at the ex-dividend date net asset value. 1.2. Janus Service appoints the Company as its agent for the limited purpose of accepting orders for the purchase and redemption of shares of the Funds by the Company on behalf of each Account. ARTICLE II. OBLIGATIONS OF THE PARTIES 2.1. Janus Capital shall prepare and be responsible for filing with the Securities and Exchange Commission and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Funds. Janus Capital shall bear the costs of registration and qualification of its shares and the preparation and filing of the documents listed in this section 2. 1. 2.2 Recordkeeping and other administrative services to Contract owners shall be the responsibility of the Company and shall not be the responsibility of Janus. Janus and the Funds will recognize one omnibus account for the Company in the Funds. Upon the request of Janus, the Company shall provide copies of records related to the Company's Fund transactions as may reasonably be requested to enable the Funds or their representatives to comply with any request of a governmental body or self-regulatory organization. 2.3. The Company agrees and acknowledges that Janus Capital is the sole owner of the name and mark "Janus" and that any and all use of any designation comprised in whole or in part of Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus. The use by the Company of any Janus Mark in any advertisement or sales literature of other materials promoting the Funds shall be with the prior written consent of Janus. Except to the extent required by law, the Company shall not, without prior written consent of Janus, make written representations regarding the Funds, Janus or their affiliates, except those contained in the then current prospectus and the then current printed sales literature for the Funds. Upon termination of this Agreement for any reason, the Company shall cease all use of any Janus Mark(s) as soon as reasonably practicable. The Company shall not hold itself out to the public or engage in any activity as an agent or distributor for the Funds. The Company will comply with all applicable state and federal laws with respect to the use of shares of the Funds. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1. The Company represents and warrants that it is an insurance company duly organized and in good standing under the laws of the State of Indiana and that it has legally and validly established each Account as a segregated asset account under such law on the date set forth in Schedule A. -2- 3.2. The Company represents and warrants that the Contracts are currently treated as group annuity contracts under applicable provisions of the Code and state law and that it will make every effort to maintain such treatment and that it will notify Janus immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 3.3. The Company represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws. 3.4. Janus represents and warrants that it is duly organized and validly existing under the laws of the State of Colorado. 3.5. Janus represents and warrants that Fund shares offered and sold pursuant to this Agreement will be registered under the Securities Act of 1933 and the Funds shall be registered under the 1940 Act prior to any issuance or sale of such shares. 3.6. Janus makes no representation as to whether any aspect of any Fund's operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states. ARTICLE IV. INDEMNIFICATION 4.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless Janus Capital, Janus Service, the Funds, and each of their trustees, officers, employees and agents and each person, if any, who controls Janus within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article IV) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in any disclosure document for the Contracts or in the Contracts themselves or in sales literature generated or approved by the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, "Company Documents" for the purposes of this Article IV), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished -3- to the Company by or on behalf of Janus for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Janus Documents as defined in Section 4.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Fund shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Fund Documents as defined in Section 4.2(a) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to Janus by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. 4.2. INDEMNIFICATION BY JANUS CAPITAL. Janus Capital agrees to indemnify and hold harmless the Company and each of its directors, officers, employees and agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article IV) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Janus) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses: (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or prospectus for the Fund (or any amendment or supplement thereto), (collectively, "Fund Documents" for the purposes of this Article IV), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to Janus by or on behalf of the Company for use in Janus Documents or otherwise for use in connection with the sale of the Contracts or Fund shares; or -4- (b) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and accurately derived from written information furnished to the Company by or on behalf of Janus; or (c) arise out of or result from any failure by Janus to provide the services or furnish the materials required under the terms of this Agreement; or (d) arise out of or result from any material breach of any representation and/or warranty made by Janus in this Agreement or arise out of or result from any other material breach of this Agreement by Janus. 4.3. Neither the Company nor Janus shall be liable under the indemnification provisions of sections 4.1 or 4.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise from such Indemnified Party's willful misfeasance, bad faith or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 4.4. Neither the Company nor Janus shall be liable under the indemnification provisions of sections 4.1 or 4.2, as applicable, with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim or shall not relieve that party from any liability which it may have to the Indemnified Party in the absence of sections 4.1 and 4.2. 4.5 In case any such action is brought against the Indemnified Parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. -5- ARTICLE V. FEES AND EXPENSES 5.1. Janus recognizes the Company as the sole shareholder of each Fund's shares purchased under this Agreement. Janus further recognizes that substantial savings in administrative expense such as significant reductions in postage expense and shareholder communications and recordkeeping by virtue of each Fund's having a sole shareholder rather than multiple shareholders will be derived. In consideration of the administrative savings resulting from such arrangement, Janus Capital agrees to pay the Company a fee equivalent to 15 basis points per annum of the average amount invested in each Fund through the Accounts in accordance with this Agreement ("Fee"). 5.2. Janus will calculate the amount of the Fee to be paid to the Company at the end of each calendar quarter and will make such payment to the Company within thirty (30) days thereafter. Each check for such payment will be accompanied by a statement showing the calculation of the Fee for the relevant calendar quarter and such other supporting data as may be reasonably requested by the Company. ARTICLE VI. TERMINATION 6.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason on sixty (60) days' advance written notice delivered to the other parties; or (b) termination by the Company by written notice to Janus with respect to any Fund based upon the Company's determination that shares of such Fund are not reasonably available to meet the requirements of the Contracts; or (c) termination by the Company by written notice to Janus with respect to any Fund in the event any of the Fund's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; and (d) termination by the Company by written notice to Janus with respect to any Fund in the event that such Fund ceases to qualify as a regulated investment company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that such Fund may fail to do so qualify. (e) termination by Janus if it is determined by any federal or state regulatory authority that compensation to be paid hereunder is in violation of or inconsistent with any federal or state law. If Janus terminates for such reason, the Company may maintain investments in the Funds without further payment from Janus. -6- ARTICLE VII. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to Janus: Janus Capital Corporation 100 Fillmore Street, Suite 300 Denver, Colorado 80206 Attention: Stephen L. Stieneker, Esq., Mark B. Whiston -If to the Company: The Lincoln National Life Insurance Company 1300 S. Clinton St. Fort Wayne, Indiana 46809 Attention: Pension Product Management ARTICLE VIII. MISCELLANEOUS 8.1 . The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 8.2. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 8.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 8.4. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Colorado. 8.5. Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. -7- 8.6. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 8.7. The parties to this Agreement, acknowledge and agree that this Agreement shall not be exclusive in any respect. 8.8. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party. 8.9. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Agreement as of the date and year first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Name: Title: JANUS CAPITAL CORPORATION By : Name: Title: JANUS SERVICE CORPORATION By: Name: Title: -8- SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and Contracts Funded Date Established by-Board of Directors By Separate Account -------------------------------------- ------------------- Separate Account 42 Form 19476 July 1, 1994 -9- SCHEDULE B JANUS FUNDS Janus Fund -10- EX-99.3 42 EXHIBIT 99.3 AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated September 15, 1998, as amended, between Janus Aspen Series, an open-end management investment company organized as a Delaware business trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") is effective as of October 15, 1999. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule A of this Agreement shall be deleted and replaced with the attached Schedule A. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: ---------------------------- Name: Title: JANUS ASPEN SERIES By: ---------------------------- Name: Bonnie M. Howe Title: Assistant Vice President SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and the Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Lincoln National Variable Multi Fund Individual Annuity Account C Variable Annuity and e Annuity (Established June 3, 1981) Lincoln National Variable GVA I, II, III Annuity Account L (non-New York) Lincoln Life Variable Multi Fund Group Annuity Account Q Variable Annuity (non-New York) Lincoln National Life Insurance Director Group Company Separate Account 34 Variable Annuity Lincoln Life Flexible Premium Variable Lincoln VUL Life Account M Lincoln VULDB Lincoln Life Flexible Premium Variable Lincoln SVUL Account R Lincoln Life Flexible Premium Variable Lincoln CVUL Life Account S Lincoln National Variable Annuity Multi Fund Individual Account 53 Variable Annuity (non-registered) EX-99.4 43 EXHIBIT 99.4 AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated September 15, 1998, as amended, between Janus Aspen Series, an open-end management investment company organized as a Delaware business trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") is effective as of _______________, 1999. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule A of this Agreement shall be deleted and replaced with the attached Schedule A. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Name: Title: JANUS ASPEN SERIES By: Name: Title: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and the Contracts Funded Date Established by Board of Directors By Separate Account -------------------------------------- ------------------- Lincoln National Variable Multi Fund Individual Annuity Account C Variable Annuity and e Annuity (Established June 3, 1981) GVA 1, 11, 111 Lincoln National Variable (non-New York) Annuity Account L Multi Fund Group Lincoln Life Variable Variable Annuity Annuity Account Q (non-New York) Lincoln National Life Insurance Director Group Company Separate- Account 34 Variable Annuity Lincoln Life Flexible Premium Variable Lincoln VUL Life Account M Lincoln SVUL Lincoln Life Flexible Premium Variable Account R Lincoln CVUL Lincoln Life Flexible Premium Variable Multi Fund Individual Life Account S Variable Annuity (non-registered) Lincoln National Variable Annuity Account 53 EX-99.5 44 EXHIBIT 99.5 AMENDMENT DATED JAN. 21, 1999/8 TO THE FUND PARTICIPATION AGREEMENT BACKGROUND WHEREAS, JANUS ASPEN SERIES (the "Trust'), and LINCOLN NATIONAL LIFE INSURANCE COMPANY (The "Company") entered into a Fund Participation Agreement dated September 25, 1998. WHEREAS, the parties now desire to modify the Agreement as follows: AMENDMENT For good and valuable consideration the receipt of which is acknowledged, the parties agree that: 1. Section 2.3. OBLIGATIONS OF THE PARTIES be amended with the addition of the following: If the Company elects to include any materials provided by the Trust, specifically prospectuses, SAIs, shareholder reports and proxy materials, on its web site or any other computer or electronic format, the Company assumes sole responsibility for maintaining such materials in the form provided by the Trust and for promptly replacing such materials with all updates provided by the Trust. 2. The Agreement, as modified by this Amendment, is ratified and confirmed. LINCOLN NATIONAL LIFE JANUS ASPEN SERIES INSURANCE COMPANY By: By: Name: Title: EX-99.6 45 EXHIBIT 99.6 AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated September 15, 1998, as amended, between Janus Aspen Series, an open-end management investment company organized as a Delaware business trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") is effective as of May 1, 2000. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule A of this Agreement shall be deleted and replaced with the attached Schedule A. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: ---------------------------- Name: Steven M. Kluever Title: Second Vice President JANUS ASPEN SERIES By: ---------------------------- Name: Bonnie M. Howe Title: Assistant Vice President SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and the Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Lincoln National Variable Multi Fund Individual Annuity Account C Variable Annuity and e Annuity (Established June 3, 1981) Lincoln National Variable GVA I, II, III Annuity Account L (non-New York) Lincoln Life Variable Multi Fund Group Annuity Account Q Variable Annuity (non-New York) Lincoln National Life Insurance Director Group Company Separate Account 34 Variable Annuity Lincoln Life Flexible Premium Variable Lincoln VUL Life Account M Lincoln VUL-DB- Lincoln Life Flexible Premium Variable Lincoln SVUL Life Separate Account R Lincoln SVUL II Lincoln Life Flexible Premium Variable Lincoln CVUL Life Account S Lincoln CVUL Series III Lincoln National Variable Annuity Multi Fund Individual Account 53 Variable Annuity (non-registered) EX-99.1 46 EXHIBIT 99.1 FUND PARTICIPATION AGREEMENT THIS AGREEMENT made as of the 18th day of September, 1998, by and between NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), a Delaware business trust, ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), a New York common law trust, NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"), a New York corporation, and THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized under the laws of the State of Indiana. WHEREAS, TRUST and MANAGERS TRUST are registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended ("40 Act") as open-end, diversified management investment companies; and WHEREAS, TRUST is organized as a series fund comprised of several portfolios ("Portfolios"), the currently available of which are listed on Appendix A hereto; and WHEREAS, MANAGERS TRUST is organized as a series fund, comprised of several portfolios ("Series"), the currently operational of which are listed on Appendix A hereto; and WHEREAS, each Portfolio of TRUST will invest all of its net investable assets in a corresponding Series of MANAGERS TRUST; and WHEREAS, TRUST was organized to act as the funding vehicle for certain variable life insurance and/or variable annuity contracts ("Variable Contracts") offered by life insurance companies through separate accounts of such life insurance companies ("Participating Insurance Companies") and also offers its shares to certain qualified pension and retirement plans; and WHEREAS, TRUST has received an order from the SEC, dated May 5,1995 (File No. 812-9164), granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Portfolios of the TRUST to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and certain qualified pension and retirement plans (the "Order"); and WHEREAS, LIFE COMPANY has established or will establish one or more separate accounts ("Separate Accounts") to offer Variable Contracts and is desirous of having one or more Portfolios of the TRUST as one or more of the underlying funding vehicles for such Variable Contracts; and WHEREAS, N&B MANAGEMENT is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended, and as a broker-dealer under the Securities Exchange Act of 1934, as amended; and WHEREAS, N&B MANAGEMENT is the administrator and distributor of the shares of each Portfolio of TRUST and investment manager of the corresponding Series of MANAGERS TRUST; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the aforementioned Variable Contracts and TRUST is authorized to sell such. shares to LIFE COMPANY at net asset value; NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, TRUST, MANAGERS TRUST and N&B MANAGEMENT agree as follows: Article 1. SALE OF TRUST SHARES 1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY shares of the selected Portfolios as listed in Appendix B for investment of proceeds from Variable Contracts allocated to the designated Separate Accounts, such shares to be offered as provided in TRUST's Prospectus. 1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the order for the shares of TRUST. For purposes of this Section 1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from LIFE COMPANY and receipt by such designee shall constitute receipt by TRUST; provided that TRUST receives notice of such order by 9:30 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which TRUST calculates its net asset value pursuant to the rules of the SEC. 1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any full or fractional shares of TRUST held by LIFE COMPANY, executing such requests on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the request for redemption. For purposes of this Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests for redemption from LIFE COMPANY and receipt by such designee shall constitute receipt by TRUST; provided that TRUST receives notice of such request for redemption by 9:30 a.m. New York time on the next following Business Day. 1.4 TRUST shall furnish, on or before the ex-dividend date, notice to LIFE COMPANY of any income dividends or capital gain distributions payable on the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of the Portfolio. TRUST shall notify LIFE COMPANY of the number of shares so issued as payment of such dividends and 2 distributions. LIFE COMPANY reserves the right to elect to receive any such income dividends or capital gain distributions in cash. 1.5 TRUST shall make the net asset value per share for the selected Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:00 p.m. New York time. If TRUST provides LIFE COMPANY with materially incorrect share net asset value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts, shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct share net asset value. Any material error in the calculation of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery by TRUST or N&B MANAGEMENT to LIFE COMPANY. 1.6 At the end of each Business Day, LIFE COMPANY shall use the information described in Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, LIFE COMPANY shall process each such Business Day's Separate Account transactions based on requests and premiums received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount of TRUST shares which shall be purchased or redeemed at that day's closing net asset value per share. The net purchase or redemption orders so determined shall be transmitted to TRUST by LIFE COMPANY by 9:30 am. New York Time on the Business Day next following LIFE COMPANY's receipt of such requests and premiums in accordance with the terms of Sections 1.2 and 1.3 hereof. TRUST shall provide written confirmations of all purchase or redemption orders of TRUST shares to LIFE COMPANY by 2:00 p.m. New York time on the Business Day that such purchase or redemption orders are received by the TRUST in accordance with the terms of Sections 1.2 and 1.3 hereof. 1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or its designated custodial account on the day the order is transmitted by LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption proceeds to LIFE COMPANY on the day the order is transmitted by LIFE COMPANY, unless DOING SO WOULD require TRUST to dispose of portfolio securities or otherwise incur additional costs, but in such event proceeds shall be wired to LIFE COMPANY within seven days and TRUST shall notify the person designated in writing by LIFE COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York Time the same Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's order requests the application of redemption proceeds from the redemption of shares to the purchase of shares of another fund administered or distributed by N&B MANAGEMENT, TRUST shall so apply such proceeds the same Business Day that LIFE COMPANY transmits such order to TRUST. 3 1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend the right of redemption or postpone the date of payment or satisfaction upon redemption consistent with Section 22(e) of the 40 Act and any rules thereunder. 1.9 TRUST agrees that all shares of the Portfolios of TRUST will be sold only to Participating Insurance Companies which have agreed to participate in TRUST to fund their Separate Accounts and/or to certain qualified pension and other retirement plans, all in accordance with the requirements of Section 817(h) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the Portfolios of TRUST will not be sold directly to the general public. 1.10 TRUST may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of the shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board of Trustees of TRUST, acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, deemed necessary and in the best interests of the shareholders of such Portfolios. Article II. REPRESENTATIONS AND WARRANTIES 2.1 LIFE COMPANY represents and wan-ants that it is an insurance company duly organized and validly existing under the laws of Indiana and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that LIFE COMPANY, the principal underwriter for the Variable Contracts, is registered as a broker-dealer under the Securities Exchange Act of 1934. 2.2 LIFE COMPANY represents and wan-ants that it has registered or, prior to any issuance or sale of the Variable Contracts, will register each Separate Account as a unit investment trust ("UIT") in accordance with the provisions of the '40 Act and cause each Separate Account to remain so registered to serve as a segregated asset account for the Variable Contracts, unless an exemption from registration is available. 2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be registered under the Securities Act of 1933 (the `33 Act"), unless an exemption from registration is available, prior to any issuance or sale of the Variable Contracts and that the Variable Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws, including any applicable state insurance law suitability requirement. 2.4 LIFE COMPANY represents and warrants that the Variable Contracts are currently and at the time of issuance will be treated as life insurance, endowment or annuity contracts under applicable provisions of the Code, that it will maintain such treatment and that it will notify TRUST immediately upon having a reasonable basis for believing that the Variable Contracts have ceased to be so treated or that they might not be so treated in the future. 4 2.5 LIFE COMPANY represents and warrants that it shall deliver such prospectuses, statements of additional information, proxy statements and periodic reports of the Trust as may be required to be delivered under applicable federal or state law and interpretations of federal and state securities regulators thereunder in connection with the offer and sale of the Variable Contracts. 2.6 TRUST represents and warrants that the Portfolio shares offered and sold pursuant to this Agreement will be registered under the '33 Act and sold in accordance with all applicable federal and state laws, and TRUST shall be registered under the '40 Act prior to and at the time of any issuance or sale of such shares. TRUST shall amend its registration statement under the '33 Act and the '40 Act from time to time as required in order to effect the continuous offering of its shares. TRUST shall register and qualify its shares for sale in accordance with, the laws of the various states only if and to the extent deemed advisable by TRUST. 2.7 TRUST represents and warrants that each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing any Portfolio has ceased to comply or might not so comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance within the grace period afforded by Regulation 1.8175. 2.8 TRUST represents and warrants that each Portfolio invested in by the Separate Account is currently qualified as a "regulated investment company" under Subchapter M of the Code, that it will make every effort to maintain such qualification and will notify LIFE COMPANY immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. Article III. PROSPECTUS AND PROXY STATEMENTS 3.1 TRUST shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of TRUST. TRUST shall bear the costs of registration and qualification of shares of the Portfolios, preparation and filing of the documents listed in this Section 3.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 3.2 TRUST will bear the printing costs (or duplicating costs with respect to the statement of additional information) and mailing costs associated with the delivery of the following TRUST (or individual Portfolio) documents, and any supplements thereto, to existing Variable Contract owners of LIFE COMPANY: 5 (i) prospectuses and statements of additional information; (ii) annual and semi-annual reports; and (iii) proxy materials. LIFE COMPANY will submit any bills for printing, duplicating and/or mailing costs, relating to the TRUST (or individual Portfolio) documents described above, to TRUST for reimbursement by TRUST. LIFE COMPANY shall monitor such costs and shall use its best efforts to control these costs. LIFE COMPANY will provide TRUST on a semi-annual basis, or more frequently as reasonably requested by TRUST, with a current tabulation of the number of existing Variable Contract owners of LIFE COMPANY whose Variable Contract values are invested in TRUST. This tabulation will be sent to TRUST in the form of a letter signed by a duly authorized officer of LIFE COMPANY attesting to the accuracy of the information contained in the letter. If requested by LIFE COMPANY, the TRUST shall provide such documentation (including a final copy of the TRUST's prospectus as set in type or in camera-ready copy) and other assistance as is reasonably necessary in order for LIFE COMPANY to print together in one document the current prospectus for the Variable Contracts issued by LIFE COMPANY and the current prospectus for the TRUST. For purposes of Us Article 111, if LIFE COMPANY so requests, TRUST will provide a separate prospectus for each TRUST Portfolio used in a particular Separate Account, provided such prospectus is contained in the TRUST's currently effective registration statement. Should LIFE COMPANY wish to print any of these documents in a format different from that provided by TRUST, LIFE COMPANY shall provide Trust with sixty (60) days' prior written notice and LIFE COMPANY shall bear the cost associated with any format change. 3.3 TRUST will provide, at its expense, LIFE COMPANY with the following TRUST (or individual Portfolio) documents, and any supplements thereto, with respect to prospective Variable Contract owners of LIFE COMPANY: (i) camera-ready copy of the current prospectus for printing by the LIFE COMPANY; (ii) camera-ready copies of the individual Portfolio prospectuses filed as part of the TRUST's registration statement; (iii) a copy of the statement of additional information suitable for duplication; (iv) camera-ready copy of proxy material suitable for printing; and (v) camera-ready copy of the annual and semi-annual reports for printing by the LIFE COMPANY. 6 3.4 TRUST will provide LIFE COMPANY with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to the Portfolios within 20 days after the filing of each such document with the SEC or other regulatory authority. LIFE COMPANY will provide TRUST with at least one complete copy of all prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to a Separate Account and the TRUST within 20 days after the filing of each such document with the SEC or other regulatory authority. Article IV. SALES MATERIALS 4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and N&B MANAGEMENT, each piece of sales literature or other promotional material in which TRUST, MANAGERS TRUST or N&B MANAGEMENT is named, at least ten (10) Business Days prior to its intended use. No such material will be used if TRUST, MANAGERS TRUST or N&B MANAGEMENT objects to its use in writing within five (5) Business Days after receipt of such material. 4.2 TRUST and N&B MANAGEMENT will furnish, or will cause to be furnished, to LIFE COMPANY, each piece of sales literature or other promotional material in which LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days prior to its intended use. No such material will be used if LIFE COMPANY objects to its use in writing within five (5) Business Days after receipt of such material. 4.3 TRUST and its affiliates and agents shall not give any information or make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other than the information or representations contained in a registration statement, prospectus or offering statement for such Variable Contracts, as such registration statement, prospectus or offering statement may be amended or supplemented from time to time, or in reports of the Separate Accounts or reports prepared for distribution to owners of such Variable Contracts, or in sales literature or other promotional material approved by LIFE COMPANY or its designee, except with the written permission of LIFE COMPANY. 4.4 LIFE COMPANY and its affiliates and agents shall not give any information or make any representations on behalf of TRUST or concerning TRUST other than the information or representations contained in a registration statement or prospectus for TRUST, as such registration statement and prospectus may be amended or supplemented from time to time, or in sales literature or other promotional material approved by TRUST or its designee, except with the written permission of TRUST. 7 4.5 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under National Association of Securities Dealers, Inc. rules, the '40 Act or the '33 Act. Article V. POTENTIAL CONFLICTS 5.1 The Board of Trustees of TRUST and MANAGERS TRUST (the "Boards") will monitor TRUST and MANAGERS TRUST, respectively, (collectively the "Funds"), for the existence of any material irreconcilable conflict between the interests of the Variable Contract owners of Participating Insurance Company Separate Accounts investing in the Funds. A material irreconcilable conflict may arise for a variety of reasons, including: (a) state insurance regulatory authority action; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of the Funds are being managed; (e) a difference in voting instructions given by variable annuity and variable life insurance contract owners or by contract owners of different Participating Insurance Companies; or (f) a decision by a Participating Insurance Company to disregard voting instructions of Variable Contract owners. 5.2 LIFE COMPANY will report any potential or existing conflicts to the Boards. LIFE COMPANY will provide each appropriate Board with all information reasonably necessary for it to consider any issues raised in carrying out its responsibilities under the Conditions set forth in the notice issued by the SEC for the Funds on April 12, 1995 (the "Notice") (Investment Company Act Release No. 21003), which LIFE COMPANY has reviewed. LIFE COMPANY will inform each appropriate Board whenever Variable Contract owner voting instructions are disregarded by LIFE COMPANY. These responsibilities will be carried out with a view only to the interests of the Variable Contract owners. 5.3 If a majority of the Board of a Fund or a majority of its disinterested trustees or directors, determines that a material irreconcilable conflict exists, affecting the LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable (as determined by a 8 majority of disinterested trustees or directors), will take any steps necessary to remedy or eliminate the material irreconcilable conflict consistent with the terms and conditions set forth in the Notice. If a material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at the election of the relevant Fund, to withdraw its Separate Account's investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take such remedial action shall be carried out with a view only to the interests of the Variable Contract owners. For the purposes of this Section 5.3, a majority of the disinterested members of the applicable Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will the relevant Fund or N&B MANAGEMENT (or any other investment adviser of the Funds) be required to establish a new funding medium for any Variable Contract. 5.4 Any Board's determination of the existence of an irreconcilable material conflict and its implications shall be made known promptly and in writing to LIFE COMPANY. 5.5 No less than annually, LIFE COMPANY shall submit to the Boards such reports, materials or data as such Boards may reasonably request so that the Boards may fully carry out the obligations imposed upon them by these Conditions. Such reports, materials, and data shall be submitted more frequently if deemed appropriate by the applicable Boards, provided that such request shall not be unreasonable. Article VI. VOTING 6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable Contract owners participating in registered Separate Accounts so long as the SEC continues to interpret the '40 Act as requiring pass-through voting privileges for such Variable Contract owners. This condition will apply to UIT-Separate Accounts investing in TRUST and to managed separate accounts investing in MANAGERS TRUST to the extent a vote is required with respect to matters relating to MANAGERS TRUST. Accordingly, LIFE COMPANY, where applicable, will vote shares of a Fund held in its registered Separate Accounts in a manner consistent with voting instructions timely received from its Variable Contract owners. LIFE COMPANY will be responsible for assuring that each of its registered Separate Accounts that participates in any Fund calculates voting privileges in a manner consistent with other participants as defined in the Conditions set forth in the Notice ("Participants"). The obligation to calculate voting privileges in a manner consistent with all other registered Separate Accounts investing in a Fund will be a contractual obligation of all Participants under the agreements governing participation in the Funds. Each Participant will vote shares held in a given registered Separate Account for which it has not 9 received timely voting instructions, as well as shares it owns, in the same proportion as its votes those shares in that Account for which it has received voting instructions. 6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act or the rules thereunder with respect to mixed and shared funding on terms and conditions materially different from any exemptions granted in the Order, then TRUST, MANAGERS TRUST and/or the Participants, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable. Article VII. INDEMNIFICATION 7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and hold harmless TRUST, MANAGERS TRUST, N&B MANAGEMENT and each of their Trustees, directors, officers, employees and agents and each person, if any, who controls TRUST or MANAGERS TRUST or N&B MANAGEMENT within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for purposes of this Article VII) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY, which consent shall not be unreasonably withheld) or litigation (including reasonable legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the offer, sale or acquisition of TRUST's shares or the Variable Contracts and: (a) arise out of or are based upon any untrue statements or alleged untruestatements of any material fact contained in the Registration Statement orprospectus for the Variable Contracts or contained in the Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY by or on behalf of TRUST for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or as a result of untrue statements or representations (other than statements or representations contained in the registration statement, Sprospectus or sales literature. of TRUST not supplied by LIFE COMPANY, 10 or persons under its control) or wilful misfeasance, bad faith or negligence of LIFE COMPANY or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of TRUST or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to TRUST for inclusion therein by or on behalf of LIFE COMPANY; or (d) arise as a result of any failure by LIFE COMPANY to substantially provide the services and furnish the materials under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY. 7.2 LIFE COMPANY shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement or to TRUST, whichever is applicable. 7.3 LIFE COMPANY shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified LIFE COMPANY in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY of any such claim shall not relieve LIFE COMPANY from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against an Indemnified Party, LIFE COMPANY shall be entitled to participate at its own expense in the defense of such action. LIFE COMPANY also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from LIFE COMPANY to such party of LIFE COMPANY's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and LIFE COMPANY will not be liable to such party under this Agreement 11 for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.4 INDEMNIFICATION BY N&B MANAGEMENT. N&B MANAGEMENT agrees to indemnify and hold harmless LIFE COMPANY and each of its directors, officers, employees, and agents and each person, if any, who controls LIFE COMPANY within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties" for the purposes of this Article VII) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of N&B MANAGEMENT which consent shall not be unreasonably withheld) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute, or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the offer, sale or acquisition of TRUST's shares or the Variable Contracts and: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of TRUST (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in* conformity with information famished to N&B MANAGEMENT or TRUST by or on behalf of LIFE COMPANY for use in the registration statement or prospectus for TRUST or in sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or as a result of untrue statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by N&B MANAGEMENT or persons under its control) or wilful misfeasance, bad faith or negligence of TRUST or N&B MANAGEMENT or persons under their control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not 12 misleading, if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY for inclusion therein by or on behalf of TRUST; or (d) arise as a result of (i) a failure by TRUST to substantially provide theservices and furnish the materials under the terms of this Agreement; or (ii) a failure by a Portfolio(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code and the regulations thereunder; or (iii) a failure by a Portfolio(s) invested in by the Separate Account to qualify as a "regulated investment company" under Subchapter M of the Code; or (e) arise out of or result from any material breach of any representation and/or warranty made by N&B MANAGEMENT in this Agreement or arise out of or result from any other material breach of this Agreement by N&B MANAGEMENT. 7.5 N&B MANAGEMENT shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to LIFE COMPANY. 7.6 N&B MANAGEMENT shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified N&B MANAGEMENT in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify N&B MANAGEMENT of any such claim shall not relieve N&B MANAGEMENT from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, N&B MANAGEMENT shall be entitled to participate at its own expense in the defense thereof. N&B MANAGEMENT also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from N&B MANAGEMENT to such party of N&B MANAGEMENT's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and N&B MANAGEMENT will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 13 Article VIII. TERM; TERMINATION 8.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein. 8.2 This Agreement shall terminate in accordance with the following provisions: (a) At the option of LIFE COMPANY or TRUST at any time from the date hereof upon 90 days' notice, unless a shorter time is agreed to by the parties; (b) At the option of LIFE COMPANY, if TRUST shares are not reasonably available to meet the requirements of the Variable Contracts as determined by LIFE COMPANY. Prompt notice of election to terminate pursuant to this Section 8.2(b) shall be furnished by LIFE COMPANY, said termination to be effective ten days after receipt of notice unless TRUST makes available a sufficient number of shares to reasonably meet the requirements of the Variable Contracts within said ten-day period; (c) At the option of LIFE COMPANY, upon the institution of formal proceedings against TRUST or N&B MANAGEMENT by the SEC, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in LIFE COMPANY's reasonable judgment, materially impair TRUST's ability to meet and perform TRUST's obligations and duties hereunder or N&B MANAGEMENT's ability to manage any Portfolio. Prompt notice of such election to terminate shall be furnished by LIFE COMPANY with said termination to be effective upon receipt of notice; (d) At the option of TRUST, upon the institution of formal proceedings against LIFE COMPANY by the SEC, the National Association of Securities Dealers, Inc., or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in TRUST's reasonable judgment, materially impair LIFE COMPANY's ability to meet and perform its obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by TRUST with said termination to be effective upon receipt of notice; (e) In the event TRUST's shares are not registered, issued or sold in accordance with applicable state or federal law, or such law precludes the use of such shares as the underlying investment medium of Variable Contracts issued or to be issued by LIFE COMPANY. Termination shall be effective upon such occurrence without notice; 14 (f) At the option of TRUST if the Variable Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code, or if TRUST reasonably believes that the Variable Contracts may fail to so qualify. Termination shall be effective upon receipt of notice by LIFE COMPANY; (g) At the option of LIFE COMPANY, upon TRUSTs breach of any material provision of this Agreement which breach has not been cured to the satisfaction of LIFE COMPANY within ten days after written notice of such breach is delivered to TRUST; (h) At the option of TRUST, upon LIFE COMPANY's breach of any material provision of this Agreement which breach has not been cured to the satisfaction of TRUST within ten days after written notice of such breach is delivered to LIFE COMPANY; (i) At the option of TRUST, if the Variable Contracts are not registered (unless an exemption from registration is available), issued or sold in accordance with applicable federal and/or state law. TERMINATION SHALL be effective immediately upon such occurrence without notice; (j) At the option of LIFE COMPANY, with respect to a Portfolio, upon the vote of Variable Contract Owners and written approval of LIFE COMPANY to substitute shares of another investment company for the shares of any Portfolio in accordance with the terms of the Variable Contracts, provided LIFE COMPANY has given TRUST forty-five (45) days' notice of the date of such substitution; (k) In the event this Agreement is assigned without the prior written consent of LIFE COMPANY, TRUST, MANAGERS TRUST and N&B MANAGEMENT, termination shall be effective immediately upon such occurrence without notice; (1) At the option of LIFE COMPANY if a Portfolio fails to satisfy the diversification requirements set forth in Section 2.7 hereof and does not cure such failure within the grace period afforded by Regulation 1.817-5. Termination shall be effective immediately upon notice. 8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2 hereof, TRUST will continue to make available additional TRUST shares (limited to shares of the Portfolios designated in Appendix B), as provided below, at the option of LIFE COMPANY for so 15 long as LIFE COMPANY desires pursuant to the terms and conditions of this Agreement, for all Variable Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if LIFE COMPANY so elects for TRUST to make additional TRUST shares available, the owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal authority to do so, shall be permitted to reallocate investments in TRUST, redeem investments in TRUST and/or invest in TRUST upon the payment of additional premiums under the Existing Contracts. In the event of a termination of this Agreement pursuant to Section 8.2 hereof, LIFE COMPANY, as promptly as is practicable under the circumstances, shall notify TRUST and N&B MANAGEMENT whether LIFE COMPANY elects for TRUST to continue to make TRUST shares available after such termination. If TRUST shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect. The parties agree that this Section 8.3 shall not apply to any terminations of this Agreement by the TRUST, MANAGERS TRUST or N&B MANAGEMENT pursuant to Sections 8.2(f),(h),(i) or (k) hereof. 8.4 Except as necessary to implement Variable Contract owner initiated transactions, or as required by state insurance laws or regulations, LIFE COMPANY shall not redeem the shares attributable to the Variable Contracts (as opposed to the shares attributable to LIFE COMPANY's assets held in the Separate Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from allocating payments to a Portfolio that was otherwise available under the Variable Contracts, until thirty (30) days after the LIFE COMPANY shall have notified TRUST of its intention to do so. Article IX. NOTICES Any notice hereunder shall be given by registered or certified mail return receipt requested to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to TRUST, MANAGERS TRUST or N&B MANAGEMENT: Neuberger&Berman Management Incorporated 605 Third Avenue New York, NY 10 15 8-0006 Attention: Ellen Metzger, General Counsel If to LIFE COMPANY: The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attention: Kelly D. Clevenger 16 Notice shall be deemed given on the date of receipt by the addressee as evidenced by the return receipt. Article X. MISCELLANEOUS 10.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 10.2 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 10.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 10.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the SEC granting exemptive relief therefrom and the conditions of such orders. However, the laws of the State of New York will not apply to the terms or conditions of any type of insurance contracts described herein. 10.5 The parties agree that the assets and liabilities of each Series are separate and distinct from the assets and liabilities of each other Series. No Series shall be liable or shall be charged for any debt, obligation or liability of any other Series. No Trustee, officer or agent shall be personally liable for such debt, obligation or liability of any Series or Portfolio and no Portfolio or other investor, other than the Portfolio or other investors investing in the Series which incurs a debt, obligation or liability, shall be liable therefor. 10.6 Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the National Association of Securities Dealers, Inc. and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 10.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 17 10.8 No provision of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by TRUST, MANAGERS TRUST, N&B MANAGEMENT and the LIFE COMPANY. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Fund Participation Agreement as of the date and year first above written. NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST By: Name: Title: ADVISERS MANAGERS TRUST By: Name: Title: NEUBERGER&BERMAN MANAGEMENT INCORPORATED By: Name: Title: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Name: Title: 18 APPENDIX A
Neuberger&Berman Advisers Corresponding Series of Management Trust and its Series (Portfolios Advisers Managers Trust (Series) - ------------------------------------------- -------------------------------- Balanced Portfolio AMT Balanced Investments Growth Portfolio AMT Growth Investments Guardian Portfolio AMT Guardian Investments International Portfolio AMT International Investments Limited Maturity Bond Portfolio AMT Limited Maturity Bond Investments Liquid Asset Portfolio AMT Liquid Asset Investments Mid-Cap Growth Portfolio AMT Mid-Cap Growth Investments Partners Portfolio AMT Partners Investments Socially Responsive Portfolio AMT Socially Responsive Investments
19 APPENDIX B
Separate Accounts Selected Portfolios - ----------------- ------------------- Lincoln National Variable Annuity Partners Account C Mid-Cap Growth Lincoln National Variable Annuity Partners Account L Partners Lincoln Life Variable Annuity Account Q Mid-Cap Growth Lincoln National Variable Annuity Mid-Cap Growth Account 37 Partners Lincoln National Variable Annuity Account 3 8
20 EX-99.2 47 EXHIBIT 99.2 AMENDMENT TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of May 1, 2000, between THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the State of Indiana ("LIFE COMPANY"), and NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST, a Delaware business trust ("TRUST"), ADVISERS MANAGERS TRUST, a New York common law trust ("MANAGERS TRUST"), and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, among LIFE COMPANY, TRUST, MANAGERS TRUST and NB MANAGEMENT (the "Agreement"). Terms defined in the Agreement are used herein as therein defined. WHEREAS, the parties wish to amend Appendix B to the Agreement to add new Separate Accounts. NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter contained, the parties agree as follows: 1. Appendix B of the Agreement is hereby deleted and replaced with new Appendix B attached hereto. 2. Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. 3. This Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Amendment. NEUBERGER BERMAN NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST MANAGEMENT INC. By: By: ------------------------------- ------------------------------- Name: Peter E. Sundman Name: Daniel J. Sullivan Title: President Title: Senior Vice President 1 ADVISERS MANAGERS TRUST THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: By: ------------------------------- ------------------------------- Name: Peter E. Sundman Name: Steven M. Kluever Title: President Title: Second Vice President 2 APPENDIX B Separate Accounts Selected Portfolios - ----------------- ------------------- Lincoln National Variable Annuity Partners Account C Mid-Cap Growth Lincoln National Variable Annuity Partners Account L Mid-Cap Growth Lincoln Life Variable Annuity Partners Account Q Mid-Cap Growth Lincoln National Variable Annuity Mid-Cap Growth Account 37 Lincoln National Variable Annuity Partners Account 38 Lincoln National Variable Annuity Partners Account 53 Mid-Cap Growth Lincoln National Flexible Partners Premium Life Account M Mid-Cap Growth Lincoln National FlexiblePremium Partners Variable Life Account R Mid-Cap Growth Lincoln National FlexiblePremium Partners Variable Life Account S Mid-Cap Growth 3 EX-99.1 48 EXHIBIT 99.1 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 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 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 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 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 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, 5 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 6 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 7 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 8 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 9 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. 10 (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 11 (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. 12 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; 13 (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 14 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. 15 (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. 16 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: 17 (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 18 (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. 19 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. 20 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 21 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 22 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. 23 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 24 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 (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 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 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 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 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 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. 31 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 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 SCHEDULE A Portfolios of the Fund made available under this Agreement: Premier Growth Portfolio Growth and Income Portfolio Growth Portfolio Technology Portfolio 34 SCHEDULE B Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Delaware-Lincoln ChoicePlus Variable Annuity 35 EX-99.1 49 EXHIBIT 99.1 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 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 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 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 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 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 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 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 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 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 EX-99.2 50 EXHIBIT 99.2 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 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. EX-99.10 51 EXHIBIT 99.10 EXHIBIT 99.10 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. 18 to the Registration Statement (Form N-4 No. 33-25990), and the related Statement of Additional Information appearing therein and pertaining to Lincoln National Variable Annuity Account C, and to the use therein of our reports dated (a) January 31, 2000, with respect to the statutory-basis financial statements of The Lincoln National Life Insurance Company, and (b) March 24, 2000, with respect to the financial statements of Lincoln National Variable Annuity Account C. Fort Wayne, Indiana April 10, 2000 EX-99.1 52 ORGCHART_2000 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 | | | | 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 | | | | 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 | | | | 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 | | | | 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 | | 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 | | 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 | | 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 | | 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 | | | | 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 | | | | 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. 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) 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 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. 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 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. EX-99.16(A) 53 EXHIBIT 99.16(A) POWER OF ATTORNEY I the undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account C (Multi-Fund), 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. 33-25990 filed with the Securities and Exchange Commission under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming my signature as it may be signed by any of my attorneys-in-fact to any such amendment to that Registration Statement. The power of attorney was signed on April 30, 1999. SIGNATURE TITLE - --------- ------ /s/ Todd R. Stephenson Senior Vice President, Chief Financial Officer - ---------------------- and Assistant Treasurer Todd R. Stephenson (Principal Financial Officer) STATE OF INDIANA) )SS: COUNTY OF ALLEN) Subscribed and sworn to before me this 30th day of April, 1999. /s/ Kimberly J. DeLong -------------------------------------- Notary public Commission Expires: 1-29-2007 EX-99.16(C) 54 EXHIBIT 99.16(C) POWER OF ATTORNEY I the undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account C (Multi-Fund), 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. 33-25990 filed with the Securities and Exchange Commission under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming my signature as it may be signed by any of my attorneys-in-fact to any such amendment to that Registration Statement. The power of attorney was signed on April 29, 1999. SIGNATURE TITLE - --------- ------ /s/ Keith J. Ryan Vice President and Controller - ----------------- (Principal Accounting Officer) Keith J. Ryan STATE OF INDIANA) )SS: COUNTY OF ALLEN) Subscribed and sworn to before me this 29th day of April, 1999. /s/ Janet L. Lindenberg -------------------------------------- Notary public Commission Expires: 7-10-2001 EX-99.16(F) 55 EXHIBIT 99.16(F) POWER OF ATTORNEY I the undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account C (Multi-Fund), 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. 33-25990 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 EX-99.24-15(B) 56 EXHIBIT 99.24-15(B) BOOKS AND RECORDS LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C 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 transactions accessible place PORTFOLIO SECURITIES C-Port Purchase/ Finance Eric Jones Permanently, the first two Sales Report years in an easily accessible place LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- RECEIPTS AND DELIVERIES OF SECURITIES (UNITS) Not Applicable. PORTFOLIO SECURITIES Not Applicable. RECEIPTS AND DISBURSEMENTS OF CASH AND OTHER DEBITS AND CREDITS Daily Journals CSRM Nancy Alford Permanently, the first two Finance Eric Jones years in an easily accessible place (2) General and auxiliary ledgers (or other record) reflecting all asset, liability, reserve, capital, income and expense accounts, including: (i) Separate ledger accounts (or other records) reflecting the following: (a) Securities in transfer; (b) Securities in physical possession; (c) Securities borrowed and securities loaned; (d) Monies borrowed and monies loaned (together with a record of the collateral therefore and substitutions in such collateral); (e) Dividends and interest received; (f) Dividends receivable and interest accrued. Instructions. (a) and (b) shall be stated in terms of securities quantities only; (c) and (d) shall be stated in dollar amounts and securities quantities as appropriate; (e) and (f) shall be stated in dollar amounts only. GENERAL LEDGER LNL trial Finance Eric Jones Permanently, the first two Balance (5000 years in an easily 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 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 Transactions (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. 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. 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 Distribution, Six years, the first two Agreements LNL Law Division years in an easily accessible place (11) Files of all advisory material received from the investment advisor, any advisory board or advisory committee, or any other persons from whom the investment company accepts investment advice publications distributed generally. Not Applicable. (12) The term "other records" as used in the expressions "journals (or other records of original entry)" and "ledger accounts (or other records)" shall be construed to include, where appropriate, copies of voucher checks, confirmations, or similar documents which reflect the information required by the applicable rule or rules in appropriate sequence and in permanent form, including similar records developed by the use of automatic data processing systems. Correspondence CSRM Nancy Alford Six years, the first two years in an easily accessible place LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Proxy State- CSRM Nancy Alford Six years, the first two ments and years in an easily Proxy Cards accessible place Pricing Sheets Finance Eric Jones Permanently, the first two years in an easily accessible place Bank State- Treasurers Rusty Summers Six years, the first two Ments years in an easily accessible place
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