-----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, RKIiKMj1zR8mwPDDNhv6SKSdXH0FN7yxUD1Jl7kT45HTDhcWJVwBUlbls8nG6On0 RTFdy0Fr20hv1erHp8uXWw== 0000950131-00-002798.txt : 20040421 0000950131-00-002798.hdr.sgml : 20040421 20000425183800 ACCESSION NUMBER: 0000950131-00-002798 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 42 FILED AS OF DATE: 20000426 DATE AS OF CHANGE: 20000616 EFFECTIVENESS DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN NATIONAL VARIABLE ANNUITY ACCT L GRP VAR ANNUITY II CENTRAL INDEX KEY: 0001016695 IRS NUMBER: 350472300 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-05827 FILM NUMBER: 00608594 BUSINESS ADDRESS: STREET 1: 1300 SOUTH CLINTON STREET STREET 2: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46802 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: 1300 SOUTH CLINTON STREET STREET 2: P.OL BOX 1110 CITY: FORT WA STATE: IN ZIP: 46802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN NATIONAL VARIABLE ANNUITY ACCT L GRP VAR ANNUITY II CENTRAL INDEX KEY: 0001016695 IRS NUMBER: 350472300 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07645-01 FILM NUMBER: 00608595 BUSINESS ADDRESS: STREET 1: 1300 SOUTH CLINTON STREET STREET 2: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46802 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: 1300 SOUTH CLINTON STREET STREET 2: P.OL BOX 1110 CITY: FORT WA STATE: IN ZIP: 46802 485BPOS 1 LINCOLN LIFE VARIABLE ANNUITY I, II & III AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 26, 2000 Registration No. 333-5827 Registration No. 811-7645 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ___________ FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (GROUP VARIABLE ANNUITY I, II & III) Pre-Effective Amendment No. [_] Post-Effective Amendment No. 7 [X] AND/OR REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 17 [X] ___________ LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L (Exact Name of Registrant) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Name of Depositor) 1300 South Clinton Street P.O. Box 1110 Fort Wayne, Indiana 46802 (Address of Depositor's Principal Executive Offices) DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: 219-455-2000 ELIZABETH A. FREDERICK, ESQUIRE The Lincoln National Life Insurance Company 1300 S. Clinton Street P.O. Box 1110 Fort Wayne, Indiana 46802 (Name and Complete Address of Agent for Service) Copy to: Kimberly J. Smith, Esquire Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2404 It is proposed that this filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on May 1, 2000, pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [_] on ________________ pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: [_] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of securities being registered: Interests in a separate account under group variable annuity contracts. Pursuant to Rule 429 under the Securities Act of 1933, as amended, the prospectus and statement of additional information included herein also relate to the registrant's registration statements on Form N-4 (File No. 333-04999 and File No. 333-05815). Lincoln National Variable Annuity Account L Group Variable Annuity Contracts I, II, & III Servicing Office: Home Office: Lincoln National Life Insurance Company Lincoln National Life Insurance P.O. Box 9740 Company Portland, ME 04104 1300 South Clinton Street (800) 341-0441 Fort Wayne, IN 46802 www.LincolnLife.com This Prospectus describes group annuity contracts and individual certificates issued by Lincoln National Life Insurance Company (Lincoln Life). They are for use with qualified and non-qualified retirement plans. Generally, neither the contractowner nor the individual participant pays federal income tax on the contract's growth until it is paid out. The contract is designed to accumulate account value and, as permitted by the plan for which the contractowner pur- chases the contract, to provide retirement income that a participant cannot outlive or for an agreed upon time. These benefits may be a variable or fixed amount or a combination of both. If a participant dies before the annuity com- mencement date, we pay the beneficiary or the plan a death benefit. If the contractowner gives certain rights to plan participants, we issue active life certificates to them. Participants choose whether account value accumu- lates on a variable or a fixed (guaranteed) basis or both. If a participant al- locates contributions to the fixed account, we guarantee principal and a mini- mum interest rate. All contributions for benefits on a variable basis will be placed in Lincoln National Variable Annuity Account L (variable annuity account [VAA]). The VAA is a segregated investment account of Lincoln Life. If a participant puts all or some contributions into one or more of the contract's subaccounts, the par- ticipant takes all the investment risk on the account value and the retirement income. If the selected subaccounts make money, account value goes up; if they lose money, it goes down. How much it goes up or down depends on the perfor- mance of the selected subaccounts. We do not guarantee how any of the subaccounts or their funds will perform. Also, neither the U.S. Government nor any federal agency insures or guarantees the investment in the contract. The available subaccounts, and the funds in which they invest, are listed be- low. The contractowner decides which of these subaccounts are available under the contract for participant allocations. For more information about the in- vestment objectives, policies and risks of the funds please refer to the Pro- spectuses for the funds. Balanced Account -- American Century Variable Portfolios, Inc.: VP Balanced Small Cap Growth Account -- Baron Capital Funds Trust: Baron Capital Asset Fund Insurance Shares Index Account -- Dreyfus Stock Index Fund Small Cap Account -- Dreyfus Variable Investment Fund: Small Cap Portfolio Growth I Account -- Fidelity Variable Insurance Products Fund: Growth Portfolio Initial Class Equity-Income Account -- Fidelity Variable Insurance Products Fund: Equity- Income Portfolio Initial Class Asset Manager Account -- Fidelity Variable Insurance Products Fund II: Asset Manager Portfolio Initial Class Global Growth Account -- Janus Aspen Series: Worldwide Growth Portfolio Mid Cap Growth I Account -- Lincoln National Aggressive Growth Fund, Inc. Social Awareness Account -- Lincoln National Social Awareness Fund, Inc. Mid Cap Value Account -- Neuberger Berman Advisers Management Trust: Partners Portfolio International Stock Account -- T. Rowe Price International Series, Inc. This Prospectus gives you information about the contracts and certificates that contractowners and participants should know before investing. Please review the Prospectuses for the funds, and keep them for reference. Neither the SEC nor any state securities commission has approved the contracts or determined that this Prospectus is accurate and complete. Any representation to the contrary is a criminal offense. A Statement of Additional Information (SAI), dated the same date as this Pro- spectus, has more information about the contracts and certificates. Its terms are made part of this Prospectus. For a free copy, write: Lincoln National Life Insurance Company, P.O. Box 9740, Portland, ME 04104, or call 1-800-341-0441. The SAI and other information about Lincoln Life and Account L are also avail- able on the SEC's web site (http://www.sec.gov). There is a table of contents for the SAI on the last page of this Prospectus. May 1, 2000 1 Table of Contents
Page - ------------------------------------------------- Special Terms 2 - ------------------------------------------------- Expense Tables 3 - ------------------------------------------------- Summary 5 - ------------------------------------------------- Condensed Financial Information 7 - ------------------------------------------------- Investment Results 8 - ------------------------------------------------- Financial Statements 8 - ------------------------------------------------- The Lincoln National Life Insurance Company 8 - ------------------------------------------------- Fixed Side of the Contract 8 - ------------------------------------------------- Variable Annuity Account (VAA) 8 - ------------------------------------------------- Investments of the VAA 9 - ------------------------------------------------- Description of the Funds 9 - ------------------------------------------------- Charges and Other Deductions 11 - -------------------------------------------------
Page - --------------------------------------------------- The Contracts 13 - --------------------------------------------------- Annuity Payouts 17 - --------------------------------------------------- Federal Tax Matters 18 - --------------------------------------------------- Voting Rights 22 - --------------------------------------------------- Distribution of the Contracts 22 - --------------------------------------------------- Return Privilege 22 - --------------------------------------------------- State Regulation 22 - --------------------------------------------------- Records and Reports 22 - --------------------------------------------------- Other Information 22 - --------------------------------------------------- Group Variable Annuity Contracts I, II, & III Statement of Additional Information Table of Contents 23 - ---------------------------------------------------
Special Terms Account or variable annuity account (VAA)--The segregated investment account, Account L, into which Lincoln Life sets aside and invests the assets for the variable side of the contracts offered in this Prospectus. Account value--At a given time before the annuity commencement date, the value of all accumulation units for a contract plus the value of the fixed side of the contract. Accumulation unit--A measure used to calculate account value for the variable side of the contract. Annuitant--The person on whose life the annuity benefit payments made after an annuity commencement date are based. Annuity commencement date--The date on which Lincoln Life makes the first an- nuity payout to the annuitant. Annuity payout--An amount paid at regular intervals after the annuity com- mencement date under one of several options available to the annuitant and/or any other payee. This amount may be paid on a variable or fixed basis, or a combination of both. Annuity unit--A measure used to calculate the amount of each annuity payout for the variable side of the contract after an annuity commencement date. Beneficiary--The person the participant chooses to receive any death benefit paid if the participant dies before the annuity commencement date. Contractowner--The party named on the group annuity contract (for example, an employer, a retirement plan trust, an association, or other entity allowed by law). Contributions--Amounts paid into the contract. Death benefit--An amount payable to a designated beneficiary if a participant dies before his or her annuity commencement date. Lincoln Life (we, us our)--The Lincoln National Life Insurance Company. Participant--An employee or other person affiliated with the contractowner on whose behalf we maintain an account under the contract. Participation year--A period beginning with one participation anniversary and ending the day before the next participation anniversary, except for the first participation year which begins with the participation date. Plan--The retirement program that an employer offers to its employees for which a contract is used to accumulate funds. Subaccount--The portion of the VAA that reflects investments in accumulation and annuity units of a class of a particular fund available under the con- tracts. There is a separate subaccount which corresponds to each fund. Valuation date--Each day the New York Stock Exchange (NYSE) is open for trad- ing. Valuation period--The period starting at the close of trading (currently nor- mally 4:00 p.m. New York time) on each day that the NYSE is open for trading (valuation date) and ending at the close of such trading on the next valuation date. 2 Expense Tables Contractowner transaction expenses for GVA I, II, & III: The maximum surrender charge (contingent deferred sales charge) as a percentage of the gross withdrawal amount: GVA I GVA II GVA III 5% 6% None The surrender charge percentage is reduced over time. The later the redemption occurs, the lower the surrender charge with respect to that surrender or with- drawal. Contract fees for GVA I, II, & III: Annual administration charge (per participant): $25 Loan establishment fee (per loan): $50 Systematic withdrawal option fee: $30 The annual administration charge may be paid by an employer on behalf of par- ticipants. It is not charged during the annuity period. We may reduce or waive these charges in certain situations. See Fixed Side of the Contract, Charges and Other Deductions and Systematic withdrawal options. - -------------------------------------------------------------------------------- Account L annual expenses for GVA I, II, & III subaccounts: (as a percentage of daily net asset value): "Standard" mortality and expense risk charge: 1.00% "Breakpoint" mortality and expense risk charge: .75% Contracts issued with respect to plans meeting specified eligibility require- ments will generally impose a lower "breakpoint" mortality and expense risk charge, as shown above and described in detail under Charges and Other Deduc- tions. Annual expenses of the funds for the year ended December 31, 1999: (as a percentage of each fund's average net assets):
Management 12b-1 Other Total fees + fees + Expenses = Expenses - ----------------------------------------------------------------------------------------------------- 1. American Century - VP Balanced 0.90% 0.00% 0.00% 0.90% - ----------------------------------------------------------------------------------------------------- 2. Baron Capital Funds Trust: Baron Capital Asset Fund Insurance Shares/1/ 0.62 0.25 0.63 1.50 - ----------------------------------------------------------------------------------------------------- 3. Dreyfus Stock Index Fund 0.25 0.00 0.01 0.26 - ----------------------------------------------------------------------------------------------------- 4. Dreyfus VIF: Small Cap Portfolio 0.75 0.00 0.03 0.78 - ----------------------------------------------------------------------------------------------------- 5. Fidelity VIP - Growth Portfolio Initial Class 0.58 0.00 0.08 0.66 - ----------------------------------------------------------------------------------------------------- 6. Fidelity VIP - Equity- Income Portfolio Initial Class 0.48 0.00 0.09 0.57 - ----------------------------------------------------------------------------------------------------- 7. Fidelity VIP II - Asset Manager Initial Class 0.53 0.00 0.10 0.63 - ----------------------------------------------------------------------------------------------------- 8. Janus Aspen Series: Worldwide Growth Portfolio Institutional Shares/2/ 0.65 0.00 0.05 0.70 - ----------------------------------------------------------------------------------------------------- 9. Lincoln National Aggressive Growth Fund 0.73 0.00 0.14 0.87 - ----------------------------------------------------------------------------------------------------- 10. Lincoln National Social Awareness Fund 0.33 0.00 0.05 0.38 - ----------------------------------------------------------------------------------------------------- 11. Neuberger Berman AMT: Partners Portfolio 0.80 0.00 0.07 0.87 - ----------------------------------------------------------------------------------------------------- 12. T. Rowe Price International Series 1.05 0.00 0.00 1.05 - -----------------------------------------------------------------------------------------------------
/1/The Adviser is contractually obligated to reduce its fee to the extent re- quired to limit Baron Capital Asset Fund's total operating expenses to 1.5% for the first $250 million of assets in the Fund, 1.35% for Fund assets over $250 million and 1.25% for Fund assets over $500 million. Without the expense limitations, total operating expenses for the Fund for the period January 1, 1999 through December 31, 1999 would have been 1.88%. /2/Expenses are based upon expenses for the fiscal year ended December 31, 1999, restated to reflect a reduction in the management fee for the Worldwide Growth Portfolio. 3 Examples (expenses of the subaccounts and the funds): If you surrender your contract at the end of the time period shown, you would pay the following expenses on a $1,000 investment, assuming a 5% annual return:
Standard* GVA I GVA II GVA III ------------------------------- ----------------------------------- ----------------------------------- 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years ------ ------- ------- -------- ------- -------- -------- --------- ------- -------- -------- --------- 1. American Century - VP Balanced $74 $124 $177 $270 $83 $130 $181 $320 $24 $73 $125 $268 - -------------------------------------------------------------------------------------------------------------------------------- 2. Baron Capital Funds Trust: Baron Capital Asset Fund Insurance Shares 80 141 205 329 88 147 209 376 30 91 155 327 - -------------------------------------------------------------------------------------------------------------------------------- 3. Dreyfus Stock Index Fund 68 106 146 203 77 112 150 256 17 54 93 202 - -------------------------------------------------------------------------------------------------------------------------------- 4. Dreyfus VIF: Small Cap Portfolio 73 121 171 258 82 127 175 308 23 70 119 256 - -------------------------------------------------------------------------------------------------------------------------------- 5. Fidelity VIP - Growth Portfolio Initial Class 72 117 166 245 81 123 169 297 21 66 113 244 - -------------------------------------------------------------------------------------------------------------------------------- 6. Fidelity VIP - Equity Income Portfolio Initial Class 71 115 161 236 80 121 165 288 20 63 109 234 - -------------------------------------------------------------------------------------------------------------------------------- 7. Fidelity VIP II - Asset Manager Initial Class 72 116 164 242 80 123 168 294 21 65 112 241 - -------------------------------------------------------------------------------------------------------------------------------- 8. Janus Aspen Series: Worldwide Growth Portfolio 72 119 168 250 81 125 171 300 22 67 115 248 - -------------------------------------------------------------------------------------------------------------------------------- 9. Lincoln National Aggressive Growth Fund 74 123 176 267 83 129 179 317 23 72 124 265 - -------------------------------------------------------------------------------------------------------------------------------- 10. Lincoln National Social Awareness Fund 69 109 152 216 78 115 155 268 19 57 99 214 - -------------------------------------------------------------------------------------------------------------------------------- 11. Neuberger Berman AMT: Partners Portfolio 74 123 176 267 83 129 179 317 23 72 124 265 - -------------------------------------------------------------------------------------------------------------------------------- 12. T. Rowe Price International Series 76 129 184 285 84 135 188 334 25 78 133 283 - --------------------------------------------------------------------------------------------------------------------------------
If you do not surrender your contract, you would pay the following expenses on a $1,000 investment, assuming a 5% annual return:
Standard* GVA I GVA II GVA III ------------------------------- ----------------------------------- ----------------------------------- 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years ------ ------- ------- -------- ------- -------- -------- --------- ------- -------- -------- --------- 1. American Century - VP Balanced $23 $70 $120 $257 $21 $65 $111 $240 $24 $73 $125 $268 - ------------------------------------------------------------------------------------------------------------------------- 2. Baron Capital Funds Trust: Baron Capital Asset Fund Insurance Shares 29 88 150 316 27 83 141 300 30 91 155 327 - ------------------------------------------------------------------------------------------------------------------------- 3. Dreyfus Stock Index Fund 16 50 87 189 15 45 78 171 17 54 93 202 - ------------------------------------------------------------------------------------------------------------------------- 4. Dreyfus VIF: Small Cap Portfolio 21 66 114 244 20 61 105 227 23 70 119 256 - ------------------------------------------------------------------------------------------------------------------------- 5. Fidelity VIP - Growth Portfolio Initial Class 20 63 107 232 19 57 99 214 21 66 113 244 - ------------------------------------------------------------------------------------------------------------------------- 6. Fidelity VIP - Equity Income Portfolio Initial Class 19 60 103 222 18 55 94 205 20 63 109 234 - ------------------------------------------------------------------------------------------------------------------------- 7. Fidelity VIP II - Asset Manager Initial Class 20 62 106 229 18 57 97 211 21 65 112 241 - ------------------------------------------------------------------------------------------------------------------------- 8. Janus Aspen Series: Worldwide Growth Portfolio 21 64 109 236 19 59 101 219 22 67 115 248 - ------------------------------------------------------------------------------------------------------------------------- 9. Lincoln National Aggressive Growth Fund 22 69 118 254 21 64 110 237 23 72 124 265 - ------------------------------------------------------------------------------------------------------------------------- 10. Lincoln National Social Awareness Fund 17 54 93 202 16 49 84 184 19 57 99 214 - ------------------------------------------------------------------------------------------------------------------------- 11. Neuberger Berman AMT: Partners Portfolio 22 69 118 254 21 64 110 237 23 72 124 265 - ------------------------------------------------------------------------------------------------------------------------- 12. T. Rowe Price International Series 24 74 127 272 22 69 119 255 25 78 133 283 - -------------------------------------------------------------------------------------------------------------------------
We provide these examples, which are unaudited, to show the direct and indirect costs and expenses of the contract. For more information, see Charges and Other Deductions in this Prospectus, and in the Prospectuses for the funds. Premium taxes may also apply, although they do not appear in the examples. These examples should not be considered a repre- sentation of past or future expenses. Actual expenses may be more or less than those shown. * Examples shown may be less for plans qualifying for "breakpoint" mortality and expense risk charge. 4 Summary What kind of contracts are these? They are group variable annuity contracts be- tween the contractowner and Lincoln Life. They may provide for a fixed annuity and/or a variable annuity. This Prospectus describes the variable side of the contracts. See The Contracts. What is the variable annuity account (VAA)? It is a separate account we estab- lished under Indiana insurance law, and registered with the SEC as a unit in- vestment trust. VAA assets are allocated to one or more subaccounts, according to your investment choices. VAA assets are not chargeable with liabilities arising out of any other business which Lincoln Life may conduct. See the Vari- able Annuity Account. What are the contract's investment choices? Based on instructions, the VAA ap- plies contributions to buy fund shares in one or more of the investment funds of the subaccounts: American Century Variable Portfolios, Inc.: VP Balanced; Baron Capital Funds Trust: Baron Capital Asset Fund; Dreyfus Stock Index Fund; Dreyfus Variable Investment Fund: Small Cap Portfolio; Fidelity Variable Insur- ance Products Fund: Growth Portfolio; Fidelity Variable Insurance Products Fund: Equity-Income Portfolio; Fidelity Variable Insurance Products Fund II: Asset Manager Portfolio; Janus Aspen Series: Worldwide Growth Portfolio; Lin- coln National Aggressive Growth Fund, Inc.; Lincoln National Social Awareness Fund, Inc.; Neuberger Berman Advisers Management Trust: Partners Portfolio; and T. Rowe Price International Series, Inc. In turn, each fund holds a portfolio of securities consistent with its investment policy. See the Variable Annuity Account and Description of the Funds for a description of the subaccounts. Who advises the funds? American Century Investment Management, Inc. is the in- vestment advisor of American Century VP Balanced. BAMCO, Inc. is advisor to the Baron fund. The investment advisor of the Dreyfus funds is The Dreyfus Corpora- tion, New York, NY. The investment advisor of the Fidelity funds is Fidelity Management & Research Company, Boston, MA. Janus Capital Corporation is the ad- visor to the Janus fund. Lincoln Investments, Inc. is the investment advisor of the Lincoln funds; Neuberger Berman Management Incorporated is the investment advisor to the Neuberger Berman fund. Putnam Investments is sub-advisor to the Lincoln National Aggressive Growth Fund and Vantage Investment Advisors is sub- advisor to the Lincoln National Social Awareness Fund. T. Rowe Price-Fleming International, Inc. is investment advisor of the T. Rowe Price International Series. See Description of the Funds. How do the contracts work? If we approve the application, we will send the contractowner a contract. When participants make contributions, they buy accu- mulation units. If the participant decides to purchase retirement income pay- ments, we convert accumulation units to annuity units. Retirement income pay- ments will be based on the number of annuity units received and the value of each annuity unit on payout days. See The Contracts. What charges do I pay under the contract? If participants in GVA I or GVA II withdraw account value, a surrender charge of 0-5% or 0-6%, respectively, of the gross withdrawal amount applies depending upon how many participation years the participant has been in the contract. We may reduce or waive surrender charges in certain situations. See Surrender Charges for GVA I and GVA II. There is no surrender charge for GVA III. We charge an annual administration charge of $25 per participant account. We will deduct any applicable premium tax from contributions or account value at the time the tax is incurred or at another time we choose. We apply an annual charge totaling 1.00% "standard", or .75% "breakpoint", to the daily net asset value of the VAA. See Charges and Other Deductions. We may charge $50 to set up a participant loan and $30 to establish a system- atic withdrawal option. We may waive these charges in certain situations. The funds' investment management fees, 12b-1 fees, expenses and expense limita- tions, if applicable, are more fully described in the Prospectuses for the funds. What contributions are necessary, and how often? Contributions made on behalf of participants may be in any amount unless the contractowner or the plan has a minimum amount. See The Contracts--Contributions. How will annuity payouts be calculated? If a participant decides to annuitize, they select an annuity option and start receiving retirement income payments from the contract as a fixed option or variable option or a combination of both. See Annuity payout options. Remember that participants in the VAA benefit from any gain, and take a risk of any loss, in the value of the securities in the funds' portfolios. What happens if a participant dies before he or she annuitizes? The beneficiary has options as to how any death benefit is paid. See The Contracts--Death bene- fit before the annuity commencement date. May participants transfer account value between subaccounts, and between the VAA and the fixed account? Before the annuity commencement date, yes, subject to the terms of the plan. See The Contracts--Transfers on or before the annuity commencement date. May a participant withdraw account value? Yes, during the accumulation period, subject to contract requirements, to the restrictions of any plan, and to cer- tain restrictions under GVA III. See Charges and Other Deductions. Under GVA III, a participant may not transfer more than 20% of his or her fixed account holdings to 5 the VAA each year, unless the participant intends to liquidate their fixed ac- count value. Under GVA III, liquidation of the entire fixed account value must be over 5 annual installments. See Fixed account withdrawal/ transfer limits for GVA III. The contractowner must also approve participant withdrawals under Section 401(a) plans and plans subject to Title I of ERISA. Certain charges may apply. See Charges and Other Deductions. A portion of withdrawal proceeds may be taxable. In addition, a 10% Internal Revenue Service (IRS) tax penalty may apply to distributions before age 59 1/2. A withdrawal also may be subject to 20% withholding. See Federal Tax Matters. Do participants get a free look at their certificates? A participant under a Section 403(b) or 408 plan and certain non-qualified plans can cancel the ac- tive life certificate within ten days (in some states longer) of the date the participant receives the certificate. The participant needs to give notice to our servicing office. We will refund the participant's contributions less with- drawals, or for the variable side of the contract if greater, the participant's account balance on the day we receive the written notice. See Return Privilege. 6 Condensed Financial Information The financial data included below should be read along with the financial statements of the VAA and the related data included in the SAI. Accumulation unit values (For an accumulation unit outstanding throughout the period)
1999 -------------------- 1996 1997 1998 ------- ------ ------- Standard Breakpoint+ - -------------------------------------------------------------------------------- Asset Manager Account* .. Beginning of period unit value......................... $16.309 17.267 20.583 23.445 24.279 .. End of period unit value..... $17.267 20.583 23.445 25.787 25.819 .. End of period number of units (000's omitted)............... 25 4,471 4,638 4,152 251 - -------------------------------------------------------------------------------- Balanced Account* .. Beginning of period unit value......................... $15.698 16.213 18.550 21.263 21.702 .. End of period unit value..... $16.213 18.550 21.263 23.168 23.198 .. End of period number of units (000's omitted)............... 2 1,267 1,269 1,099 94 - -------------------------------------------------------------------------------- Equity-Income Account* .. Beginning of period unit value......................... $14.763 15.790 19.985 22.087 24.433 .. End of period unit value..... $15.790 19.985 22.087 23.252 23.281 .. End of period number of units (000's omitted)............... 10 3,608 4,155 3,856 182 - -------------------------------------------------------------------------------- Global Growth Account** .. Beginning of period unit value......................... $10.000 12.520 13.979 .. End of period unit value..... $12.520 20.385 20.410 .. End of period number of units (000's omitted)............... 75 1,054 74 - -------------------------------------------------------------------------------- Growth I Account* .. Beginning of period unit value......................... $22.793 23.220 28.328 39.122 44.085 .. End of period unit value..... $23.220 28.328 39.122 53.234 53.301 .. End of period number of units (000's omitted)............... 8 4,982 5,291 5,554 151 - -------------------------------------------------------------------------------- Index Account* .. Beginning of period unit value......................... $21.013 22.705 29.827 37.861 41.583 .. End of period unit value..... $22.705 29.827 37.861 45.208 45.265 .. End of period number of units (000's omitted)............... 3 3,317 3,913 3,815 352 - -------------------------------------------------------------------------------- International Stock Account* .. Beginning of period unit value ........................ $11.687 12.276 12.503 14.342 14.861 .. End of period unit value..... $12.276 12.503 14.342 18.931 18.955 .. End of period number of units (000's omitted)............... 5 1,837 2,049 1,818 122 - -------------------------------------------------------------------------------- Mid Cap Growth I Account** .. Beginning of period unit value......................... $10.000 12.454 12.865 .. End of period unit value..... $12.454 17.563 17.585 .. End of period number of units (000's omitted)............... 19 1,486 202 - -------------------------------------------------------------------------------- Mid Cap Value Account** .. Beginning of period unit value......................... $10.000 11.861 13.254 .. End of period unit value..... $11.861 12.609 12.625 .. End of period number of units (000's omitted)............... 27 150 21 - -------------------------------------------------------------------------------- Small Cap Account* .. Beginning of period unit value......................... $14.854 15.286 17.632 16.856 18.723 .. End of period unit value .... $15.286 17.632 16.856 20.552 20.578 .. End of period number of units (000's omitted)............... 12 3,524 3,954 3,430 192 - -------------------------------------------------------------------------------- Small Cap Growth Account** .. Beginning of period unit value......................... $10.000 13.218 15.583 .. End of period unit value .... $13.218 17.775 17.800 .. End of period number of units (000's omitted)............... 27 460 23 - -------------------------------------------------------------------------------- Social Awareness Account** .. Beginning of period unit value......................... $10.000 12.791 13.358 .. End of period unit value .... $12.791 14.619 14.637 .. End of period number of units (000's omitted)............... 33 1,107 88 - -------------------------------------------------------------------------------- Pending Allocation Account* .. Beginning of period unit value......................... $11.123 11.277 11.894 12.544 12.843 .. End of period unit value..... $11.277 11.894 12.544 13.192 13.195 .. End of period number of units (000's omitted)............... 1 30 17 12 0 - --------------------------------------------------------------------------------
+Breakpoint unit values commenced on June 29, 1999. *The Sub-Account indicated commenced operations on September 26, 1996. **The Sub-Account indicated commenced operation on October 1, 1998. 7 Investment Results At times, the VAA may compare its investment results to various unmanaged in- dices or other variable annuities in reports to shareholders, sales literature and advertisements. The results will be calculated on a total return basis for various periods, with or without surrender charges. Results calculated without surrender charges will be higher. Total returns include the reinvestment of all distributions, which are reflected in changes in unit value. See the SAI for further information. Financial Statements The financial statements for the VAA and Lincoln Life are located in the SAI. For a free copy of the SAI, complete and mail the enclosed form, or call 1-800-341-0441. The Lincoln National Life Insurance Company Lincoln Life was founded in 1905 and is organized under Indiana law. We are one of the largest stock life insurance companies in the United States. We are owned by Lincoln National Corp. (LNC) which is also organized under Indiana law. LNC's primary businesses are insurance and financial services. Fixed Side of the Contract Contributions allocated to the fixed account become part of Lincoln Life's general account, and do not participate in the investment experience of the VAA. The general account is subject to regulation and supervision by the Indi- ana Insurance Department as well as the insurance laws and regulations of the jurisdictions in which the contracts are distributed. In reliance on certain exemptions, exclusions and rules, Lincoln Life has not registered interests in the general account as a security under the Securities Act of 1933 (1933 Act) and has not registered the general account as an in- vestment company under the Investment Company Act of 1940 (1940 Act). Accord- ingly, neither the general account nor any interests in it are subject to reg- ulation under the 1933 Act or the 1940 Act. Lincoln Life has been advised that the staff of the SEC has not made a review of the disclosures which are in- cluded in this Prospectus which relate to our general account and to the fixed side of the contract. These disclosures, however, may be subject to certain provisions of the federal securities laws relating to the accuracy and com- pleteness of statements made in the Prospectus. This Prospectus is generally intended to serve as a disclosure document only for aspects of the contract involving the VAA, and therefore contains only selected information regarding the fixed side of the contract. Complete details regarding the fixed side of the contract can be found in the contract. Contributions allocated to the fixed account are guaranteed to be credited with a minimum interest rate, specified in the contract, of at least 3.0%. A contribution allocated to the fixed side of the contract is credited with in- terest beginning on the next calendar day following the date of receipt if all participant data is complete. Lincoln Life may vary the way in which it cred- its interest to the fixed side of the contract from time to time. ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LINCOLN LIFE'S SOLE DISCRETION. PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0% WILL BE DECLARED. Under GVA III, special limits apply to transfers and withdrawals from the fixed account. See Fixed account withdrawal/transfer limits for GVA III. If the Plan permits loans, then during the participant's accumulation period, the participant may apply for a loan by completing a loan application that we provide. The participant's account balance in the fixed account secures the loan. Loans are subject to restrictions imposed by the IRC, Title I of the Em- ployee Retirement Income Security Act of 1974 (ERISA), and the participant's plan. For plans subject to Title I of ERISA, the initial amount of a partici- pant loan cannot exceed the lesser of 50% of the participant's vested account balance in the fixed account or $50,000 and must be at least $1,000. For plans not subject to Title I of ERISA, a participant may borrow up to $10,000 of his or her vested account balance. A participant may have only one loan outstand- ing at a time and may not take more than one loan in any six-month period. Amounts serving as collateral for the loan are not subject to the minimum in- terest rate under the contract and will accrue interest at a rate below the loan interest rate provided in the contract. Under certain contracts, a fee of up to $50 may be charged for a loan. More information about loans and loan in- terest rates is in the contract, the active life certificates, the annuity loan agreement and is available from us. Variable Annuity Account (VAA) On April 29, 1996, the VAA was established as an insurance company separate account under Indiana law. It is registered with the SEC as a unit investment trust under the provisions of the 1940 Act. The SEC does not supervise the VAA or Lincoln Life. The VAA is a segregated investment account, meaning that its assets may not be charged with liabilities resulting from any other 8 business that we may conduct. Income, gains and losses, whether realized or not, from assets allocated to the VAA are, in accordance with the applicable annuity contracts, credited to or charged against the VAA. They are credited or charged without regard to any other income, gains or losses of Lincoln Life. The VAA satisfies the definition of a separate account under the federal secu- rities laws. We do not guarantee the investment performance of the VAA. Any in- vestment gain or loss depends on the investment performance of the funds. You assume the full investment risk for all amounts placed in the VAA. Investments of the VAA The contractowner decides which of the subaccounts available under the contract will be available for participant allocations. There is a separate subaccount which corresponds to each fund. Participant allocations may be changed without penalty or charges. Shares of the funds will be sold at net asset value with no initial sales charge to the VAA in order to fund the contracts. The funds are required to redeem fund shares at net asset value on our request. We reserve the right to add, delete, or substitute funds. Each fund, described below, is an investment vehicle for insurance company sep- arate accounts. Certain funds offered as part of this contract have similar in- vestment objectives and policies to other portfolios managed by the fund's ad- visor. The investment results of the funds, however, may be higher or lower than the results of other portfolios that are managed by the advisor. There can be no assurance, and no representation is made, that the investment results of any of the funds will be comparable to the investment results of any other portfolio managed by the advisor. Description of the Funds Following are brief summaries of the investment objectives and policies of the funds, and a description of their managers. Each fund is subject to certain in- vestment policies and restrictions which may not be changed without a majority vote of shareholders of that fund. More detailed information can be obtained from the current Prospectus for the fund, which is included in this booklet. There is no assurance that any of the funds will achieve its stated objective. 1. American Century Variable Portfolios, Inc.--American Century VP Balanced seeks capital growth and current income. Its investment team intends to maintain approximately 60% of the portfolio's assets in common stocks that are considered by its manager to have better than average prospects for ap- preciation and the balance in bonds and other fixed income securities. Amer- ican Century Investment Management, Inc. is the investment manager of this portfolio. 2. Baron Capital Funds Trust--Baron Capital Asset Fund's investment objective is to purchase stocks, judged by the advisor, to have the potential of in- creasing their value at least 50% over two subsequent years, although that goal may not be achieved. BAMCO, Inc. serves as the Fund's investment advi- sor. 3. Dreyfus Stock Index Fund is a non-diversified index fund that seeks to match the total return of the Standard & Poor's 500 Composite Stock Price Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's Cor- poration. The Dreyfus Corporation acts as the Fund manager and Mellon Equity Associates, an affiliate of Dreyfus, is the Fund index manager. 4. Dreyfus Variable Investment Fund--Small Cap Portfolio seeks to maximize cap- ital appreciation by investing primarily in common stocks of domestic and foreign issuers with market capitalizations of less than $1.5 billion at the time of purchase. The portfolio manager seeks companies believed to be char- acterized by new or innovative products or services which should enhance prospects for growth in future earnings. The Portfolio may also invest in special situations such as corporate restructurings, mergers or acquisi- tions. The Dreyfus Corporation serves as the Portfolio's investment adviser. 5. Fidelity Variable Insurance Products Fund (VIP)--Growth Portfolio seeks long-term capital appreciation. The Portfolio normally purchases common stocks. Fidelity Management & Research Company ("FMR") is the manager of this portfolio. 6. Fidelity Variable Insurance Products Fund (VIP)--Equity-Income Portfolio seeks reasonable income by investing primarily in income-producing equity securities, with some potential for capital appreciation, seeking a yield that exceeds the composite yield on the securities comprising the Standard and Poor's 500 Index (S&P 500). FMR is the investment manager of this port- folio. 7. Fidelity Variable Insurance Products Fund II (VIP II)--Asset Manager Portfo- lio seeks high total return with reduced risk over the long term by allocat- ing its assets among domestic and foreign stocks, bonds and short-term money market instruments. FMR is the investment manager of this portfolio. 8. Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of capital in a manner consistent with the preservation of capital. The Portfo- lio pursues its objective by investing primarily in common stocks of compa- nies of any size throughout the world. The Portfolio normally invests in is- suers from at least 5 different countries, including the U.S. The Portfolio may at times invest in fewer than five countries or even a single country. Janus Capital Corporation serves as the Fund's investment advisor. 9 9. Lincoln National Aggressive Growth Fund, Inc. seeks to maximize capital ap- preciation. The fund invest in stocks of small, lesser known companies which have a chance to grow significantly in a short time. Lincoln Investment* is the fund's investment advisor, and Putnam Investments is the fund's invest- ment sub-advisor. 10. Lincoln National Social Awareness Fund, Inc. seeks long-term capital appre- ciation. The fund buys stocks of established companies which adhere to cer- tain specific social criteria. Lincoln Investment Management, Inc. (Lincoln Investment*) is the fund's investment advisor and Vantage Investment Advi- sors is the fund's investment sub-advisor. 11. Neuberger Berman Advisers Management Trust--Partners Portfolio seeks capi- tal growth by investing mainly in common stocks of mid- to large-capital- ization established companies using the value-oriented investment approach. Neuberger Berman Management Incorporated serves as the Fund's investment advisor. Neuberger Berman, LLC serves as the Fund's investment sub-advisor. 12. T. Rowe Price International Series, Inc.--T. Rowe Price International Stock Portfolio seeks long-term growth of capital through investments primarily in common stocks of established, non-U.S. companies. Rowe Price-Fleming In- ternational, Inc. is the investment manager of this portfolio. Fidelity VIP--Money Market Portfolio seeks to obtain as high a level of current income as is consistent with preserving capital and providing liquidity. For more information about the Portfolio into which initial contributions are in- vested pending Lincoln Life's receipt of a complete order, see The Contracts. *Lincoln Investments has informed the funds to which it provides advisory serv- ices that it intends to merge into a newly created series of its affiliate, Delaware Management Business Trust, during the second or third quarter of 2000. Lincoln Investments does not expect the merger to result in any change in the level of advisory services that it currently provides to these funds, although there may be some changes in, and additions to, personnel. See the prospectuses for these funds for more information. As compensation for their services to the fund, the investment advisors receive a fee from the fund, which is accrued daily and paid monthly or quarterly. This fee is based on the net assets of each fund, defined under Purchase and Redemp- tion of Shares, in the Prospectus for the fund. With respect to a fund, the advisor and/or distributor, or an affiliate there- of, may compensate Lincoln Life (or an affiliate) for administrative, distribu- tion, or other services. Some funds may compensate us more than other funds. It is anticipated that such compensation will be based on assets of the particular fund attributable to the contracts along with certain other variable contracts issued or administered by Lincoln Life (or an affiliate). Sale of shares by the funds We will purchase shares of the funds at net asset value and direct them to the appropriate subaccounts of the VAA. We will redeem shares of the appropriate funds to pay annuity payouts, death benefits, surrender/ withdrawal proceeds or for other purposes described in the contract. If a participant wants to trans- fer all or part of his or her account balance from one subaccount to another, we redeem shares held in the first and purchase shares of the other. The shares are retired, but they may be reissued later. Shares of the funds are not sold directly to the general public. They are sold to Lincoln Life and may be sold to other insurance companies for investment of assets of the subaccounts established by those insurance companies to fund variable annuity and variable life insurance contracts. When a fund sells shares both to variable annuity and to variable life insur- ance separate accounts, it is engaging in mixed funding. When a fund sells shares to separate accounts of unaffiliated life insurance companies, it is en- gaging in shared funding. The funds may engage in mixed and shared funding. Due to differences in redemp- tion rates or tax treatment, or other considerations, the interests of various contractowners participating in a fund could conflict. The funds' Directors or Trustees will monitor for the existence of any material conflicts, and deter- mine what action, if any, should be taken. See the Prospectuses of the funds. Reinvestment of dividends and capital gain distributions All dividend and capital gain distributions of the funds are automatically reinvested in shares of the distributing funds at their net asset value on the date of distribution. Dividends are not paid out to contractowners as additional units, but are reflected as changes in unit values. Addition, deletion or substitution of investments We reserve the right, within the law, to make additions, deletions and substi- tutions for the funds in which the VAA participates. (We may substitute shares of other funds for shares already purchased, or to be purchased in the future, under the contract. This substitution might occur if shares of a fund should no longer be available, or if investment in any fund's shares should become inap- propriate, in the judgment of our management, for the purposes of the con- tract.) We cannot substitute shares without approval by the SEC. We will also notify contractowners and participants. 10 Charges and Other Deductions We will deduct the charges described below to cover our costs and expenses, services provided, and risks assumed under the contracts. We will incur cer- tain costs and expenses for distribution and administration of the contracts and for providing the benefits payable thereunder. More particularly, our ad- ministrative services include: processing applications and enrollment forms and issuing the contracts and active life certificates, processing purchases and redemptions of fund shares as required, maintaining records, administering annuity payout options, furnishing accounting and valuation services (includ- ing the calculation and monitoring of daily subaccount values), reconciling and depositing cash receipts, providing contract confirmations, providing toll-free inquiry services and furnishing telephone fund transfer services. The risks we assume include: the risk that annuitants receiving annuity payouts under the contract will live longer than we assumed when we calculated our guaranteed rates (these rates cannot be changed); the risk that death ben- efits paid will exceed actual participant account balances (less outstanding loans); the risk that more participants than expected will qualify for waiver of the surrender charge under GVA I or GVA II; and the risk that our costs in providing the services will exceed our revenues from contract charges which we cannot change. The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the de- scription of the charge. For example, the surrender charge collected under GVA I or GVA II may not fully cover all of the sales and distribution expenses ac- tually incurred by us. Deductions from the VAA for GVA I, II, & III We deduct from the VAA an amount, computed daily, which is equal to a maximum annual rate of 1.00% or .75% of the daily net asset value. The charge is a mortality and expense risk charge. It is assessed during the accumulation pe- riod and during the annuity period, even though during the annuity period, we bear no mortality risk on annuity options that do not have life contingencies. Contracts eligible for the lower, or "breakpoint", mortality and expense risk charge are those contracts which, either at issue or after issue and at the end of a calendar quarter, satisfy eligibility criteria anticipated to result in lower issue and administrative costs for us over time. Such criteria in- clude, for example, expected size of account value and contributions, adminis- trative simplicity, and/or limited competition. For cases not eligible for the lower mortality and risk expense charge at issue, the lower charge will be im- plemented on the calendar quarter-end valuation date following the end of the calendar quarter in which the contract becomes eligible for the lower charge. We periodically modify the criteria for eligibility. Modifications will not be unfairly discriminatory against any person. Contact your agent for our current eligibility criteria. Annual administration charge During the accumulation period, we currently deduct $25 (or the balance of the participant's account, if less) per year from each participant's account bal- ance on the last business day of the month in which a participant anniversary occurs. We also deduct the charge from a participant's account balance if the participant's account is totally withdrawn. The charge may be increased or de- creased. Surrender charge for GVA I and GVA II* Under GVA I and GVA II, a surrender charge applies (except as described below) to total or partial withdrawals of a participant's account balance during the accumulation period as follows:
During Participation Year GVA I GVA II - ------------------------- ----- ------ 1-5 5% 6% 6 5% 3% 7 4% 3% 8 3% 3% 9 2% 3% 10 1% 3% 11-15 0% 1% 16 and later 0% 0%
* There is no surrender charge taken on withdrawals from GVA III. The surrender charge is imposed on the gross withdrawal amount, and is de- ducted from the subaccounts and the fixed account in proportion to the amount withdrawn from each. We do not impose a surrender charge on death benefits, or on account balances converted to an annuity payout option. For any partici- pant, the surrender charge will never exceed 8.5% of the cumulative contribu- tions to the participant's account. We impose the surrender charge on GVA I and GVA II to compensate us for the loss we experience on our distribution costs when a participant withdraws ac- count value before distribution costs have been recovered. We may also recover distribution costs from other contract charges, including the mortality and expense risk charge. Fixed account waiver of surrender charges and withdrawal/transfer limits Under certain conditions, a participant may withdraw part or all of his or her fixed account balance without incurring a surrender charge under GVA I or GVA II, or without being subject to the fixed account withdrawal/transfer limits under GVA III. We must receive reasonable proof of the condition with the withdrawal request. The chart below shows the standard conditions provided by GVA I, GVA II, and 11 GVA III, as well as optional conditions the contractowner may or may not make available under the contracts: Standard conditionsOptional conditions - ------------------------------------------------------------------------------- GVA I . the partici- . the partici- pant has at- pant has tained age separated 59 1/2 from service with their employer and is at least 55 years of . the partici- age pant has died . the partici- pant has in- curred a . the partici- disability pant is ex- (as defined periencing under the financial contract) hardship . the partici- pant has separated from service with their employer GVA II . the partici- . the partici- pant has at- pant has tained age separated 59 1/2 from service with their employer . the partici- pant has died . the partici- . the partici- pant has in- pant is ex- curred a periencing disability financial (as defined hardship under the contract) . the partici- pant has separated from service with their employer and is at least 55 years of age GVA III . the partici- . the partici- pant has at- pant has tained age separated 59 1/2 from service with their employer and is at least 55 years of age . the partici- pant has died . the partici- pant has in- curred a disability (as defined under the contract) . the partici- pant has separated from service with their employer . the partici- pant is ex- periencing financial hardship* * A GVA III contractowner has the option not to include the financial hardship condition. Under GVA I and GVA II, a contractowner may also elect an optional contract provision that permits participants to make a withdrawal once each contract year of up to 20% of the participant's account balance without a surrender charge. Fixed account withdrawal/transfer limits for GVA III GVA III has no surrender charges, but under GVA III, special limits apply to withdrawals and transfers from the fixed account. During any one calendar year a participant may make one withdrawal from the fixed account, OR one transfer to the VAA from the fixed account, of up to 20% of their fixed account balance. Participants who want to liquidate their entire fixed account balance or transfer it to the VAA, however, may make one withdrawal or transfer request from their fixed account in each of five consecutive calendar years, according to the following percentages:
Year Request Received Percentage of Fixed Account By Lincoln Life Available Under GVA III - --------------------- --------------------------- 1 20% 2 25% 3 33.33% 4 50% 5 100%
Each consecutive withdrawal or transfer may not be made more frequently than twelve months apart. This liquidation schedule is also subject to the same conditions as other withdrawals and transfers. We reserve the right to pro- hibit any additional contributions by a participant that notifies us their in- tention to liquidate their fixed account balance and stop contributions to the contract. In addition, at contract termination certain 403(b) GVA III contracts offer lump sum payouts from the fixed account which may have a market value adjustment. Lump sum payouts will never be less than net contributions accumulated at an annual effective rate of 3%. See The Contract. A contractowner choosing one or more of the optional provisions may receive a different declared interest rate on the fixed account than will holders of contracts without these provisions. Deductions for premium taxes Any premium tax or other tax levied by any governmental entity as a result of the existence of the contracts or the VAA will be deducted from account value when incurred, or at another time of our choosing. The applicable premium tax rates that states and other governmental entities impose on the purchase of an annuity are subject to change by legislation, by administrative interpretation or by judicial action. The tax ranges from 0% to 5.0% in those states where the tax is imposed. Other charges and deductions There are deductions from and expenses paid out of the assets of the under- lying funds that are more fully described in the Prospectuses for the funds. We may impose a $50 fee to establish a participant loan from the fixed ac- count, and loans are subject to loan interest charges. In addition, we may im- pose a $30 fee to set up a systematic withdrawal option for a participant. Additional information The annual administration charge and surrender charge described previously may be reduced or eliminated under a particular contract. However, these charges will 12 be reduced only to the extent that we anticipate lower distribution and/or ad- ministrative expenses, or that we perform fewer sales or administrative serv- ices than those originally contemplated in establishing the levels of those charges. Lower distribution and/or administrative expenses may be the result of economies associated with (i) the size of a particular group; (ii) an ex- isting relationship with the contractowner or employer; (iii) the use of mass enrollment procedures; (iv) the performance of administrative or sales func- tions by the employer; or (v) the use by an employer of automated techniques in submitting contributions or information relating to contributions on behalf of its employees. In addition, an employer may pay the annual administration charge on behalf of participants under a contract, or by election impose this charge only on participants with account balances in the VAA. The Contracts Purchase of the contracts We designed the contracts for employers and other entities to enable partici- pants and employers to accumulate funds for retirement programs meeting the requirements of the following Sections of the Internal Revenue Code of 1986, as amended (tax code): 401(a), 403(b), 408 and other related sections, as well as for programs offering non-qualified annuities. An employer, association or trustee in some circumstances, may apply for a contract by completing an ap- plication and returning it to us. If we accept the application, the contractowner or an affiliated employer can forward contributions on behalf of employees who then become participants under the contracts. For plans that have allocated rights to the participant, we will issue to each participant a separate active life certificate that describes the basic provisions of the contract to each participant. Contributions Contractowners generally forward contributions to us for investment. Depending on the plan, the contributions may consist of salary reduction contributions, employer contributions or post-tax contributions. Contributions may accumulate on either a guaranteed or variable basis selected from those subaccounts made available by the contractowner. Contributions made on behalf of participants may be in any amount unless there is a minimum amount set by the contractowner or plan. A contract may require the contractowner to contribute a minimum annual amount on behalf of all par- ticipants. Annual contributions under qualified plans may be subject to maxi- mum limits imposed by the tax code. Annual contributions under non-qualified plans may be limited by the terms of the contract. Subject to any restrictions imposed by the plan or the tax code, we will ac- cept transfers from other contracts and qualified rollover contributions. Section 830.205 of the Texas Education Code provides that employer or state contributions (other than salary reduction contributions) on behalf of partic- ipants in the Texas Optional Retirement Program ("ORP") vest after one year of participation in the program. We will return employer contributions to the contractowner for those employees who terminate employment in all Texas insti- tutions of higher education before becoming vested. During this first partici- pation year in the ORP, ORP Participants may only direct employer and state contributions to the fixed account. Contributions must be in U.S. funds, and all withdrawals and distributions un- der the contract will be in U.S. funds. If a bank or other financial institu- tion does not honor the check or other payment method used for a contribution, we will treat the contribution as invalid. All allocation and subsequent transfers resulting from the invalid contributions will be reversed and the party responsible for the invalid contribution must reimburse us for any losses or expenses resulting from the invalid contribution. Initial contributions When we receive a completed enrollment form and all other information neces- sary for processing a contribution, we will price the initial contribution for a participant to his or her account no later than two business days after we receive the contribution. If we receive contributions without a properly completed enrollment form, we will notify the contractowner and deposit the contributions to the pending al- location account. Within two business days of receipt of a properly completed enrollment form, we will transfer the participant's account balance in the pending allocation account in accordance with the allocation percentages elected on the enrollment form. We will allocate all future contributions in accordance with these percentages until the participant notifies us of a change. If we do not receive a properly completed enrollment form after we send three monthly notices, then we will refund the participant's account bal- ance in the pending allocation account within 105 days of the date of the ini- tial contribution. The pending allocation account invests in Fidelity VIP-- Money Market Portfolio, which is not available as an investment option under the contract. We do not impose the mortality and expense risk charge or the annual administration charge on the pending allocation account. We begin im- posing these charges when we receive a properly completed enrollment form. The participant's participation date will be the date we deposited the partici- pant's contribution into the pending allocation account. Valuation date Accumulation units and annuity units will be valued once daily at the close of trading (currently normally 4:00 13 p.m., New York time) on each day the New York Stock Exchange is open (valua- tion date). On any date other than a valuation date, the accumulation unit value and the annuity unit value will not change. Allocation of contributions The contractowner forwards contributions to us, specifying the amount being contributed on behalf of each participant and allocation information in accor- dance with our procedures. Contributions are placed into the VAA's subaccounts, each of which invests in shares of a fund, and/or the fixed ac- count, according to written participant instructions and subject to the plan. The contribution allocation percentage to the subaccounts or the fixed account can be in any whole percent. A participant may allocate contributions to a maximum of ten subaccounts, or to a maximum of nine subaccounts and the fixed account. Upon allocation to the appropriate subaccount, contributions are converted to accumulation units. The number of accumulation units credited is determined by dividing the amount allocated to each subaccount by the value of an accumula- tion unit for that subaccount on the valuation date on which the contribution is received by us if received before the end of the valuation date (normally 4:00 p.m., New York time). If the contribution is received at or after the end of the valuation date, we will use the accumulation unit value computed on the next valuation date. The number of accumulation units determined in this way is not changed by any subsequent change in the value of an accumulation unit. However, the dollar value of an accumulation unit will vary depending not only upon how well the underlying fund's investments perform, but also upon the ex- penses of the VAA and the underlying funds. Subject to the terms of the plan, a participant may change the allocation of contributions by notifying us in writing or by telephone in accordance with our published procedures. The change is effective for all contributions re- ceived concurrently with the allocation change form and for all future contri- butions, unless the participant specifies a later date. Changes in the alloca- tion of future contributions have no effect on amounts a participant may have already contributed. Such amounts, however, may be transferred between subaccounts and the fixed account pursuant to the requirements described in "Transfers on or before the annuity commencement date." Allocations of em- ployer contributions may be restricted by the applicable plan. Valuation of accumulation units Contributions allocated to the VAA are converted into accumulation units. This is done by dividing each contribution by the value of an accumulation unit for the valuation period during which the contribution is allocated to the VAA. The accumulation unit value for each subaccount was or will be established at the inception of the subaccount. It may increase or decrease from valuation period to valuation period. The accumulation unit value for a subaccount for a later valuation period is determined as follows: (1) The total value of the fund shares held in the subaccount is calculated by multiplying the number of fund shares owned by the subaccount at the be- ginning of the valuation period by the net asset value per share of the fund at end of the valuation period, and adding any dividend or other dis- tribution of the fund if an ex-dividend date occurs during the valuation period; minus (2) The liabilities of the subaccount at the end of the valuation period; these liabilities include daily charges imposed on the subaccount, and may include a charge or credit with respect to any taxes paid or reserved for by us that we determine result from the operations of the VAA; and (3) The result of (2) is divided by the number of subaccount units outstanding at the beginning of the valuation period. The daily charges imposed on a subaccount for any valuation period are equal to the mortality and expense risk charge multiplied by the number of calendar days in the valuation period. Transfers on or before the annuity commencement date Subject to the terms of a plan, a participant may transfer all or a portion of the participant's account balance from one subaccount to another, and between the VAA and the fixed account. Under GVA III transfers from the fixed account are subject to special limits. See Fixed account withdrawals/ transfer limits for GVA III. A transfer from a subaccount involves the surrender of accumulation units in that subaccount, and a transfer to a subaccount involves the purchase of accu- mulation units in that subaccount. Subaccount transfers will be done using ac- cumulation unit values determined at the end of the valuation date on which we receive the transfer request. There is no charge for a transfer. We do not re- quire any minimum transfer amount, and do not limit the number of transfers other than for transfers from the fixed account under GVA III. A transfer may be made by writing to us or, if a Telephone Exchange Authoriza- tion form (available from us) is on file with us, by a toll-free telephone call. In most instances, a transfer between subaccounts can also be made through the Internet Service Center or Voice Response Unit. In order to pre- vent unauthorized or fraudulent telephone transfers, we may require the caller to provide certain identifying information before we will act upon their in- structions. We may also assign the participant a Personal Identification Num- ber (PIN) 14 to serve as identification. We will not be liable for following telephone in- structions we reasonably believe are genuine. Telephone requests may be re- corded and written confirmation of all transfer requests will be mailed to the participant on the next valuation date. If the participant or contractowner de- termines that a transfer was made in error, the contractowner or participant must notify us within 30 days of the confirmation date. Telephone transfers will be processed on the valuation date that they are received when they are received by us before the end of the valuation date (normally 4:00 p.m. New York time). When thinking about a transfer of account value, the participant should con- sider the inherent risk involved. Frequent transfers based on short-term expec- tations may increase the risk that a transfer will be made at an inopportune time. Transfers after the annuitycommencement date We do not permit transfers of a participant's account balance after the annuity commencement date. Death benefit before the annuity commencement date The payment of death benefits is governed by the applicable plan and the tax code. The participant may designate a beneficiary during the participant's lifetime and change the beneficiary by filing a written request with us. Each change of beneficiary revokes any previous designation. If the participant dies before the annuity commencement date, the death benefit paid to the participant's designated beneficiary will be the greater of: (1) the net contributions; or (2) the participant's account balance less any out- standing loan (including principal and due and accrued interest), provided that, if we are not notified of the participant's death within six months of such death, we pay the beneficiary the amount in (2). We determine the value of the death benefit as of the date on which the death claim is approved for payment. This payment will occur when we receive (1) proof, satisfactory to us, of the death of the participant; (2) written autho- rization for payment; and (3) all required claim forms, fully completed. If a death benefit is payable, the beneficiary may elect to receive payment of the death benefit either in the form of a lump sum settlement or an annuity payout, or as a combination of these two. If a lump sum settlement is request- ed, the proceeds will be mailed within seven days of receipt of satisfactory claim documentation as discussed previously, subject to the laws and regula- tions governing payment of death benefits. If no election is made within 60 days after we receive satisfactory notice of the participant's death, we will pay a lump sum settlement to the beneficiary at that time. This payment may be postponed as permitted by the 1940 Act. Payment will be made in accordance with applicable laws and regulations governing payment of death benefits. Under qualified contracts, if the beneficiary is someone other than the spouse of the deceased participant, the tax code provides that the beneficiary may not elect an annuity which would commence later than December 31st of the calendar year following the calendar year of the participant's death. If a non-spousal beneficiary elects to receive payment in a single lump sum, the tax code pro- vides that such payment must be received no later than December 31st of the fourth calendar year following the calendar year of the participant's death. If the beneficiary is the surviving spouse of the deceased participant, distri- butions generally are not required under the tax code to begin earlier than De- cember 31st of the calendar year in which the participant would have attained age 70 1/2. If the surviving spouse dies before the date distributions com- mence, then, for purposes of determining the date distributions to the benefi- ciary must commence, the date of death of the surviving spouse is substituted for the date of death of the participant. Other rules apply to non-qualified annuities. See Federal Tax Matters. If there is no living named beneficiary on file with us at the time of a par- ticipant's death and unless the plan directs otherwise, we will pay the death benefit to the participant's estate in the form of a lump sum payment, upon re- ceipt of satisfactory proof of the participant's death, but only if we receive proof of death no later than the end of the fourth calendar year following the year of the participant's death. In such case, the value of the death benefit will be determined as of the end of the valuation period during which we re- ceive due proof of death, and the lump sum death benefit generally will be paid within seven days of that date. Withdrawals Before the annuity commencement date and subject to the terms of the plan, withdrawals may be made from the subaccounts or the fixed account of all or part of the participant's account balance remaining after deductions for any applicable (1) surrender charge; (2) annual administration charge (imposed on total withdrawals), (3) premium taxes, and (4) outstanding loan. Converting all or part of the account balance or death benefit to an annuity payout is not considered a withdrawal. Under GVA III, special limits apply to withdrawals from the fixed account. See Fixed account withdrawal/transfer limits for GVA III. The account balance available for withdrawal is determined at the end of the valuation period during which we receive the written withdrawal request. Unless a request for withdrawal specifies otherwise, withdrawals 15 will be made from all subaccounts within the VAA and from the fixed account in the same proportion that the amount of withdrawal bears to the total partici- pant account balance. Unless prohibited, withdrawal payments will be mailed within seven days after we receive a valid written request. The payment may be postponed as permitted by the 1940 Act. There are charges associated with withdrawals of account value. See Charges and Other Deductions. The tax consequences of a withdrawal are discussed later in this booklet. See Federal Tax Matters. Total withdrawals. Only participants with no outstanding loans can make a to- tal withdrawal. A total withdrawal of a participant's account will occur when (a) the participant or contractowner requests the liquidation of the partici- pant's entire account balance, or (b) the amount requested plus any surrender charge results in a remaining participant account balance of an amount less than or equal to the annual administration charge, in which case we treat the request as a request for liquidation of the participant's entire account balance. Any active life certificate must be surrendered to us when a total withdrawal occurs. If the contractowner resumes contributions on behalf of a participant after a total withdrawal, the participant will receive a new participation date and active life certificate. Partial withdrawals. A partial withdrawal of a participant's account balance will occur when less than a total withdrawal is made from a participant's ac- count. Systematic withdrawal option. Participants who are at least age 59 1/2, are separated from service from their employer, or are disabled, and certain spousal beneficiaries and alternate payees who are former spouses, may be eli- gible for a Systematic Withdrawal Option ("SWO") under the contract. Payments are made only from the fixed account. Under the SWO a participant may elect to withdraw either a monthly amount which is an approximation of the interest earned between each payment period based upon the interest rate in effect at the beginning of each respective payment period, or a flat dollar amount with- drawn on a periodic basis. A participant must have a vested pre-tax account balance of at least $10,000 in the fixed account in order to select the SWO. A participant may transfer amounts from the VAA to the fixed account in order to support SWO payments. These transfers, however, are subject to the transfer restrictions imposed by any applicable plan. A one-time fee of up to $30 will be charged to set up the SWO. This charge is waived for total vested pre-tax account balances of $25,000 or more. More information about SWO, including ap- plicable fees and charges, is available in the contracts and active life cer- tificates and from us. Required minimum distribution program (formerly known as maximum conservation option). Under certain contracts participants who are at least age 70 1/2 may ask us to calculate and pay to them the minimum annual distribution required by Sections 401(a)(9), 403(b)(10) or 408 of the tax code. The participant must complete the forms we require to elect this option. We will base our calcula- tion solely on the participant's account value with us. Participants who se- lect this option are responsible for determining the minimum distributions amount applicable to their non-Lincoln Life contracts. Withdrawal restrictions. Withdrawals under Section 403(b) contracts are sub- ject to the limitations under Section 403(b)(11) of the tax code and regula- tions thereof and in any applicable plan document. That section provides that withdrawals of salary reduction contributions deposited and earnings credited on any salary reduction contributions after December 31, 1988 can only be made if the participant has (1) died; (2) become disabled; (3) attained age 59 1/2; (4) separated from service; or (5) incurred a hardship. If amounts accumulated in a Section 403(b)(7) custodial account are deposited in a contract, these amounts will be subject to the same withdrawal restrictions as are applicable to post-1988 salary reduction contributions under the contracts. For more in- formation on these provisions see Federal Tax Matters. Withdrawal requests for a participant under Section 401(a) plans and plans subject to Title I of ERISA must be authorized by the contractowner on behalf of a participant. All withdrawal requests will require the contractowner's written authorization and written documentation specifying the portion of the participant's account balance which is available for distribution to the par- ticipant. As required by Section 830.105 of the Texas Education Code, withdrawal re- quests by participants in the Texas Optional Retirement Program ("ORP") are only permitted in the event of (1) death; (2) retirement; (3) termination of employment in all Texas institutions of higher education; or (4) attainment of age 70 1/2. A participant in an ORP contract is required to obtain a certifi- cate of termination from the participant's employer before a withdrawal re- quest can be granted. For withdrawal requests (other than transfers to other investment vehicles) by participants under plans not subject to Title I of ERISA and non-401(a) plans, the participant must certify to us that one of the permitted distribution events listed in the tax code has occurred (and provide supporting informa- tion, if requested) and that we may rely on this representation in granting the withdrawal request. See Federal Tax Matters. A participant should consult his or her tax adviser as well as review the provisions of their plan before requesting a withdrawal. 16 A plan and applicable law may contain additional withdrawal or transfer re- strictions. Withdrawals may have Federal tax consequences. In addition, early withdrawals, as defined under Section 72(q) and 72(t) of the tax code, may be subject to a 10% excise tax. Amendment of the contract We reserve the right to amend the contract to meet the requirements of the 1940 Act or other applicable federal or state laws or regulations. The contractowner will be notified in writing of any changes, modifications or waivers. Commissions We pay commissions of up to 3.5% of contributions to dealers. In some instanc- es, we may lower commissions on contributions by as much as 3.5% and include a commission of up to .50% of annual contract values (or an equivalent sched- ule). These commissions are not deducted from contributions or account value; they are paid by us. Ownership Contractowners have all rights under the contract except those allocated to participants. According to Indiana law, the assets of the VAA are held for the exclusive benefit of all contractowners, participants, and their designated beneficiaries; and the assets of the VAA are not chargeable with liabilities arising from any other business that we may conduct. Qualified contracts and active life certificates may not be assigned or transferred except as permit- ted by ERISA and on written notification to us. In addition, a participant, beneficiary, or annuitant may not, unless permitted by law, assign or encumber any payment due under the contract. Contractowner questions The obligations to purchasers under the contracts are those of Lincoln Life. Questions about the contract should be directed to us at 1-800-341-0441 or visit www.LincolnLife.com. Annuity Payouts As permitted by the plan, the participant, or the beneficiary of a deceased participant, may elect to convert all or part of the participant's account balance or the death benefit to an annuity payout. The contract provides op- tional forms of annuity payouts (annuity payout options), each of which is payable on a variable basis, a fixed basis or a combination of both as speci- fied. If the contractowner does not give us instructions, we will apply the participant's account balance in the fixed account to a fixed annuity, and ac- count balance in the VAA to a variable annuity. If the participant's account balance or the beneficiary's death benefit is less than $2,000 or if the amount of the first payout is less than $20, we have the right to cancel the annuity and pay the participant or beneficiary the entire amount in a lump sum. We may maintain variable annuity payouts in the VAA, or in another separate account of Lincoln Life (variable payout division). We do not impose a charge when the annuity conversion amount is applied to a variable payout division to provide an annuity payout option. The contract benefits and charges for an an- nuity payout option, whether maintained in the VAA or in a variable payout di- vision, are as described in this Prospectus. The selection of funds available through a variable payout division may be different from the funds available through the VAA. If we will maintain a participant's variable annuity payout in a variable payout division, we will provide a Prospectus for the variable payout division before the annuity commencement date. Under qualified plans, any annuity selected must be payable over a period that does not extend beyond the life expectancy of the participant and the benefi- ciary. If the beneficiary is not the participant's spouse, the present value of payouts to be made to the participant must be more than 50% of the present value of the total payouts to be made to the participant and the beneficiary. If an annuitant dies before the end of a designated annuity period, the bene- ficiary, if any, or the annuitant's estate will receive any remaining payouts due under the annuity option in effect. Annuity payout options Note Carefully: Under the Single Life Annuity and Joint Life Annuity options it would be possible for only one annuity payout to be made if the annuitant(s) were to die before the due date of the second annuity payout; only two annuity payouts if the annuitant(s) were to die before the due date of the third annuity payout; and so forth. Single Life Annuity. Payouts are made monthly during the lifetime of the annu- itant, and the annuity terminates with the last payout preceding death. Life Annuity with Guaranteed Periods of 10, 15 or 20 Years. Payouts are made monthly during the lifetime of the annuitant with a monthly payout guaranteed to the beneficiary for the remainder of the selected number of years, if the annuitant dies before the end of the period selected. Payouts under this annu- ity option are smaller than a single life annuity without a guaranteed payout period. Joint Life Annuity. Payouts are made monthly during the joint lifetime of the annuitant and a designated second person. Non-Life Annuities. Annuity payouts are guaranteed monthly for the selected number of years. While there is no right to make any total or partial with- drawals during the annuity period, an annuitant or beneficiary who has se- lected this annuity option as a variable annuity may request at any time dur- ing the payout period that the present value of any remaining installments be 17 paid in one lump sum. This lump sum payout will be treated as a total with- drawal during the accumulation period and may be subject to a surrender charge. See Charges and Other Deductions and Federal Tax Matters. Additional information Annuity payout options are only available if consistent with the contract, the plan, the tax code, and ERISA. The annuity commencement date is the date on which we make the first annuity payout to an annuitant. For plans subject to Section 401(a)(9)(B) of the tax code, a beneficiary must select an annuity commencement date that is not later than one year after the date of the participant's death. A participant or contractowner may select an annuity commencement date for the annuitant, which is shown in the retired life certificate. Selection of an annuity commencement date may be affected by the distribution restrictions under the tax code and the minimum distribution requirements under Section 401(a)(9) of the tax code. See Federal Tax Matters. You must send us written notice of the selected annuity commencement date, the annuity payout option (including whether fixed or variable), and the annuity conversion amount to be converted on behalf of a participant or beneficiary, at least 30 days before the selected annuity commencement date. If proceeds become available to a beneficiary in a lump sum, the beneficiary may choose any annuity payout option. The annuity conversion amount is either the participant's account balance or a portion thereof, or the death benefit plus interest, as of the annuity payout calculation date. For a fixed annuity, the annuity commencement date is usu- ally one month after the annuity payout calculation date; subsequent annuity payouts are at one-month intervals from the annuity commencement date. For a variable annuity, the annuity commencement date is ten business days after the initial annuity payout calculation date; subsequent monthly payouts have annu- ity payout calculation dates which are ten business days prior. Annuity payout calculation Fixed annuity payouts are determined by dividing the participant's annuity conversion amount in the fixed account as of the initial annuity payout calcu- lation date by the applicable annuity conversion factor (in the contract) for the annuity payout option selected. Variable annuity payouts will be determined using: 1. The participant's annuity conversion amount in the VAA as of the initial annuity payout calculation date; 2. The annuity conversion factor in the contract; 3. The annuity payout option selected; and 4. The investment performance of the funds selected. To determine the amount of annuity payouts, we make this calculation: 1. Determine the dollar amount of the first payout; then 2. Credit the retired life certificate with a specific number of annuity units equal to the first payout divided by the annuity unit value; and 3. Calculate the value of the annuity units each period thereafter. We assume an investment return of a specified percentage per year, as applied to the applicable mortality table. The amount of each annuity payout after the initial payout will depend upon how the underlying fund(s) perform, relative to the assumed rate. If the actual net investment rate (annualized) exceeds the assumed rate, the payment will increase at a proportional rate to the amount of such excess. Conversely, if the actual rate is less than the assumed rate, annuity payouts will decrease. There is a more complete explanation of this calculation in the SAI. Federal Tax Matters Introduction The Federal income tax treatment of the contract is complex and sometimes un- certain. The Federal income tax rules may vary with your particular circum- stances. This discussion does not include all the Federal income tax rules that may affect the contractowner, participant and contract. This discussion also does not address other Federal tax consequences, or state or local tax consequences, associated with the contract. As a result, a contractowner and a participant should always consult a tax advisor about the application of tax rules to their individual situation. Taxation of nonqualified annuities This part of the discussion describes some of the Federal income tax rules ap- plicable to nonqualified annuities. A nonqualified annuity is a contract not issued in connection with a qualified retirement plan, such as an IRA or a section 403(b) plan, receiving special tax treatment under the tax code. Tax deferral on earnings The Federal income tax law generally does not tax any increase in the contract value until the contractowner or participant receives a contract distribution. However, for this general rule to apply, certain requirements must be satis- fied: .. An individual must own the contract (or the tax law must treat the contract as owned by an individual). .. The investments of the VAA must be "adequately diversified" in accordance with IRS regulations. .. The right to choose particular investments for a contract must be limited. .. The annuity commencement date must not occur near the end of the annuitant's life expectancy. 18 Contracts not owned by an individual If a contract is owned by an entity (rather than an individual) the tax code generally does not treat it as an annuity contract for Federal income tax pur- poses. This means that the entity owning the contract pays tax currently on the excess of the contract value over the contributions for the contract. Ex- amples of contracts where the owner pays current tax on the contract's earn- ings are contracts issued to a corporation or a trust. Exceptions to this rule exist. For example, the tax code treats a contract as owned by an individual if the named owner is a trust or other entity that holds the contract as an agent for an individual. However, this exception does not apply in the case of any employer that owns a contract to provide deferred compensation for its employees. Investments in the VAA must be diversified For a contract to be treated as an annuity for Federal income tax purposes, the investments of the VAA must be "adequately diversified." IRS regulations define standards for determining whether the investments of the VAA are ade- quately diversified. If the VAA fails to comply with these diversification standards, the participant could be required to pay tax currently on the ex- cess of the contract value over the contract contributions. Although we do not control the investments of the underlying investment options, we expect that the underlying investment options will comply with the IRS regulations so that the VAA will be considered "adequately diversified." Restrictions Federal income tax law limits the contractowner's and the participant's rights to choose particular investments for the contract. Because the IRS has not is- sued guidance specifying those limits, the limits are uncertain and your right to allocate contract values among the subaccounts may exceed those limits. If so, the contractowner and/or participant would be treated as the owner of the assets of the VAA and thus subject to current taxation on the income and gains from those assets. We do not know what limits may be set by the IRS in any guidance that it may issue and whether any such limits will apply to existing contracts. We reserve the right to modify the contract without the contractowner's or participant's consent to try to prevent the tax law from considering them as the owner of the assets of the VAA. Age at which annuity payouts begin Federal income tax rules do not expressly identify a particular age by which annuity payouts must begin. However, those rules do require that an annuity contract provide for amortization, through annuity payouts, of the contract's contributions and earnings. If annuity payouts under the contract begin or are scheduled to begin on a date past the annuitant's 85th birthday, it is possi- ble that the tax law will not treat the contract as an annuity for Federal in- come tax purposes. In that event, the contractowner and/or participant would be currently taxable on the excess of the contract value over the contribu- tions of the contract. Tax treatment of payments We make no guarantees regarding the tax treatment of any contract or of any transaction involving a contract. However, the rest of this discussion assumes that the contract will be treated as an annuity for Federal income tax pur- poses and that the tax law will not tax any increase in the contract value un- til there is a distribution from the contract. Taxation of withdrawals and surrenders A contractowner and/or participant will pay tax on withdrawals to the extent their contract value exceeds contributions in the contract. This income (and all other income from the contract) is considered ordinary income. A higher rate of tax is paid on ordinary income than on capital gains. A contractowner and/or participant will pay tax on a surrender to the extent the amount re- ceived exceeds contributions. In certain circumstances contributions are re- duced by amounts received from the contract that were not included in income. Taxation of annuity payouts The tax code imposes tax on a portion of each annuity payout (at ordinary in- come tax rates) and treats a portion as a nontaxable return of contributions in the contract. We will notify you annually of the taxable amount of your an- nuity payout. Once you have recovered the total amount of the purchase payment in the contract, you will pay tax on the full amount of your annuity payouts. If annuity payouts end because of the annuitant's death and before the total amount of the contributions in the contract has been received, the amount not received generally will be deductible. Taxation of death benefits We may distribute amounts from the contract because of the death of a partici- pant. The tax treatment of these amounts depends on whether the participant or the annuitant dies before or after the annuity commencement date. .. Death prior to the annuity commencement date-- .. If the beneficiary receives death benefits under an annuity payout option, they are taxed in the same manner as annuity payouts. .. If the beneficiary does not receive death benefits under an annuity payout option, they are taxed in the same manner as a withdrawal. .. Death after the annuity commencement date-- .. If death benefits are received in accordance with the existing annuity pay- out option, they are excludible from income if they do not exceed the con- tributions not yet distributed from the contract. All annuity payouts in excess of the contributions not previously received are includible in in- come. 19 .. If death benefits are received in a lump sum, the tax law imposes tax on the amount of death benefits which exceeds the amount of contributions not previously received. Penalty taxes payable on withdrawals, surrenders, or annuity payouts The tax code may impose a 10% penalty tax on any distribution from the con- tract which the contractowner and/or participant must include in gross income. The 10% penalty tax does not apply if one of several exceptions exists. These exceptions include withdrawals, surrenders, or annuity payouts that: .. participant receives on or after they reach age 59 1/2, .. participant receives because they became disabled (as defined in the tax law), .. a beneficiary receives on or after participant's death, or .. participant receives as a series of substantially equal periodic payments for their life (or life expectancy). Special rules if you own more than one annuity contract In certain circumstances, we must combine some or all of the nonqualified an- nuity contracts a participant owns in order to determine the amount of an an- nuity payout, a surrender, or a withdrawal that a participant must include in income. For example, if a contractowner and/or participant purchase two or more deferred annuity contracts from the same life insurance company (or its affiliates) during any calendar year, the tax code treats all such contracts as one contract. Treating two or more contracts as one contract could affect the amount of a surrender, a withdrawal or an annuity payout that the partici- pant must include in income and the amount that might be subject to the pen- alty tax described above. Loans and assignments Except for certain qualified contracts, the tax code treats any amount re- ceived as a loan under a contract, and any assignment or pledge (or agreement to assign or pledge) any portion of a participant's contract value, as a with- drawal of such amount or portion. Gifting a contract If the contractowner and/or participant transfer ownership of the contract to a person other than participant's spouse (or to participant's former spouse incident to divorce), and receive a payment less than the contract's value, the participant will pay tax on their contract value to the extent it exceeds the contractowner's and/or participant's contributions not previously re- ceived. The new owner's contributions in the contract would then be increased to reflect the amount included in the contractowner's and/or participant's in- come. Loss of interest deduction After June 8, 1997 if a contract is issued to a taxpayer that is not an indi- vidual, or if a contract is held for the benefit of an entity, the entity will lose a portion of its deduction for otherwise deductible interest expenses. This disallowance does not apply if you pay tax on the annual increase in the contract value. Entities that are considering purchasing a contract, or enti- ties that will benefit from someone else's ownership of a contract, should consult a tax advisor. Qualified retirement plans We also designed the contracts for use in connection with certain types of re- tirement plans that receive favorable treatment under the tax code. Contracts issued to or in connection with a qualified retirement plan are called "quali- fied contracts." We issue contracts for use with different types of qualified plans. The Federal income tax rules applicable to those plans are complex and varied. As a result, this Prospectus does not attempt to provide more than general information about use of the contract with the various types of quali- fied plans. Persons planning to use the contract in connection with a quali- fied plan should obtain advice from a competent tax advisor. Types of qualified contracts and terms of contracts Currently, we issue contracts in connection with the following types of quali- fied plans: .. Individual Retirement Accounts and Annuities ("Traditional IRAs") .. Public school system and tax-exempt organization annuity plans ("403(b) plans") .. Qualified employee pension and profit-sharing plans ("401(a) plans") and qualified annuity plans ("403(a) plans") We may issue a contract for use with other types of qualified plans in the fu- ture. We will amend contracts to be used with a qualified plan as generally neces- sary to conform to tax law requirements for the type of plan. However, the rights of a person to any qualified plan benefits may be subject to the plan's terms and conditions, regardless of the contract's terms and conditions. In addition, we are not bound by the terms and conditions of qualified plans to the extent such terms and conditions contradict the contract, unless we con- sent. Tax treatment of qualified contracts The Federal income tax rules applicable to qualified plans and qualified con- tracts vary with the type of plan and contract. For example, .. Federal tax rules limit the amount of contributions that can be made, and the tax deduction or exclusion that may be allowed for the contributions. These 20 limits vary depending on the type of qualified plan and the plan participant's specific circumstances, e.g., the participant's compensation. .. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the par- ticipant must begin receiving payments from the contract in certain minimum amounts by a certain age, typically age 70 1/2. However, these "minimum dis- tribution rules" do not apply to a Roth IRA. .. Loans are allowed under certain types of qualified plans, but Federal income tax rules prohibit loans under other types of qualified plans. For example, Federal income tax rules permit loans under some section 403(b) plans, but prohibit loans under Traditional and Roth IRAs. If allowed, loans are subject to a variety of limitations, including restrictions as to the loan amount, the loan's duration, and the manner of repayment. Your contract or plan may not permit loans. Tax treatment of payments Federal income tax rules generally include distributions from a qualified con- tract in the participant's income as ordinary income. These taxable distribu- tions will include contributions that were deductible or excludible from in- come. Thus, under many qualified contracts, the total amount received is in- cluded in income since a deduction or exclusion from income was taken for con- tributions. There are exceptions. For example, participant does not include amounts received from a Roth IRA in income if certain conditions are satisfied. Failure to comply with the minimum distribution rules applicable to certain qualified plans, such as Traditional IRAs, will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a mini- mum required distribution exceeds the actual distribution from the qualified plan. Federal penalty taxes payable on distributions The tax code may impose a 10% penalty tax on the amount received from the qual- ified contract that must be included in income. The tax code does not impose the penalty tax if one of several exceptions applies. The exceptions vary de- pending on the type of qualified contract purchased. For example, in the case of an IRA, exceptions provide that the penalty tax does not apply to a with- drawal, surrender, or annuity payout: .. received on or after the participant reaches age 59 1/2, .. received on or after the participant's death or because of the participant's disability (as defined in the tax law), .. received as a series of substantially equal periodic payments for the partic- ipant's life (or life expectancy), or .. received as reimbursement for certain amounts paid for medical care. These exceptions, as well as certain others not described here, generally apply to taxable distributions from other qualified plans. However, the specific re- quirements of the exception may vary. Transfers and direct rollovers In many circumstances, money may be moved between qualified contracts and qual- ified plans by means of a rollover or a transfer. Special rules apply to such rollovers and transfers. If the applicable rules are not followed, participant may suffer adverse Federal income tax consequences, including paying taxes which might not otherwise have had to be paid. A qualified advisor should al- ways be consulted before contractowner or participant move or attempt to move funds between any qualified plan or contract and another qualified plan or con- tract. The direct rollover rules apply to certain payments (called "eligible rollover distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10 plans, and contracts used in connection with these types of plans. (The direct rollover rules do not apply to distributions from IRAs). The direct rollover rules require that we withhold Federal income tax equal to 20% of the eligible rollover distribution from the distribution amount, unless participant elects to have the amount directly transferred to certain qualified plans or con- tracts. Before we send a rollover distribution, we will provide the participant with a notice explaining these requirements and how the 20% withholding can be avoided by electing a direct rollover. Federal income tax withholding We will withhold and remit to the IRS a part of the taxable portion of each distribution made under a contract unless the participant notifies us at or be- fore the time of the distribution that tax is not to be withheld. In certain circumstances, Federal income tax rules may require us to withhold tax. At the time a withdrawal, surrender, or annuity payout is requested, we will give the participant an explanation of the withholding requirements. Tax status of Lincoln Life Under existing Federal income tax laws, Lincoln Life does not pay tax on in- vestment income and realized capital gains of the VAA. Lincoln Life does not expect that it will incur any Federal income tax liability on the income and gains earned by the VAA. We, therefore, do not impose a charge for Federal in- come taxes. If Federal income tax law changes and we must pay tax on some or all of the income and gains earned by the VAA, we may impose a charge against the VAA to pay the taxes. Changes in the law The above discussion is based on the tax code, IRS regulations, and interpreta- tions existing on the date of this Prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively. 21 Voting Rights As required by law, we will vote the fund shares held in the VAA at meetings of shareholders of the funds. The voting will be done according to the in- structions of participants that have interests in any subaccounts which invest in the funds. If the 1940 Act or any regulation under it should be amended or if present interpretations should change, and if as a result we determine that we are permitted to vote the fund shares in our own right, we may elect to do so. The number of votes which the participant has the right to cast will be deter- mined by applying the participant's percentage interest in a subaccount to the total number of votes attributable to the subaccount. In determining the num- ber of votes, fractional shares will be recognized. Shares held in a subaccount for which no timely instructions are received will be voted by us in proportion to the voting instructions which are received for all contracts participating in that subaccount. Voting instructions to abstain on any item to be voted on will be applied on a pro-rata basis to reduce the number of votes eligible to be cast. Whenever a shareholders meeting is called, we will furnish participants with a voting interest in a subaccount with proxy voting materials, reports, and vot- ing instruction forms. Since the funds engage in shared funding, other persons or entities besides Lincoln Life may vote fund shares. See Description of the Funds--Sale of shares by the funds. Distribution of the Contracts Lincoln Financial Advisors Corporation (LFA), 1300 South Clinton Street, Fort Wayne, Indiana 46802, is the distributor and principal underwriter of the con- tracts. The contracts will be sold by properly licensed registered representa- tives of independent broker-dealers which in turn have selling agreements with LFA and have been licensed by state insurance departments to represent us. LFA is registered with the SEC under the Securities Exchange Act of 1934 as a bro- ker-dealer and is a member of the National Association of Securities Dealers (NASD). Lincoln Life will offer contracts in all states where it is licensed to do business. Return Privilege Participants under Sections 403(b), 408 and certain non-qualified plans will receive an active life certificate. Within the free-look period (ten days) af- ter the participant receives the active life certificate, the participant may cancel it for any reason by giving us written notice. The postmark date of the notice is the date of notice for these purposes. An active life certificate canceled under this provision will be void. With respect to the fixed side of the contract, we will return the participant's contributions less withdrawals made on behalf of the participant. With respect to the VAA, we will return the greater of the participant's contributions less withdrawals made on behalf of the participant, or the participant's account balance in the VAA on the date we receive the written notice. No surrender charge applies. State Regulation As a life insurance company organized and operated under Indiana law, we are subject to provisions governing life insurers and to regulation by the Indiana Commissioner of Insurance. Our books and accounts are subject to review and examination by the Indiana Department of Insurance at all times. A full examination of our operations is conducted by that department at least every five years. Records and Reports As presently required by the 1940 Act and applicable regulations, we are re- sponsible for maintaining all records and accounts relating to the VAA. We have entered into an agreement with the Delaware Management Company, 2005 Mar- ket Street, Philadelphia, PA 19203, to provide accounting services to the VAA. We will mail to the contractowner, at its last known address of record at our offices, at least semiannually after the first contract year, reports contain- ing information required by that Act or any other applicable law or regulation. Other Information Contract deactivation. Under certain contracts, we may deactivate a contract by prohibiting new contributions and/or new participants after the date of de- activation. We will give the contractowner and participants at least ninety days notice of the deactivation date. Delay in payments. We may delay payments from the fixed account for up to six months. During this period, we will continue to credit the current declared interest rate to a participant's account in the fixed account. Contract pro- ceeds from the VAA will be paid within seven days, except (i) when the NYSE is closed (except weekends and holidays); (ii) times when market trading is re- stricted or the SEC declares an emergency, and we cannot value units or the funds cannot redeem shares; or (iii) when the SEC so orders to protect contractowners. IMSA. We are a member of the Insurance Marketplace Standards Association ("IMSA") and may include the 22 IMSA logo and information about IMSA membership in our advertisements. Compa- nies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and services for individually sold life insurance and annuities. Legal proceedings. Lincoln Life is involved in various pending or threatened legal proceedings arising from the conduct of its business. Most of those pro- ceedings are routine and in the ordinary course of business. In some instances they include claims for unspecified or substantial punitive damages and simi- lar types of relief in addition to amounts for equitable relief. After consul- tation with legal counsel and a review of available facts, it is management's opinion that the ultimate liability, if any, under these suits will not have a material adverse effect on the financial position of Lincoln Life. Lincoln Life is presently defending several lawsuits in which Plaintiffs seek to represent national classes of policyholders in connection with alleged fraud, breach of contract and other claims relating to the sale of interest- sensitive universal and participating whole life in surance policies. As of the date of this prospectus, the courts have not certified a class in any of the suits. Plaintiffs seek unspecified damages and penalties for themselves and on behalf of the putative class. Although the relief sought in these cases is substantial, the cases are in the preliminary stages of litigation, and it is premature to make assessments about potential loss, if any. Management is defending these suits vigorously. The amount of liability, if any, which may ultimately arise as a result of these suits cannot be reasonably determined at this time. Group Variable Annuity Contracts I, II, & III Statement of Additional Information Table of Contents
Page DEFINITIONS 2 DETERMINATION OF VARIABLE ANNUITY PAYOUTS 2 PERFORMANCE CALCULATIONS 3 DISTRIBUTION OF CONTRACTS 6 INDEPENDENT AUDITORS 6 ADVERTISING AND SALES LITERATURE 6 FINANCIAL STATEMENTS 9
........................................................................... (Please Print) Name: ___________________________ Social Security No.: _____________ Address: _________________________________________________________________ City ____________________________ State _______ Zip __________ Mail to Lincoln National Life Insurance Co., P.O. Box 9740, Portland, Maine 04104-5001 23 STATEMENT OF ADDITIONAL INFORMATION May 1, 2000 GROUP VARIABLE ANNUITY CONTRACTS I, II, & III FUNDED THROUGH THE SUB-ACCOUNTS OF LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L OF THE LINCOLN NATIONAL LIFE INSURANCE COMPANY TABLE OF CONTENTS
PAGE ---- Definitions................................................................ 2 Determination of Variable Annuity Payments................................. 2 Performance Calculations................................................... 3 Distribution of Contracts.................................................. 6 Independent Auditors....................................................... 6 Advertising and Sales Literature........................................... 6 Financial Statements....................................................... 9
This Statement of Additional Information (SAI) is not a prospectus. It should be read in conjunction with the prospectus for the Group Variable Annuity Contracts (the "Contracts"), dated May 1, 2000. A copy of the prospectus to which this SAI relates is available at no charge by writing to Lincoln Life at Lincoln National Life Insurance Company, P.O. Box 9740, Portland, Maine 04104, by calling Lincoln Life at 1-800-341-0441or by visiting www.LincolnLife.com. 90022 DEFINITIONS ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount in determining the dollar amount of an annuitant's annuity payments for Guaranteed Annuities or the initial payment for Variable Annuities. ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first day of a calendar month. For Variable Annuities, this is the Valuation Date ten (10) business days prior to the first day of a calendar month. ANNUITY UNIT: An accounting unit of measure that is used in calculating the amounts of annuity payments to be made from a Sub-Account during the Annuity Period. ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in a Sub-Account on any Valuation Date. CODE: The Internal Revenue Code of 1986, as amended. DETERMINATION OF VARIABLE ANNUITY PAYMENTS As stated in the prospectus, the amount of each Variable Annuity payment will vary depending on investment experience. The initial payment amount of the Annuitant's Variable Annuity for each Sub- Account is determined by dividing his Annuity Conversion Amount in each Sub- Account as of the initial Annuity Payment Calculation Date ("APCD") by the Applicable Annuity Conversion Factor defined as follows: The Annuity Conversion Factors which are used to determine the initial payments are based on the 1983 Individual Annuity Mortality Table and an interest rate in an integral percentage ranging from zero to six percent (0 to 6.00%) as selected by the Annuitant. The amount of the Annuitant's subsequent Variable Annuity payment for each Sub-Account is determined by: (a) Dividing the Annuitant's initial Variable Annuity payment amount by the Annuity Unit Value for that Sub-Account selected for his interest rate option as described above as of his initial APCD; and (b) Multiplying the resultant number of annuity units by the Annuity Unit Values for the Sub-Account selected for his interest rate option for his respective subsequent APCDs. Each subsequent Annuity Unit Value for a Sub-Account for an interest rate option is determined by: Dividing the Accumulation Unit Value for the Sub-Account as of subsequent APCD by the Accumulation Unit Value for the Sub-Account as of the immediately preceding APCD; Dividing the resultant factor by one (1.00) plus the interest rate option to the n/365 power where n is the number of days from the immediately preceding APCD to the subsequent APCD; and Multiplying this factor times the Annuity Unit Value as of the immediately preceding APCD. Illustration of Calculation of Annuity Unit Value 1. Annuity Unit Value as of immediately preceding Annuity Pay- ment Calculation Date....................................... $11.0000 2. Accumulation Unit Value as of Annuity Payment Calculation Date........................................................ $20.0000 3. Accumulation Unit Value as of immediately preceding Annuity Payment Calculation Date.................................... $19.0000 4. Interest Rate............................................... 6.00% 5. Interest Rate Factor (30 days).............................. 1.0048 6. Annuity Unit Value as of Annuity Payment Calculation Date = 1 times 2 divided by 3 divided by 5......................... $11.5236
2 Illustration of Annuity Payments 1. Annuity Conversion Amount as of Participant's initial Annuity Payment Calculation Date..................................... $100,000.00 2. Assumed Annuity Conversion Factor per $1 of Monthly Income for an individual age 65 selecting a Single Life Annuity with Assumed Interest Rate of 6%.................................. $ 138.63 3. Participant's initial Annuity Payment = 1 divided by 2....... $ 721.34 4. Assumed Annuity Unit Value as of Participant's initial Annuity Payment Calculation Date............................. $ 11.5236 5. Number of Annuity Units = 3 divided by 4..................... 62.5968 6. Assumed Annuity Unit Value as of Participant's second Annuity Payment Calculation Date..................................... $ 11.9000 7. Participant's second Annuity Payment = 5 times 6............. $ 744.90
CALCULATION OF INVESTMENT RESULTS Standard investment results: Standard performance is based on a formula to calculate performance that is prescribed by the SEC. Under rules issued by the SEC, standard performance must be included in any marketing material that discusses the performance of the VAA and the subaccounts. This information represents past performance and does not indicate or represent future performance. Average annual return for each period is determined by finding the average annual compounded rate of return over each period that would equate the initial amount invested to the ending redeemable value for that period, according to the following formula: P(1+T)n = ERV Where: P = a hypothetical initial purchase payment of $1,000 T = average annual total return for the period in question N = number of years ERV = ending redeemable value (as of the end of the period in question) of a hypothetical $1,000 purchase payment made at the beginning of the 1-year, 5-year, or 10-year period in question (or fractional period thereof) The formula assumes that: (1) all recurring fees have been charged to the contractowner accounts; (2) all applicable non-recurring charges (including any surrender charges) are deducted at the end of the period in question; and (3) there will be a complete redemption upon the anniversary of the 1-year, 5-year, or 10-year period in question. In accordance with SEC guidelines, we will report standard performance back to the first date that the Fund became available in the VAA. Because standard performance reporting periods of less than one year could be misleading, we may report "N/A's" for standard performance until one year after the option became available in the Separate Account. 3 Standard performance data for GVA II the period ending December 31, 1999:
Sub- 10 Account Years/Since Inception 1 5 Inception Subaccounts (Fund Names) Date Year Years Date - ------------------------ --------- ----- ----- ----------- Asset Manager Account/1/ 05/01/91 3.38% 13.58% 11.08% (Fidelity VIP II-Asset Manager) Balanced Account/1/ 05/01/91 2.42 12.89 9.71 (American Century VP Balanced) Equity-Income Account/1/ 05/01/94 -1.05 N/A 15.37 (Fidelity VIP Equity-Income Portfolio) Global Growth Account/2/ 10/01/98 53.04 N/A 68.28 (Janus Aspen Series Worldwide Growth Portfolio Institutional Shares) Growth I Account/1/ 05/01/91 27.90 27.44 20.77 (Fidelity VIP Growth Portfolio) Index Account/1/ 12/12/89 12.23 25.81 16.12 (Dreyfus Stock Index Fund) International Stock Account/1/ 05/02/94 24.07 13.18 11.26 (T Rowe Price International Series) Mid Cap Growth I Account/2/ 10/01/98 32.55 N/A 49.36 (Lincoln National Aggressive Growth Fund) Mid Cap Value Account/2/ 10/01/98 -0.08 N/A 14.56 (Neuberger Berman AMT Partners Portfolio) Small Cap Account/1/ 05/02/89 14.60 13.88 12.89 (Dreyfus VIF Small Cap Portfolio) Small Cap Growth Account/2/ 10/01/98 26.41 N/A 50.80 (Baron Capital Asset Fund) Social Awareness Account/2/ 10/01/98 7.42 N/A 28.96 (Lincoln National Social Awareness Fund)
/1/ Sub-account inception dates which reflect inception dates of the sub- accounts of the UNUM Variable Annuity-II Separate Account. /2/ Sub-account inception dates which reflect inception dates of the sub- accounts of the Lincoln Variable Annuity-II Separate Account. The table provides performance information for GVA II "standard". Performance information for GVA I and GVA III and GVA II "breakpoint" is not shown. Non-standard investment results: The VAA may report its results over various periods--daily, monthly, three- month, six-month, year-to-date, yearly (fiscal year), three, five, ten years or more and lifetime--and compare its results to indices and other variable annuities in sales materials including advertisements, brochures and reports. Performance information for the periods prior to the date that a Fund became available in the VAA will be calculated based on (1) the performance of the Fund adjusted for Contract charges (ie: mortality and expense risk fees, any applicable administrative charges, and the management and other expenses of the fund) and (2) the assumption that the subaccounts were in existence for the same periods as indicated for the Fund. It may or may not reflect charges for any Riders that were in effect during the time periods shown. This performance is referred to as non-standardized performance data. Such results may be computed on a cumulative and/or annualized basis. We may also report performance assuming that you deposited $10,000 into a subaccount at inception of the underlying fund or 10 years ago (whichever is less). This non-standard performance may be shown as a graph illustrating how that deposit would have increased or decreased in value over time based on the performance of the underlying fund adjusted for Contract charges. This information represents past performance and does not indicate or represent future performance. The investment return and value of a Contract will fluctuate so that contractowner's investment may be worth more or less than the original investment. 4 Cumulative quotations are arrived at by calculating the change in Accumulation Unit Value between the first and last day of the base period being measured, and expressing the difference as a percentage of the unit value at the beginning of the base period. Annualized quotations are arrived at by applying a formula which reflects the level rate of return, which if earned over the entire base period, would produce the cumulative return. Non-standard performance data for GVA II for the period ending December 31, 1999 (Adjusted for Contract Expense Charges):
Fund Inception 1 3 5 10 Since Subaccounts (Fund Names) Date YTD Year Years Years Years Inception - ------------------------ --------- ----- ----- ----- ----- ----- --------- Asset Manager Account 9/6/89 9.99% 9.99% 14.30% 14.33% 11.79% 11.44% (Fidelity VIP II-- Asset Manager) Balanced Account 5/1/91 8.96 8.96 12.64 13.64 N/A 10.17 (American Century VP Balanced) Equity-Income Account 10/9/86 5.27 5.27 13.77 17.28 13.16 12.45 (Fidelity VIP Equity- Income Portfolio) Global Growth Account 9/13/93 62.82 62.82 35.87 32.11 N/A 28.22 (Janus Aspen Series Worldwide Growth Portfolio Institutional Shares) Growth I Account 10/9/86 36.07 36.07 31.86 28.27 18.55 17.37 (Fidelity VP Growth Portfolio) Index Account 9/29/89 19.41 19.41 25.80 26.64 16.33 16.04 (Dreyfus Stock Index Fund) International Stock Account 3/31/94 32.00 32.00 15.53 13.93 N/A 12.17 (T Rowe Price International Series) Mid Cap Growth I Account 2/3/94 41.02 41.02 16.78 19.63 N/A 13.67 (Lincoln National Aggressive Growth Fund) Mid Cap Value Account 3/22/94 6.30 6.30 12.46 19.67 N/A 16.15 (Neuberger Berman AMT Partners Portfolio) Small Cap Account 8/31/90 21.93 21.93 10.37 14.63 N/A 34.08 (Dreyfus VIF Small Cap Portfolio) Small Cap Growth Account 10/1/98 34.48 34.48 N/A N/A N/A 58.48 (Baron Capital Asset Fund) Social Awareness Account 5/2/88 14.29 14.29 22.59 27.20 17.16 17.53 (Lincoln National Social Awareness Fund)
The table provides performance information for GVA II "standard". Performance information for GVA I and GVA III and GVA II "breakpoint" is not shown. 5 DISTRIBUTION OF CONTRACTS Lincoln Financial Advisors Corporation ("LFA"), an indirect subsidiary of Lincoln National Corporation, is registered with the Securities and Exchange Commission as a broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. LFA is the Variable Investment Division's principal underwriter and also enters into selling agreements with other unaffiliated broker-dealers authorizing them to offer the Contracts. INDEPENDENT AUDITORS The financial statements of the Lincoln National Variable Annuity Account L and the statutory-basis financial statements of The Lincoln National Life Insurance Company appearing in the SAI and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports also appearing elsewhere in this document and in the Registration Statement. The financial statements audited by Ernst & Young LLP have been included in this document in reliance on their reports given on their authority as experts in accounting and auditing. ADVERTISING AND SALES LITERATURE As set forth in the Prospectus, Lincoln Life may refer to the following organizations (and others) in its marketing materials: A.M. Best's Rating System is designed to evaluate the various factors affecting the overall performance of an insurance company in order to provide an opinion as to an insurance company's relative financial strength and ability to meet its contractual obligations. The procedure includes both a quantitative and qualitative review of each company. A.M. Best also provides certain rankings, to which Lincoln Life intends to refer. Duff & Phelps insurance company claims paying ability (CPA) service provides purchasers of insurance company policies and contracts with analytical and statistical information on the solvency and liquidity of major U.S. licensed insurance companies, both mutual and stock. EAFE Index is prepared by Morgan Stanley Capital International (MCSI). It measures performance of equity securities in Europe, Australia and the Far East. The index reflects the movements of world stock markets by representing the evolution of an unmanaged portfolio. The EAFE Index offers international diversification representing over 1,000 companies across 20 different countries. Lipper Variable Insurance Products Performance Analysis Service is a publisher of statistical data covering the investment company industry in the United States and overseas. Lipper is recognized as the leading source of data on open-end and closed-end funds. Lipper currently tracks the performance of over 5,000 investment companies and publishes numerous specialized reports, including reports on performance and portfolio analysis, fee and expense analysis. Moody's insurance financial strength rating is an opinion of an insurance company's financial strength and ability to meet financial obligations. The purpose of Moody's ratings is to provide investors with a simple system of gradation by which the relative quality of insurance companies may be notes. Morningstar is an independent financial publisher offering comprehensive statistical and analytical coverage of open-end and closed-end funds and variable annuities. Standard & Poor's insurance claims-paying ability rating is an opinion of an operating insurance company's financial capacity to meet obligations under an insurance policy in accordance with the terms. The likelihood of a timely flow of funds from the insurer to the trustee for the bondholders is a key element in the rating determination for such debt issues. 6 VARDS (Variable Annuity Research Data Service) provides a comprehensive guide to variable annuity contract features and historical fund performance. The service also provides a readily understandable analysis of the comparative characteristics and market performance of funds inclusive in variable contracts. Standard & Poor's 500 Index--A broad-based measurement of U.S. stock-market performance based on the weighted average performance of 500 common stocks of leading company's and leading industries; commonly known as the Standard & Poor's 500 (S&P 500). The selection of stocks, their relative weightings to reflect differences in the number of outstanding shares, and publication of the index itself are services of Standard & Poor's Corporation, a financial advisory, securities rating, and publishing firm. NASDAQ-OTC Price Index--This index is based on the National Association of Securities Dealers Automated Quotations (NASDAQ) and represents all domestic over-the-counter stocks except those traded on exchanges and those having only one market maker, a total of some 3,500 stocks. It is market value-weighted and was introduced with a base of 100.00 on February 5, 1971. Dow Jones Industrial Average (DJIA)--Price-weighted average of 30 actively traded blue chip stocks, primarily industrials but currently including American Express Company and American Telephone and Telegraph Company. Prepared and published by Dow Jones & Company, it is the oldest and most widely quoted of all the market indicators. The average is quoted in points, not dollars. Russell 1000 Index--Measurers the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 90% of the total market capitalization of the Russell 3000 that measurers 3000 of the largest US companies. Russell 2000 Index--Measurers the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 that measurers 3000 of the largest US companies. Lehman Brothers Aggregate Bond Index--Composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Indexes are rebalanced monthly by market capitalization. Lehman Brothers Government/Corporate Bond Index--Composed of all bonds that are investment grade (rated Baa or higher by Moody's or BBB or higher by S&P, if unrated by Moody's). Issues must have at least one year to maturity. Lehman Brothers Government Intermediate Bond Index--Composed of all bonds covered by the Lehman Brothers Government Bond Index (all publicly issued, nonconvertible, domestic debt of the US government or any agency thereof, quasi-federal corporations, or corporate debt guaranteed by the US government) with maturities between one and 9.99 years. Merrill Lynch High Yield Master Index--This is an index of high yield debt securities. High yield securities are those below the top four quality rating categories and are considered more risky than investment grade. Issues must be rated by Standard & Poor's or by Moody's Investors Service as less than investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less). Issues must be in the form of publicly paced nonconvertible, coupon-bearing US domestic debt and must carry a term to maturity of at least one year. Morgan Stanley Emerging Markets Free Index--A market capitalization weighted index composed of companies representative of the market structure of 22 Emerging Market countries in Europe, Latin America, and the Pacific Basin. This index excludes closed markets and those shares in otherwise free markets, which are not purchasable by foreigners. Morgan Stanley World Capital International World Index--A market capitalization weighted index composed of companies representative of the market structure of 22 Developed Market countries in North America, Europe and the Asia/Pacific Region. 7 Morgan Stanley Pacific Basin (Ex-Japan) Index--An arithmetic, market value- weighted average of the performance of securities listed on the stock exchanges of the following Pacific Basin Countries: Australia, Hong Kong, Malaysia, New Zealand and Singapore. Nareit Equity Reit Index--All of the data is based on the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market weighted. Salomon Brothers World Government Bond (Non US) Index--A market capitalization weighted index consisting of government bond markets of the following 13 countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, The Netherlands, Spain, Sweden, and The United Kingdom. Salomon Brothers 90 Day Treasury-Bill Index--Equal dollar amounts of three- month Treasury bills are purchased at the beginning of each of three consecutive months. As each bill matures, all proceeds are rolled over or reinvested in a new three-month bill. Standard and Poor's Index (S&P 400)--Consists of 400 domestic stocks chosen for market size, liquidity, and industry group representations. Standard and Poor's Utilities Index--The utility index is one of several industry groups within the broader S&P 500. Utility stocks include electric, natural gas, and telephone companies included in the S&P 500. Internet. An electronic communications network which may be used to provide information regarding Lincoln Life, performance of the subaccounts and advertisement literature. In its advertisements and other sales literature for the VAA and the series funds, Lincoln Life intends to illustrate the advantages of the contracts in a number of ways: Compound Interest Illustrations. These will emphasize several advantages of the variable annuity contract. For example, but not by way of illustration, the literature may emphasize the potential tax savings through tax deferral; the potential advantage of the variable annuity account over the fixed account; and the compounding effect when a client makes regular deposits to his or her contract. Dollar-cost averaging illustrations. These illustrations will generally discuss the price-leveling effect of making regular purchases in the same subaccounts over a period of time, to take advantage of the trends in market price of the portfolio securities purchased for those subaccounts. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln Financial Group has consolidated assets of over $103 billion and annual consolidated revenues of $6.8 billion. Through its wealth accumulation and protection businesses, the company provides annuities, life insurance, 401(k) plans, life-health reinsurance, mutual funds, institutional investment management and financial planning and advisory services. Lincoln Life's customers. Sales literature for the VAA and the series' funds may refer to the number of employers and the number of individual annuity clients which Lincoln Life serves. As of the date of this SAI, Lincoln Life was serving over 15,000 employers and more than 1.5 million individuals. Lincoln Life's assets, size. Lincoln Life may discuss its general financial condition (see, for example, the reference to A.M. Best Company, above); it may refer to its assets; it may also discuss its relative size and/or ranking among companies in the industry or among any sub-classification of those companies, based upon recognized evaluation criteria (see reference to A.M. Best Company above). For example, at year-end 1999 Lincoln Life had statutory admitted assets of over $79 billion. 8 Sales literature may reference the Group Variable Annuity newsletter which is a newsletter distributed quarterly to clients of the VAA. The contents of the newsletter will be a commentary on general economic conditions and, on some occasions, referencing matter in connection with the Group Variable Annuity. Sales literature and advertisements may reference theses and other similar reports from Best's or other similar publications which report on the insurance and financial services industries. FINANCIAL STATEMENTS Financial statements of the VAA and the statutory-basis financial statements of Lincoln Life appear on the following pages. 9 [THIS PAGE INTENTIONALLY LEFT BLANK] Lincoln National Variable Annuity Account L Statement of assets and liability December 31, 1999
American Century VP Dreyfus Dreyfus Capital Stock Index Small Cap Appreciation Combined Subaccount Subaccount Subaccount - ----------------------------------------------------------------------------- Assets Investments at Market--Affiliated (Cost $35,806,953) $ 47,131,269 $ -- $ -- $ -- Investments at Market--Unaffiliated (Cost $638,513,904) 872,285,280 188,370,905 74,437,646 -- - ----------------------- ------------ ------------ ----------- ---------- Total Assets 919,416,549 188,370,905 74,437,646 -- - ----------------------- Liability--Payable to The Lincoln National Life Insurance Company 24,667 5,031 1,969 -- - ----------------------- ------------ ------------ ----------- ---------- Net Assets $919,391,882 $188,365,874 $74,435,677 $ -- - ----------------------- ============ ============ =========== ========== Percent of net assets 100.00% 20.49% 8.10% 0.00% - ----------------------- ============ ============ =========== ========== Net assets are represented by: Standard . Units in accumulation period 3,814,654 3,429,814 -- --------------------- . Unit value $ 45.208 $ 20.552 $ -- --------------------- ------------ ----------- ---------- . Value in accumulation period 172,452,253 70,489,226 -- ---------------------- ------------ ----------- ---------- Breakpoint . Units in accumulation period 351,565 191,780 -- --------------------- . Unit value $ 45.265 $ 20.578 $ -- --------------------- ------------ ----------- ---------- . Value in accumulation period 15,913,621 3,946,451 -- - ----------------------- ------------ ----------- ---------- Net Assets $188,365,874 $74,435,677 $ -- - ----------------------- ============ =========== ==========
See accompanying notes. L-2
Fidelity Fidelity American Fidelity Fidelity VIP II Calvert T. Rowe VIP Century VP VIP VIP Asset Social Price Money AMT Balanced Growth Equity-Income Manager Balanced International Market Partners Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------------------------------------ $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- 27,649,253 303,723,614 93,902,532 113,568,089 -- 36,732,047 159,909 2,164,330 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- 27,649,253 303,723,614 93,902,532 113,568,089 -- 36,732,047 159,909 2,164,330 739 8,215 2,525 3,059 -- 986 -- 56 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- $27,648,514 $303,715,399 $93,900,007 $113,565,030 $ -- $36,731,061 $159,909 $2,164,274 =========== ============ =========== ============ ======== =========== ======== ========== 3.01% 33.02% 10.21% 12.35% 0.00% 4.00% 0.02% 0.24% =========== ============ =========== ============ ======== =========== ======== ========== 1,099,207 5,554,246 3,855,732 4,152,440 -- 1,818,003 11,959 150,328 $ 23.168 $ 53.234 $ 23.252 $ 25.787 $ -- $ 18.931 $ 13.192 $ 12.609 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- 25,466,854 295,674,290 89,652,426 107,076,688 -- 34,416,656 157,769 1,895,472 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- 94,046 150,861 182,446 251,300 -- 122,101 162 21,291 $ 23.198 $ 53.301 $ 23.281 $ 25.819 $ -- $ 18.955 $ 13.195 $ 12.625 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- 2,181,660 8,041,110 4,247,581 6,488,342 -- 2,314,405 2,139 268,803 - ----------- ------------ ----------- ------------ -------- ----------- -------- ---------- $27,648,514 $303,715,399 $93,900,007 $113,565,030 $ -- $36,731,061 $159,909 $2,164,274 =========== ============ =========== ============ ======== =========== ======== ==========
L-3 Lincoln National Variable Annuity Account L Statement of assets and liability (continued) December 31, 1999
Lincoln Lincoln Baron Janus Aspen National National Capital Series Social Aggressive Asset WorldWide Awareness Growth Subaccount Subaccount Subaccount Subaccount - ----------------------------------------------------------------------------- Assets Investments at Market-- Affiliated (Cost $35,806,953) $ -- $ -- $17,478,509 $29,652,760 Investments at Market-- Unaffiliated (Cost $638,513,904) 8,586,115 22,990,840 -- -- - ------------------------- ---------- ----------- ----------- ----------- Total Assets 8,586,115 22,990,840 17,478,509 29,652,760 - ------------------------- Liability--Payable to The Lincoln National Life Insurance Company 231 613 467 776 - ------------------------- ---------- ----------- ----------- ----------- Net Assets $8,585,884 $22,990,227 $17,478,042 $29,651,984 - ------------------------- ========== =========== =========== =========== Percent of net assets 0.93% 2.50% 1.90% 3.23% - ------------------------- ========== =========== =========== =========== Net assets are represented by: Standard . Units in accumulation period 460,448 1,053,507 1,107,455 1,486,234 ----------------------- . Unit value $ 17.775 $ 20.385 $ 14.619 $ 17.563 ----------------------- ---------- ----------- ----------- ----------- . Value in accumulation period 8,184,626 21,475,351 16,189,616 26,102,012 ------------------------ ---------- ----------- ----------- ----------- Breakpoint . Units in accumulation period 22,543 74,221 88,023 201,878 ----------------------- . Unit value $ 17.800 $ 20.410 $ 14.637 $ 17.585 ----------------------- ---------- ----------- ----------- ----------- . Value in accumulation period 401,258 1,514,876 1,288,426 3,549,972 - ------------------------- ---------- ----------- ----------- ----------- Net Assets $8,585,884 $22,990,227 $17,478,042 $29,651,984 - ------------------------- ========== =========== =========== ===========
See accompanying notes. L-4 Lincoln National Variable Annuity Account L Statement of operations Year Ended December 31, 1999
American Century Dreyfus Dreyfus VP Capital Stock Index Small Cap Appreciation Combined Subaccount Subaccount Subaccount - -------------------------------------------------------------------------------- Net Investment Income (loss): .. Dividends from investment income $ 7,984,457 $ 1,825,497 $ 47,555 $ -- ------------------------- .. Dividends from net realized gains on investments 36,722,840 1,584,054 -- -- ------------------------- Mortality and expense guarantees: .. Standard (7,691,943) (1,604,381) (642,750) (123,070) ------------------------ .. Breakpoint (163,838) (53,932) (13,007) (2,056) - -------------------------- ------------ ----------- ----------- ---------- Net Investment Income (Loss) 36,851,516 1,751,238 (608,202) (125,126) - -------------------------- Net Realized and Unrealized Gain (Loss) on Investments: .. Net realized gain (loss) on investments 11,212,200 3,241,455 602,779 659,640 ------------------------- .. Net change in unrealized appreciation or depreciation on investments 122,620,849 25,154,434 13,636,771 1,339,467 - -------------------------- ------------ ----------- ----------- ---------- Net Realized and Unrealized Gain (Loss) on Investments 133,833,049 28,395,889 14,239,550 1,999,107 - -------------------------- ------------ ----------- ----------- ---------- Net Increase in Net Assets Resulting from Operations $170,684,565 $30,147,127 $13,631,348 $1,873,981 - -------------------------- ============ =========== =========== ==========
See accompanying notes. L-5 Lincoln National Variable Annuity Account L Statement of operations (continued) Year Ended December 31, 1999
Fidelity Fidelity American Fidelity VIP VIP II Century VIP Equity- Asset VP Balanced Growth Income Manager Subaccount Subaccount Subaccount Subaccount - -------------------------------------------------------------------------------- Net Investment Income (loss): .. Dividends from investment income $ 518,078 $ 372,697 $1,364,477 $ 3,601,360 --------------------------- .. Dividends from net realized gains on investments 3,574,736 23,433,298 3,016,212 4,561,723 - ---------------------------- Mortality and expense guarantees: .. Standard (258,663) (2,416,711) (929,234) (1,073,217) --------------------------- .. Breakpoint (7,951) (24,241) (15,502) (22,794) - ---------------------------- ----------- ----------- ---------- ----------- Net Investment Income (Loss) 3,826,200 21,365,043 3,435,953 7,067,072 - ---------------------------- Net Realized and Unrealized Gain (Loss) on Investments: .. Net realized gain (loss) on investments (73,599) 2,656,719 1,364,238 683,905 --------------------------- .. Net change in unrealized appreciation or depreciation on investments (1,418,311) 54,827,089 (17,265) 2,796,651 - ---------------------------- ----------- ----------- ---------- ----------- Net Realized and Unrealized Gain (Loss) on Investments (1,491,910) 57,483,808 1,346,973 3,480,556 - ---------------------------- ----------- ----------- ---------- ----------- Net Increase in Net Assets Resulting from Operations $ 2,334,290 $78,848,851 $4,782,926 $10,547,628 - ---------------------------- =========== =========== ========== ===========
See accompanying notes. L-6
Fidelity Janus Lincoln Lincoln Calvert T. Rowe VIP Baron Aspen National National Social Price Money AMT Capital Series Social Aggressive Balanced International Market Partners Asset WorldWide Awareness Growth Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------------------------------- $ -- $ 132,607 $6,572 $ 4,875 $ 1,073 $ 13,800 $ 95,830 $ 36 -- 416,764 -- 8,479 41,002 -- 86,572 -- (73,022) (291,499) -- (10,428) (35,171) (80,765) (68,034) (84,998) (686) (7,257) -- (657) (830) (3,114) (3,449) (8,362) --------- ---------- ------ -------- ---------- ---------- ---------- ---------- (73,708) 250,615 6,572 2,269 6,074 (70,079) 110,919 (93,324) 1,137,308 650,240 -- 4,692 24,749 18,535 30,002 211,537 (976,958) 8,054,095 -- 5,884 1,335,593 6,623,735 1,993,385 9,266,279 --------- ---------- ------ -------- ---------- ---------- ---------- ---------- 160,350 8,704,335 -- 10,576 1,360,342 6,642,270 2,023,387 9,477,816 --------- ---------- ------ -------- ---------- ---------- ---------- ---------- $ 86,642 $8,954,950 $6,572 $ 12,845 $1,366,416 $6,572,191 $2,134,306 $9,384,492 ========= ========== ====== ======== ========== ========== ========== ==========
L-7 Lincoln National Variable Annuity Account L Statements of changes in net assets Years Ended December 31, 1998 and 1999
American Century Dreyfus Dreyfus VP Capital Stock Index Small Cap Appreciation Combined Subaccount Subaccount Subaccount - ---------------------------------------------------------------------------------- Net Assets at January 1, 1998 $ 545,552,683 $ 98,949,245 $ 62,131,736 $ 24,088,149 - ------------------------ Changes From Operations: .. Net investment income (loss) 39,174,530 734,033 616,677 952,761 - ------------------------ .. Net realized gain (loss) on investments 3,419,297 1,482,539 (106,334) (301,838) - ------------------------ .. Net change in unrealized appreciation or depreciation on investments 69,625,312 27,492,153 (3,589,388) (1,352,820) - ------------------------ ------------- ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Operations 112,219,139 29,708,725 (3,079,045) (701,897) - ------------------------ Change From Unit Transactions: .. Contract purchases 176,888,310 42,083,567 23,847,325 4,749,580 - ------------------------ .. Terminated contracts (120,802,225) (22,590,049) (16,246,394) (7,331,376) - ------------------------ ------------- ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Unit Transactions 56,086,085 19,493,518 7,600,931 (2,581,796) - ------------------------ ------------- ------------ ------------ ------------ Total Increase (Decrease) in Net Assets 168,305,224 49,202,243 4,521,886 (3,283,693) - ------------------------ ------------- ------------ ------------ ------------ Net Assets at December 31, 1998 713,857,907 148,151,488 66,653,622 20,804,456 - ------------------------ Changes From Operations: .. Net investment income (loss) 36,851,516 1,751,238 (608,202) (125,126) - ------------------------ .. Net realized gain (loss) on investments 11,212,200 3,241,455 602,779 659,640 - ------------------------ .. Net change in unrealized appreciation or depreciation on investments 122,620,849 25,154,434 13,636,771 1,339,467 - ------------------------ ------------- ------------ ------------ ------------ Net Increase in Net Assets Resulting from Operations 170,684,565 30,147,127 13,631,348 1,873,981 - ------------------------ Change From Unit Transactions: .. Contract purchases 238,188,776 44,550,458 15,829,789 2,485,925 - ------------------------ .. Terminated contracts (203,339,366) (34,483,199) (21,679,082) (25,164,362) - ------------------------ ------------- ------------ ------------ ------------ Net Increase (Decrease) in Net Assets Resulting from Unit Transactions 34,849,410 10,067,259 (5,849,293) (22,678,437) - ------------------------ ------------- ------------ ------------ ------------ Total Increase (Decrease) in Net Assets 205,533,975 40,214,386 7,782,055 (20,804,456) - ------------------------ ------------- ------------ ------------ ------------ Net Assets at December 31, 1999 $ 919,391,882 $188,365,874 $ 74,435,677 $ -- - ------------------------ ============= ============ ============ ============
See accompanying notes. L-8
Fidelity Fidelity American Fidelity Fidelity VIP II Calvert T. Rowe VIP Century VIP VIP Asset Social Price Money VP Balanced Growth Equity-Income Manager Balanced International Market AMT Partners Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------------------------------------------- $23,879,353 $141,132,780 $ 72,107,842 $ 92,021,265 $ 7,919,230 $22,966,631 $ 356,452 $ -- 2,941,595 18,238,618 3,929,867 10,794,014 760,970 195,823 10,109 (367) 184,157 1,517,383 364,660 97,882 52,997 124,560 -- 312 438,875 36,722,248 3,733,755 2,201,200 614,617 3,164,543 -- 12,992 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- 3,564,627 56,478,249 8,028,282 13,093,096 1,428,584 3,484,926 10,109 12,937 5,683,978 38,227,170 27,399,400 18,491,100 4,281,621 8,719,313 1,152,783 329,477 (6,140,665) (28,830,323) (15,753,535) (14,863,454) (1,777,700) (5,783,658) (1,309,612) (19,978) - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- (456,687) 9,396,847 11,645,865 3,627,646 2,503,921 2,935,655 (156,829) 309,499 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- 3,107,940 65,875,096 19,674,147 16,720,742 3,932,505 6,420,581 (146,720) 322,436 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- 26,987,293 207,007,876 91,781,989 108,742,007 11,851,735 29,387,212 209,732 322,436 3,826,200 21,365,043 3,435,953 7,067,072 (73,708) 250,615 6,572 2,269 (73,599) 2,656,719 1,364,238 683,905 1,137,308 650,240 -- 4,692 (1,418,311) 54,827,089 (17,265) 2,796,651 (976,958) 8,054,095 -- 5,884 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- 2,334,290 78,848,851 4,782,926 10,547,628 86,642 8,954,950 6,572 12,845 5,438,764 54,860,285 20,158,465 16,372,551 2,067,729 7,854,559 1,083,892 2,408,145 (7,111,833) (37,001,613) (22,823,373) (22,097,156) (14,006,106) (9,465,660) (1,140,287) (579,152) - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- (1,673,069) 17,858,672 (2,664,908) (5,724,605) (11,938,377) (1,611,101) (56,395) 1,828,993 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- 661,221 96,707,523 2,118,018 4,823,023 (11,851,735) 7,343,849 (49,823) 1,841,838 - ----------- ------------ ------------ ------------ ------------ ----------- ----------- ---------- $27,648,514 $303,715,399 $ 93,900,007 $113,565,030 $ -- $36,731,061 $ 159,909 $2,164,274 =========== ============ ============ ============ ============ =========== =========== ==========
L-9 Lincoln National Variable Annuity Account L Statements of changes in net assets (continued) Years Ended December 31, 1998 and 1999
Lincoln Lincoln Baron Janus Aspen National National Capital Series Social Aggressive Asset WorldWide Awareness Growth Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------------- Net Assets at January 1, 1998 $ -- $ -- $ -- $ -- - --------------------------- Changes From Operations: .. Net investment income (loss) (374) 247 825 (268) - --------------------------- .. Net realized gain (loss) on investments 1,522 540 718 199 - --------------------------- .. Net change in unrealized appreciation or depreciation on investments 35,322 87,163 41,835 22,817 - --------------------------- ----------- ----------- ----------- ----------- Net Increase (Decrease) in Net Assets Resulting from Operations 36,470 87,950 43,378 22,748 - --------------------------- Change From Unit Transactions: .. Contract purchases 421,431 876,175 396,874 228,516 - --------------------------- .. Terminated contracts (95,205) (21,684) (20,073) (18,519) - --------------------------- ----------- ----------- ----------- ----------- Net Increase (Decrease) in Net Assets Resulting from Unit Transactions 326,226 854,491 376,801 209,997 - --------------------------- ----------- ----------- ----------- ----------- Total Increase (Decrease) in Net Assets 362,696 942,441 420,179 232,745 - --------------------------- ----------- ----------- ----------- ----------- Net Assets at December 31, 1998 362,696 942,441 420,179 232,745 - --------------------------- Changes From Operations: .. Net investment income (loss) 6,074 (70,079) 110,919 (93,324) - --------------------------- .. Net realized gain (loss) on investments 24,749 18,535 30,002 211,537 - --------------------------- .. Net change in unrealized appreciation or depreciation on investments 1,335,593 6,623,735 1,993,385 9,266,279 - --------------------------- ----------- ----------- ----------- ----------- Net Increase in Net Assets Resulting from Operations 1,366,416 6,572,191 2,134,306 9,384,492 - --------------------------- Change From Unit Transactions: .. Contract purchases 8,292,841 16,982,918 16,797,408 23,005,047 - --------------------------- .. Terminated contracts (1,436,069) (1,507,323) (1,873,851) (2,970,300) - --------------------------- ----------- ----------- ----------- ----------- Net Increase (Decrease) in Net Assets Resulting from Unit Transactions 6,856,772 15,475,595 14,923,557 20,034,747 - --------------------------- ----------- ----------- ----------- ----------- Total Increase (Decrease) in Net Assets 8,223,188 22,047,786 17,057,863 29,419,239 - --------------------------- ----------- ----------- ----------- ----------- Net Assets at December 31, 1999 $ 8,585,884 $22,990,227 $17,478,042 $29,651,984 - --------------------------- =========== =========== =========== ===========
See accompanying notes. L-10 Lincoln National Variable Annuity Account L Notes to financial statements 1. Accounting Policies and Account Information The Variable Account: Lincoln National Variable Annuity Account L (Variable Account) is a segregated investment account of The Lincoln National Life In- surance Company (the Company) and is registered with the Securities and Ex- change Commission under the Investment Company Act of 1940, as amended, as a unit investment trust. Beginning June 30, 1999, contracts are eligible for the lower, or "Breakpoint", mortality and expense risk charge if criteria has been satisfied that the Company realizes lower issue and administrative cost. On October 1, 1996, UNUM Life Insurance Company of America (UNUM America) com- pleted the sale of their tax-qualified annuity business to the Company and Lincoln Life & Annuity Company of New York (LLANY), a wholly owned subsidiary of the Company. The contracts of participants in the variable accounts of UNUM America with respect to which consent is obtained from the contractholders and/or participants have been reinsured pursuant to an assumption reinsurance agreement. Assets attributable to such participants' contracts were trans- ferred to the Variable Account and variable accounts of LLANY. Assets attrib- utable to contracts of participants with respect to which such consent is not obtained will remain in the variable accounts of UNUM America. During 1998, the net assets of the Variable Account increased by approximately $12,045,131 from novations of assets from the variable accounts of UNUM America. The assets of the Variable Account are owned by the Company. The portion of the Variable Account's assets supporting the annuity contracts may not be used to satisfy liabilities arising from any other business of the Company. Basis of Presentation: The accompanying financial statements have been pre- pared in accordance with accounting principles generally accepted in the United States for unit investment trusts. Investments: The assets of the Variable Account are divided into variable sub- accounts each of which is invested in shares of thirteen portfolios (the Funds) of nine diversified open-end management investment companies, each portfolio with its own investment objective. The Funds are: Dreyfus Variable Investment Fund: .. Dreyfus Small Cap Portfolio .. Dreyfus Stock Index Fund American Century Variable Portfolios, Inc.: .. American Century VP Balanced Portfolio Fidelity Variable Insurance Products Fund: .. Fidelity VIP Equity Income Portfolio .. Fidelity VIP Growth Portfolio .. Fidelity VIP Money Market Portfolio Fidelity Variable Insurance Products Fund II: .. Fidelity VIP II Asset Manager Portfolio T. Rowe Price International Series, Inc.: .. T. Rowe Price International Stock Portfolio Neuberger Berman Advisors Management Trust (AMT) .. AMT Partners Fund Baron Capital Asset Fund Trust Janus Aspen Series, Worldwide Growth Fund Lincoln National: .. Lincoln National Social Awareness Fund .. Lincoln National Aggressive Growth Fund The Fidelity VIP Money Market Portfolio is used only for investments of ini- tial contributions for which the Company has not received complete order in- structions. Upon receipt of complete order instructions, the payments trans- ferred to the Fidelity VIP Money Market Portfolio are allocated to purchase shares of one of the above Funds. Investments in the Funds are stated at the closing net asset value per share on December 31, 1999, which approximates fair value. The difference between cost and fair value is reflected as unrealized appreciation and depreciation of investments. Investment transactions are accounted for on a trade date basis. The cost of investments sold is determined by the average cost method. Dividends: Dividends paid to the Variable Account are automatically reinvested in shares of the Funds on the payable date with the exception of Fidelity VIP Money Market Portfolio which is invested monthly. Dividend income is recorded on the ex-dividend date. Federal Income Taxes: Operations of the Variable Account form a part of and are taxed with operations of the Company, which is taxed as a "life insurance company" under the Internal Revenue Code. The Variable Account will not be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code. Using current federal income tax law, no federal income taxes are payable with respect to the Variable Account's net investment income and the net realized gain on investments. 2. Mortality and Expense Guarantees Amounts are paid to the Company for mortality and expense guarantees at a per- centage of the current value of the Variable Account each day with the excep- tion of Fidelity VIP Money Market Portfolio. The rates are as follows: .. Standard at a daily rate of .00273973 (1.00% on an annual basis) .. Breakpoint at a daily rate of .00205479 (.75% on an annual basis) Accordingly, the Company is responsible for all sales, general and administra- tive expenses applicable to the Variable Account. L-11 Lincoln National Variable Annuity Account L Notes to financial statements (continued) 3. Net assets The following is a summary of net assets owned at December 31, 1999.
Dreyfus Dreyfus Stock Index Small Cap Combined Subaccount Subaccount - ------------------------------------------------------------------------------ Unit Transactions: Accumulation units $569,817,941 $113,280,752 $56,314,140 - --------------------------------- Accumulated net investment income (loss) 88,508,202 5,608,973 3,051,069 - --------------------------------- Accumulated net realized gain on investments 15,970,047 4,936,832 923,728 - --------------------------------- Net unrealized appreciation on investments 245,095,692 64,539,317 14,146,740 - --------------------------------- ------------ ------------ ----------- $919,391,882 $188,365,874 $74,435,677 ============ ============ =========== Fidelity Calvert T. Rowe VIP Social Price Money Balanced International Market Subaccount Subaccount Subaccount - ------------------------------------------------------------------------------ Unit Transactions: Accumulation units $ (2,407,392) $ 24,110,651 $ 135,993 - --------------------------------- Accumulated net investment income (loss) 1,178,798 750,826 23,916 - --------------------------------- Accumulated net realized gain on investments 1,228,594 848,121 -- - --------------------------------- Net unrealized appreciation on investments -- 11,021,463 -- - --------------------------------- ------------ ------------ ----------- $ -- $ 36,731,061 $ 159,909 ============ ============ ===========
L-12
American Fidelity Century VP American Fidelity Fidelity VIP II Capital Century VP VIP VIP Asset Appreciation Balanced Growth Equity-Income Manager Subaccount Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------ $(1,267,673) $19,476,079 $149,758,171 $70,774,481 $ 78,446,061 855,094 7,190,409 40,175,813 8,601,452 21,115,930 412,579 162,761 4,439,767 1,849,326 875,533 -- 819,265 109,341,648 12,674,748 13,127,506 ----------- ----------- ------------ ----------- ------------ $ -- $27,648,514 $303,715,399 $93,900,007 $113,565,030 =========== =========== ============ =========== ============ Lincoln Lincoln Baron Janus Aspen National National AMT Capital Series Social Aggressive Partners Asset WorldWide Awareness Growth Subaccount Subaccount Subaccount Subaccount Subaccount - ------------------------------------------------------------------------ $ 2,138,492 $ 7,182,998 $ 16,330,086 $15,300,358 $ 20,244,744 1,902 5,700 (69,832) 111,744 (93,592) 5,004 26,271 19,075 30,720 211,736 18,876 1,370,915 6,710,898 2,035,220 9,289,096 ----------- ----------- ------------ ----------- ------------ $ 2,164,274 $ 8,585,884 $ 22,990,227 $17,478,042 $ 29,651,984 =========== =========== ============ =========== ============
L-13 Lincoln National Variable Annuity Account L Notes to financial statements (continued) 4. Purchases and Sales of Investments The aggregate cost of investments purchased and the aggregate proceeds from in- vestments sold were as follows for 1999.
Aggregate Aggregate Cost of Proceeds Purchases from Sales - ----------------------------------------------------------------------------- Dreyfus Stock Index Fund $ 22,549,763 $ 10,730,378 Dreyfus Small Cap Portfolio 3,781,226 10,238,526 American Century VP Capital Appreciation Portfolio 376,374 23,180,495 American Century VP Balanced Portfolio 6,355,903 4,202,805 Fidelity VIP Growth Portfolio 49,898,904 10,672,705 Fidelity VIP Equity Income Portfolio 10,433,411 9,662,357 Fidelity VIP II Asset Manager Portfolio 12,670,682 11,328,132 Calvert Social Balanced Portfolio 950,519 12,962,929 T. Rowe Price International Series 3,322,423 4,682,733 Fidelity VIP Money Market Portfolio 783,021 832,844 AMT Partners Fund 2,189,318 358,009 Baron Capital Asset Fund 7,419,973 556,906 Janus Aspen Series Worldwide Fund 15,559,101 152,997 Lincoln National Social Awareness Fund 15,883,279 848,347 Lincoln National Aggressive Growth Fund 21,517,534 1,575,341 - -------------------------------------------------- ------------ ------------ $173,691,431 $101,985,504 ============ ============
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 - ------------------------------------------------------------------------------- Dreyfus Stock Index Fund 4,899,113 $38.45 $188,370,905 $123,831,588 Dreyfus Small Cap Portfolio 1,122,063 66.34 74,437,646 60,290,906 American Century VP Balanced Portfolio 3,549,326 7.79 27,649,253 26,829,988 Fidelity VIP Growth Portfolio 5,529,285 54.93 303,723,614 194,381,966 Fidelity VIP Equity Income Portfolio 3,652,374 25.71 93,902,532 81,227,784 Fidelity VIP II Asset Manager Portfolio 6,082,919 18.67 113,568,089 100,440,583 T. Rowe Price International Series 1,929,204 19.04 36,732,047 25,710,584 Fidelity VIP Money Market Portfolio 159,909 1.00 159,909 159,909 AMT Partners Fund 110,201 19.64 2,164,330 2,145,454 Baron Capital Asset Fund 483,181 17.77 8,586,115 7,215,200 Janus Aspen Series Worldwide Fund 481,484 47.75 22,990,840 16,279,942 Lincoln National Social Awareness Fund 394,622 44.29 17,478,509 15,443,289 Lincoln National Aggressive Growth Fund 1,557,498 19.04 29,652,760 20,363,664 ------------ ------------ $919,416,549 $674,320,857 ============ ============
L-14 Lincoln National Variable Annuity Account L Notes to financial statements (continued) 6. New Investment Funds Effective October 1, 1998, the AMT Partners Fund, Baron Capital Asset Fund, Ja- nus Aspen Series Worldwide Fund, Lincoln National Social Awareness Fund and Lincoln National Aggressive Growth Fund became available as investment options for Variable Account contract owners. 7. Fund Substitution On or about September 30, 1998, the Company and the Variable Account filed an application with the Securities and Exchange Commission (the "SEC") seeking an order approving the substitution of shares of the Lincoln National Social Awareness Fund for shares of the Calvert Social Balanced Portfolio and shares of the Lincoln National Aggressive Growth Fund for shares of the American Cen- tury VP Capital Appreciation Portfolio. In December 1998, the SEC approved the above application. In August of 1999 the share substitution replaced the Calvert Social Balanced Portfolio with the Lincoln National Social Awareness Fund, and the American Century VP Capital Appreciation Portfolio with the Lincoln National Aggressive Growth Fund, as investment options under the variable annuity contracts. The substitution resulted in the involuntary reinvestment of participants cash value in the Calvert Social Balanced Portfolio and the American Century VP Cap- ital Appreciation Portfolio. L-15 Report of Ernst & Young LLP, Independent Auditors Board of Directors of The Lincoln National Life Insurance Company and Contract Owners of Lincoln National Variable Annuity Account L We have audited the accompanying statement of assets and liability of Lincoln National Variable Annuity Account L ("Variable Account") (comprised of the Dreyfus Stock Index, Dreyfus Small Cap, American Century VP Capital Apprecia- tion, American Century VP Balanced, Fidelity VIP Growth, Fidelity VIP Equity- Income, Fidelity VIP II Asset Manager, Calvert Social Balanced, T. Rowe Price International, Fidelity VIP Money Market, AMT Partners, Baron Capital Asset, Janus Aspen Series Worldwide, Lincoln National Social Awareness and Lincoln Na- tional Aggressive Growth subaccounts) as of December 31, 1999, and the related statement of operations for the year then ended and the statements of changes in net assets for each of the two years in the period then ended. These finan- cial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally ac- cepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test ba- sis, evidence supporting the amounts and disclosures in the financial state- ments. Our procedures included confirmation of investments owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assess- ing the accounting principles used and significant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts constituting the Lincoln National Variable Annuity Account L at De- cember 31, 1999, the results of their operations for the year then ended, and the changes in their net assets for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States. Fort Wayne, Indiana March 24, 2000 L-16 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. 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 (b) Exhibits 1(a). Resolution adopted by the Board of Directors of The Lincoln National Life Insurance Company on April 29, 1996 establishing the Lincoln National Variable Annuity Account L ("Account L")./1/ 1(b). Amendment dated December 2, 1996 adopted by the Board of Directors to resolution establishing Account L./2/ 2. Not applicable. 3(a). Principal Underwriting Contract./1/ 3(b). Broker-dealer sales agreement./1/ 4(a). Group Variable Annuity I Contract for The Lincoln National Life Insurance Company. 4(b). Group Variable Annuity II Contract for The Lincoln National Life Insurance Company. 4(c). Group Variable Annuity III Contract for The Lincoln National Life Insurance Company. 4(d). Endorsement to Group Annuity Contracts. 4(e). Group Annuity Amendment to the contract. 4(f). Endorsement to Certificate. 5(a). Application for Group Annuity Contract. 5(b). Participant Enrollment Form 6(a). Articles of Incorporation of The Lincoln National Life Insurance Company./5/ 6(b). Bylaws of The Lincoln National Life Insurance Company./6/ 7. Not applicable. 8(a). Services Agreement between Delaware Management Holdings, Inc., Delaware Service Company, Inc., and Lincoln National Life Insurance Company./7/ 8(b). Fund Participation Agreement/Amendments for American Century. 8(c). Fund Participation Agreement/Amendments for Baron. 8(d). Participation Agreement between The Lincoln National Life Insurance Company and Dreyfus Life & Annuity Index Fund, Inc. and Dreyfus Variable Investment Fund./1/ 8(e). Fund Participation Agreement/Amendments for Fidelity. C-1 8(f). Fund Participation Agreement/Amendments for Janus. 8(g). Fund Participation Agreement/Amendments for The Lincoln National Aggressive Growth Fund, Inc. 8(h). Fund Participation Agreement/Amendments for The Lincoln National Social Awareness Fund, Inc. 8(i). Fund Participation Agreement/Amendments for Neuberger Berman. 8(j). Participation Agreement between The Lincoln National Life Insurance Company and T. Rowe Price International Services, Inc. and T. Rowe Price Investment Services, Inc./1/ 9. Consent and opinion of Jeremy Sachs, Senior Counsel, The Lincoln National Life Insurance Company, as to the legality of the securities being registered./1/ 10(a). Consent of Ernst & Young LLP, Independent Auditors 11. Not applicable. 12. Not applicable. 13.(a) Schedule for Computation of Performance Quotations./3/ 13.(b) Supplement to Schedule for Computation of Performance Quotations./4/ 14. Not applicable. 15(a). Organizational Chart of Lincoln National Life Insurance Holding Company System. 15(b). Memorandum Concerning Books and Records. 16(a). Powers of Attorney-Todd R. Stephenson. 16(b). Powers of Attorney-Lawrence T. Rowland./8/ 16(c). Powers of Attorney-Keith J. Ryan. 16(d). Powers of Attorney-H. Thomas McMeekin./8/ 16(e). Powers of Attorney-Richard C. Vaughan./8/ 16(f). Powers of Attorney-Jon A. Boscia. /1/ Incorporated herein by reference to Pre-effective Amendment No. 1 on Form N-4 filed by the Lincoln National Variable Annuity Account L of The Lincoln National Life Insurance Company with The Securities and Exchange Commission on September 26, 1996 (File No. 333-05827). /2/ Incorporated herein by reference to Post-effective Amendment No. 2 on Form N-4 filed by the Lincoln National Variable Annuity Account L of The Lincoln National Life Insurance Company on April 30, 1998 (File No. 333-04999). /3/ Incorporated herein by reference to Post-effective Amendment No. 1 on Form N-4 filed by the Lincoln National Variable Annuity Account L of The Lincoln National Life Insurance Company on April 30, 1997 (File No. 333-05827). /4/ Incorporated herein by reference to Post-effective Amendment No. 2 on Form N-4 filed by the Lincoln National Variable Annuity Account L of The Lincoln National Life Insurance Company on May 1, 1998 (File No. 333-5827). /5/ Incorporated by reference to the Registration Statement on Form S-6 (333-40745) filed November 21, 1997. /6/ Incorporated by reference to Post-effective Amendment No. 1 to the Registration Statement on Form N-4 (333-40937) filed on November 9, 1998. /7/ Incorporated herein by reference to the Registration Statement on Form N-1A (2-80741), Amendment No. 21 filed on April 10, 2000. /8/ Incorporated herein by reference to Post-effective Amendment No. 4 on Form N-4 filed by the Lincoln National Variable Annuity Account L of The Lincoln National Life Insurance Company on April 16, 1999 (File No. 333-5827). Item 25. Directors and Officers of the Depositor The following list contains the officers and directors of The Lincoln National Life Insurance Company who are engaged directly or indirectly in activities relating to Lincoln National Variable Annuity Account L as well as the Contracts. The list also shows The Lincoln National Life Insurance Company's executive officers.
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 39/th/ floor, Philadelphia, PA 19103 C-2 Item 26. Persons Controlled by or Under Common Control with The Lincoln National Life Insurance Company ("Lincoln Life") or Lincoln National Variable Annuity Account L Lincoln National Variable Annuity Account L is a separate account of Lincoln Life and may be deemed to be controlled by Lincoln Life although Lincoln Life will follow voting instructions of Contractholders with respect to voting on certain important matters requiring a vote of Contractholders. See Exhibit 15(a): The Organizational Chart of Lincoln National Life Insurance Holding Company System is hereby incorporated herein by this reference. C-3 Item 27. Number of Contractholders As of March 31, 2000, Registrant had 484 Contractholders. Item 28. Indemnification Under the Participation Agreements entered into between Lincoln Life and the Dreyfus Life & Annuity Index Fund, Inc., Dreyfus Variable Investment Fund and Dreyfus Corporation, Variable Insurance Products Funds I and II and Fidelity Distributors Corporation, Twentieth Century Management Company, and T. Rowe Price (the "Funds"), Lincoln Life and its directors, officers, employees, agents and control persons have been indemnified by the Funds against any losses, claims or liabilities that arise out of any untrue statement or alleged untrue statement or omission of a material fact in the Funds' registration statements, prospectuses or sales literature. In addition, the Funds will indemnify Lincoln Life against any liability, loss, damages, costs or expenses which Lincoln Life may incur as a result of the Funds' incorrect calculations, incorrect reporting and/or untimely reporting of the Funds' net asset values, dividend rates or capital gain distribution rates. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to C-4 a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. Item 29. Principal Underwriter (a) Lincoln Financial Advisors Corporation also acts as the principal underwriter for Lincoln Life & Annuity Variable Annuity Account L, the VA-I Separate Account of UNUM Life Insurance Company of America, and the VA-1 Separate Account of First UNUM Life Insurance Company. (b)(1) The following table sets forth certain information regarding the officers and directors of Lincoln Financial Advisors Corporation:
NAME AND ADDRESS POSITIONS AND OFFICES - ---------------- WITH LINCOLN FINANCIAL ADVISORS CORPORATION ------------------------------------------- J. Michael Hemp***** President and Director John M. Behrendt** Vice President Jeffrey C. Carleton***** Vice President Lucy D. Case** Vice President and Assistant Secretary Matthew Lynch***** Vice President, Chief Financial Officer, Administrative Officer, and Director C. Gary Shimmin***** Vice President Gary D. Giller**** Director Michael E. McMath***** Senior Vice President and Director Janet C. Chrzan*** Vice President and Treasurer Cynthia A. Rose* Secretary
* Principal business address of each person is 1300 S. Clinton Street, Fort Wayne, Indiana 46802. ** Principal business address of each person is 200 East Berry Street, Fort Wayne, Indiana 46802-2706. *** Principal business address is Center Square West Tower, 1500 Market Street - Suite 3900, Philadelphia, PA 19102-2118 **** 7650 Rivers Edge Dr., Suite 250, Columbus, OH 43235. *****350 Church Street, Hartford, CT 06103 c)
Name of Net Underwriting Principal Discounts and Compensation Brokerage Underwriter Commissions on Redemption Commissions Compensation - ----------- ---------------- ------------- ----------- ------------ Lincoln Financial Advisors Corporation None None None 7,855,781
C-5 Item 30. Location of Accounts and Records Exhibit 15(b) is hereby expressly incorporated herein by this reference (to be updated). Item 31. Management Services None Item 32. Undertakings and Representations The Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in this registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted, unless otherwise permitted. (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. (c) To deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. 403(b) ANNUITIES ---------------- The Registrant intends to rely on the no-action response dated November 28, 1988, from Ms. Angela C. Goelzer of the Commission staff to the American Council of Life Insurance concerning the redeemability of Section 403(b) annuity contracts and the Registrant has complied with the provisions of paragraphs (1)- (4) thereof. TEXAS ORP --------- The Registrant intends to offer Contracts to Participants in the Texas Optional Retirement Program. In connection with that offering, Rule 6c-7 of the Investment Company Act of 1940 is being relied upon and paragraphs (a)-(d) of that Section will be complied with. FEES AND CHARGES ---------------- The Lincoln National Life Insurance Company hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by The Lincoln National Life Insurance Company. C-6 SIGNATURES (a) As required by the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Amendment and has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of Fort Wayne, and the State of Indiana of this 26th day of April, 2000. LINCOLN NATIONAL VARIABLE ANNUITY Account L - Group Variable Annuity (Registrant) /s/ Kelly D. Clevenger By:_____________________________ Kelly D. Clevenger Vice President, LNL By: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Depositor) /s/ Stephen H. Lewis By:_____________________________ Stephen H. Lewis (Signature-Officer of Depositor) Interim Chief Executive Officer & Senior Vice President, LNL (Title) (b) As required by the Securities Act of 1993, this Amendment to the Registration Statement has been signed for the Depositors by the following persons in the capacities and on dates indicated. Signature Title Date - --------- ----- ---- ** President and Director April 26, 2000 - ------------------------ (Principal Executive Officer) Jon A. Boscia * Executive Vice President April 26, 2000 - ------------------------ and Director Lawrence T. Rowland ** Vice President, and Controller April 26, 2000 - ------------------------ (Principal Accounting Officer) Keith J. Ryan ** Senior Vice President, Chief April 26, 2000 - ------------------------ Financial Officer and Assistant Todd R. Stephenson Treasurer (Principal Financial Officer) Chief Executive Officer of April , 2000 ________________________ Life Insurance, Senior Vice John H. Gotta President and Director /s/ Stephen H. Lewis Interim Chief Executive Officer April 26, 2000 ________________________ of Annuities, Senior Vice Stephen H. Lewis President and Director * Director April 26, 2000 - ------------------------ H. Thomas McMeekin * Director April 26, 2000 - ----------------------- Richard C. Vaughan /s/ Steven M. Kluever Pursuant to a Power of Attorney filed with *By____________________ Post-Effective Amendment No. 4 to the Steven M. Kluever Registration Statement /s/ Steven M. Kluever Pursuant to a Power of Attorney filed with **By ___________________ this Registration Statement Steven M. Kluever EX-99.4.A 2 GROUP VARIABLE ANNUNITY I CONTRACT [LETTERHEAD OF LINCOLN NATIONAL LIFE INSURANCE CO.] Servicing Office: P.O. Box 9740, Portland, ME 04104-5001 GROUP VARIABLE ANNUITY CONTRACT NO.: EFFECTIVE DATE: CONTRACTHOLDER: (Herein referred to as "You" or "Your") THIS CONTRACT WAS DELIVERED IN THE State/Commonwealth of and is subject to the laws of that jurisdiction. Lincoln Life by this Contract agrees to provide benefits for Participants in accordance with the terms and conditions of the Contract. The entire Contract consists of the provisions on the following pages, and the Application, including any amendments, schedules, or endorsements. IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne, Indiana on this day of , 20 , and caused this Contract to be in full force as of its Effective Date as set forth above. /s/ Jon A. Boscia /s/ Kelly D. Clevenger - ----------------------- ---------------------------------- Jon A Boscia, President Kelly D. Clevenger, Vice President Non-Participating PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. 1 TABLE OF CONTENTS I. CONTRACT SPECIFICATIONS II. DEFINITIONS III. CONTRIBUTIONS IV. GUARANTEED INTEREST DIVISION V. VARIABLE INVESTMENT DIVISION VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS VII. WITHDRAWALS AND DISTRIBUTIONS VIII. DEATH BENEFITS IX. PAYOUT ANNUITIES X. LOANS XI. DISCONTINUANCE AND TERMINATION OF CONTRACT XII. GENERAL PROVISIONS
2 ARTICLE I - CONTRACT SPECIFICATIONS 1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of all Participants under this Contract shall be twenty thousand dollars ($20,000). This minimum figure is for aggregate annual Contributions, not for each Participant. 1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L 1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT: A. Guaranteed Interest Division B. Variable Investment Division 1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD: Unlimited transfer requests may be made by a Participant each calendar year. 1.5 ANNUAL ADMINISTRATION CHARGE: Twenty-five dollars ($25) per Participant. Twenty-five dollars ($25) per Participant who allocates a contribution, during the year ending on a Participation Anniversary, to any one (1) or more of the Sub-Accounts established in the Variable Investment Division. 1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%). 1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan 1.8 PLAN NAME: 1.9 EMPLOYER: 1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the total Account balance is twenty-five thousand dollars ($25,000), or greater, such amount will be waived. 3 ARTICLE II - DEFINITIONS 2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of increases to, decreases from and accumulations in each Sub-Account during the Accumulation Period. 2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each Sub-Account on any Valuation Date. 2.3 ACCUMULATION PERIOD: The period commencing on a Participant's Participation Date and terminating when the Participant's Account balance is reduced to zero, either through withdrawal(s), conversion to an annuity, imposition of charges, payment of a Death Benefit or a combination thereof. 2.4 ANNUITANT: The person receiving annuity payments under the terms of this Contract. 2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first annuity payment to the Annuitant as required by the Retired Life Certificate. This date, as well as the date each subsequent annuity payment is made, will be the first day of a calendar month. 2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied toward the purchase of an Annuity. 2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount in determining the dollar amount of an annuitant's annuity payments for Guaranteed Annuities or the initial payment for Variable Annuities. 2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first day of a calendar month. For Variable Annuities, this is the Valuation Date ten (10) business days prior to the first day of a calendar month. 2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation Period, during which an Annuitant's annuity payments are made. 2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating the amounts of annuity payments to be made from each Sub-Account during the Annuity Period. 2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub- Account on any Valuation Date. 4 2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account balance in the event of the Participant's death during the Accumulation Period or the person(s) designated to receive any applicable remainder of an annuity in the event of the Annuitant's death during the Annuity Period. 2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange are customarily open for business. 2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant outlining the basic provisions of the Contract. A Retired Life Certificate is issued to each Annuitant outlining the basic provisions of his Annuity. 2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this Contract including any amount transferred from another contract. 2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment Division named in Section 1.3. 2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the Separate Account specified in Section 1.2 or any other separate account. 2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is reduced when a withdrawal occurs, including any applicable Contingent Deferred Sales Charge and Annual Administration Charge. 2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the amount of each payment as long as the annuity is payable. 2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for these and other contracts for which Lincoln Life guarantees the principal amount and interest credited thereto, subject to any fees and charges as set forth in this Contract. Amounts allocated to the Guaranteed Interest Division are part of the General Account. 2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office in Fort Wayne, Indiana. All correspondence and inquiries should be submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME 04101-5001. 2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant Account less any net Withdrawal Amounts, outstanding loan (including principal and due and accrued interest) and amounts converted to a Payout Annuity. 2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal occurs. 5 2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains a Participant's Account. 2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the Accumulation Period, the total balance of which equals the Participant's Account balance in the Variable Investment Division plus the Participant's Account balance in the Guaranteed Interest Division. 2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year intervals from that Participant's Participation Date. If an anniversary occurs on a non-Business Day, it is treated as occurring on the next Business Day. 2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to the date on which the first Contribution on behalf of that Participant under this Contract is received by Lincoln Life. A Participant will receive a new Participation Date if such Participant makes a Total Withdrawal as defined in Section 7.2 and Contributions on behalf of the Participant are resumed under any Contract. 2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary and ending the day before the next Participation Anniversary, except for the first Participation Year that begins with the Participation Date. 2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this Contract to a person. A Payout Annuity may be either a Guaranteed Annuity or a Variable Annuity. 2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable Investment Division that invests unallocated contributions in shares of a money market mutual fund. Lincoln Life does not guarantee the principal amount or investment results. 2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax benefits under Section 403(b) of the Internal Revenue Code of 1986 and under which this Contract is authorized. 2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a group of assets segregated from Lincoln Life's General Account whose income, gains and losses, realized or unrealized, are credited to or charged against the Separate Account without regard to other income, gains or losses of Lincoln Life. Additional information is provided in Section 12.15. 2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division that invests in shares of a corresponding mutual fund. 6 2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are computed on each Valuation Date as of the close of trading on the New York Stock Exchange. 2.35 VALUATION PERIOD: A period used in measuring the investment experience of each Sub-Account. The Valuation Period begins at the close of trading on the New York Stock Exchange on one Valuation Date and ends at the corresponding time on the next Valuation Date. 2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in accordance with the investment results of the selected Sub-Account(s). 2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that is maintained by Lincoln Life for this and other Section 403(b) Lincoln Life contracts for which Lincoln Life does not guarantee the principal amount or investment results. Amounts allocated to the Variable Investment Division are part of the Separate Account. 2.38 YOU or YOUR: The Contractholder named on the face page of this Contract. 7 ARTICLE III - CONTRIBUTIONS 3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be credited to the Participant's Account no later than two (2) Business Days after it is received by Lincoln Life if it is preceded or accompanied by a completed enrollment form containing all the information necessary for processing the Participant's Contribution. 3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated to the Divisions and Sub-Accounts according to the percentages requested by the Participant. The allocation percentage can be any whole percent and may be changed on an unlimited basis per year. You or the Participant shall notify Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life of such changes. 3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to Lincoln Life specifying the amount being contributed on behalf of each Participant. You shall forward such Contributions and provide such allocation information in accordance with procedures established by Lincoln Life. The Contributions shall be allocated among the Guaranteed Interest Division and each Sub-Account in accordance with the percentage information provided by the Participant subject to the terms of the Plan. 3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions transferred from another Contract, Lincoln Life must be provided with the following information in a form acceptable to Lincoln Life: (a) The source of the Contributions transferred (e.g., salary reduction, employer match or post-tax Contributions). Lincoln Life will record all such transferred amounts where no source information is provided as salary reduction Contributions. (b) Identification of Contributions transferred as Contributions made or earnings credited: (i) prior to January 1, 1987; (ii) during 1987 and 1988; or (iii) subsequent to December 31, 1988. Amounts not so identified will be treated as attributable to period (iii) for purposes of Sections 7.4 and 7.5. 8 3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a calendar year for a Participant are subject to the limits imposed under Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the Code), as it may be amended from time to time. Lincoln Life assumes no responsibility for monitoring these limits for a Participant. Elective deferrals made under the terms of a salary reduction agreement must not exceed the annual limits on elective deferrals as provided in IRC Section 402(g). Contributions in excess of such amounts may be distributed upon request of the Contractholder and Participant by Lincoln Life as permitted by law. 3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated as of the Business Day that Lincoln Life receives the Contribution and Lincoln Life will credit interest beginning with the next calendar day following the Business Day that Lincoln Life receives the Contribution. For a Variable Investment Division Sub-Account Contribution, Lincoln Life will credit a Participant's Account with the number of Accumulation Units for each Sub-Account selected by the Participant with the number of Accumulation Units equal to the Contribution Amount divided by the Accumulation Unit Value which is next computed following Lincoln Life's receipt of the Contribution. 3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 from each Participant's Account each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Account. When a Total Withdrawal of a Participant's Account, as defined in Section 7.2, occurs on a date other than the last Business Day of the month in which his Participation Anniversary occurs, Lincoln Life will first deduct the amount stated in Section 1.5 from his Participant's Account. ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 on a pro-rata basis from the Participant's Variable Investment Division Account balance each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Variable Investment Division Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Variable Investment Division Account. When a Participant requests, on a date other than the last Business Day of the month in which his Participation Anniversary occurs, 9 (a) a withdrawal, or (b) a transfer, from the Variable Investment Division, which would leave a remaining balance of less than the Annual Administration Charge defined in Section 1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from the Participant's Variable Investment Division Account balance prior to the Withdrawal or Transfer. 3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not been received for a Participant, Lincoln Life will deposit such Contributions to the Pending Allocation Account as described in ARTICLE II- DEFINITIONS, unless such Contributions are designated to another Account in accordance with the Plan. Lincoln Life will follow up with the Contractholder monthly for a period of ninety (90) days for enrollment information for Participants with deposits in the Pending Allocation Account. Within two (2) business days of receipt of a completed enrollment form, the Participant's Account balance in the Pending Allocation Account will be transferred to the Divisions and/or Sub-Accounts according to the percentages requested by the Participant. When the completed enrollment form is received, the Participation Date will be the date on which the first Contribution on behalf of the Participant was deposited into the Pending Allocation Account. If an enrollment form is not received after the ninety (90) day notice, a Participant's Account balance in the Pending Allocation Account will be refunded to the Contractholder within one hundred five (105) days of the date of the initial Contribution. Contributions received after a refund while there is still no allocation information, will be deposited to the Pending Allocation Account. The Pending Allocation Account will only be used for the purpose mentioned above; Participants may not direct a portion of their Contributions to this Account. Contributions deposited in the Pending Allocation Account will not be afforded the same rights as Contributions under this Contract. The following Articles and/or Sections under this Contract will not be applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII -WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v) ARTICLE X - LOANS. 10 ARTICLE IV - GUARANTEED INTEREST DIVISION 4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar value of a Participant's Account balance in the Guaranteed Interest Division as of a date will be equal to the sum of: (a) Contributions allocated, on behalf of the Participant, to the Guaranteed Interest Division on or prior to that date, and (b) Amounts transferred, on behalf of the Participant, to the Guaranteed Interest Division from the Variable Investment Division on or prior to that date, less any; (c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on behalf of the Participant, on or prior to that date; and (d) Amounts transferred, on behalf of the Participant, to the Variable Investment Division on or prior to that date; and (e) Applicable charges to the Participant's Account on or prior to that date; and (f) Annuity Conversion Amounts, on behalf of the Participant, on or prior to that date, plus any; (g) Interest credited to the Participant's Account balance in the Guaranteed Interest Division on or prior to that date. 4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the Participant's Account balance in the Guaranteed Interest Division, using the previous day's ending balance. The rate of interest credited each day, if compounded for three hundred sixty-five (365) days, yields the annual interest rate in effect for the day. Lincoln Life will declare in advance a guaranteed interest rate which will be effective for all amounts in the Participant's Account balance in the Guaranteed Interest Division during the designated year. This rate will never be less than three percent (3%). However, this minimum rate will not be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT) under this Contract. Lincoln Life may also declare in advance separate interest rate guarantees which are in excess of the guaranteed interest rate for some or all of the Participant's Account balance in the Guaranteed Interest Division for specific period(s) during the designated year. 11 ARTICLE V - VARIABLE INVESTMENT DIVISION 5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The Participant's Account balance in the Variable Investment Division is equal to the sum of the dollar value of a Participant's Account balance in each Sub-Account as of the end of a Valuation Period which will be equal to the product of: (a) The Participant's number of Accumulation Units as of the end of that Valuation Period; times (b) The Accumulation Unit Value as of the end of that Valuation Period. 5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in a Sub-Account as of the end of any Valuation Period is the number of Accumulation Units the Participant had in that Sub-Account as of the end of the preceding Valuation Period; plus (a) The number of Accumulation Units attributable to amounts deposited to or transferred to that Sub-Account during the current Valuation Period; minus (b) The number of Accumulation Units attributable to amounts transferred from, converted to an annuity, removed as a charge, paid as a death benefit, or withdrawn from that Sub-Account during the current Valuation Period. 5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account was set initially at ten dollars ($10), except for the Index Account which was set at nine and nine hundred six one thousands ($9.9060) of a dollar. Subsequent Accumulation Unit Values are determined by multiplying; (a) The Net Investment Factor for the current Valuation Period by; (b) The Accumulation Unit Value as of the end of the immediately preceding Valuation Period. 5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the investment experience of a Sub-Account net of the Mortality and Expense Risk Charge as defined in Section 5.5. The Net Investment Factor for a Valuation Period is equal to (a) divided by (b) with the result multiplied by (c) and adjusted by the amount per share of any taxes which are incurred by Lincoln Life because of the existence of the Sub-Account; 12 where (a) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the Valuation Period, plus; the amount per share of any dividend or capital gain distribution from the underlying mutual fund held by the Sub-Account during the Valuation Period, where (b) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the immediately preceding Valuation Period, where (c) is; one (1.00) minus the Annual Mortality and Expense Risk Charge shown in Section 1.6 to the n/365th power where n equals the number of calendar days since the immediately preceding Valuation Date. 5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate Lincoln Life for its assumption of mortality and expense risks under this Contract. This charge is shown on an annualized basis in Section 1.6 and is deducted on a daily basis as described in Section 5.4. This charge may not be increased without the approval of a majority of all affected Lincoln Life contractholders. 13 ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS 6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in Section 1.4, Participants may transfer all or part of their Account balance in any Division or Sub-Account to another Division or Sub-Account. You or the Participant may make a transfer request by notifying Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life. 6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of the Annuitant's Annuity Conversion Amount. 14 ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS 7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation Period, a Participant may withdraw from any or all Divisions, subject to the restrictions stated in Section 7.4, all or part of the Participant's Account balance in the Division or Sub-Accounts remaining after reductions for any applicable Annual Administration Charge (imposed on Total Withdrawals), Contingent Deferred Sales Charge (CDSC), premium taxes and outstanding loan, including the loan security thereon. Annuity Conversion Amounts are not considered withdrawals. All withdrawal requests must be submitted in a form acceptable to Lincoln Life and must indicate the amount and the Division(s) from which the withdrawal is to be made. Lincoln Life reserves the right to delay payment of Guaranteed Interest Division withdrawal amounts per Section 12.8. 7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will occur when a Participant who has no outstanding loans (a) requests the liquidation of his entire Account balance, or (b) requests an amount such that the amount requested plus any CDSC as defined in Section 7.6 results in a remaining Participant's Account balance being less than the applicable Annual Administration Charge as defined in Section 1.5, in which case, the request is treated as if it were a request for liquidation of the Participant's entire Account balance. The Participant's Active Life Certificate must be surrendered to Lincoln Life when a Total Withdrawal of a Participant's Account occurs. A Participant refund under the Free-look provisions of Section 12.17 is not considered a Total Withdrawal under this Article. 7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will occur when: (a) A Participant who has an outstanding loan makes a withdrawal; or (b) A Participant who has no outstanding loans, requests an amount less than a total withdrawal. 15 7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject to the requirements set forth in Section 403(b) of the Code and regulations thereof. (a) Withdrawal Requests for Participants under Section 403(b) Plans Subject to Title I of ERISA: You must make withdrawal requests on behalf of Participants. All withdrawal requests will require Your written authorization and written documentation specifying the portion of the Participant's Account balance which is available for distribution to the Participant. (b) Withdrawal Requests for Participants under Section 403(b) Plans not --- Subject to Title I of ERISA: Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction contribution made and/or earnings credited prior to January 1, 1989, (including transferred amounts recorded as such pursuant to Section 3.4), may be withdrawn for any reason. Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction Contribution made and/or earnings credited after December 31, 1988, (including transferred amounts recorded as such pursuant to Section 3.4), are subject to the withdrawal restrictions stated in Section 403(b) of the Code. Participants must certify to Lincoln Life (and provide supporting information, if requested), that an event permitting withdrawal has occurred and that Lincoln Life may rely on such representation in granting the withdrawal request. 7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section 403(b)(10) of the Code and regulations thereunder require that distributions be made from this Contract in a manner which satisfies requirements similar to the requirements of Section 401(a)(9) including the incidental death benefit requirements of Section 401(a)(9)(G). (1) Section 401(a)(9) requires that: (a) the Participant's Account be distributed not later than the required beginning date; or (b) the Participant's Account be distributed not later than the required beginning date, over the life of the Participant or over the lives of the Participant and a designated Beneficiary. (2) A Participant may choose to have the Participant's Account distributed in one of the following manners: (a) As a lump sum payment; 16 (b) As an annuity meeting the requirements of Section 401(a)(9) of the Code; (c) As an annual distribution where the amount distributed each calendar year is at least an amount equal to the quotient obtained by dividing: (a) the amount of the Participant's Account required to be distributed as of December 31 of the calendar year immediately preceding the calendar year for which the distribution is being made; by (b) the life expectancy of the Participant, or the life expectancy of the Participant and the Beneficiary; or (d) A combination of the above. With respect to (c) and (d) above, the life expectancy of the Participant and a surviving spouse Beneficiary may be recalculated, but not more frequently than annually. A non-spouse Beneficiary's life expectancy may not be recalculated. 7.6 CONTINGENT DEFERRED SALES CHARGE (CDSC): The following schedule of CDSC shall apply to all Withdrawal Amounts. (a) WHEN A WITHDRAWAL IS REQUESTED AND ONE OR THE CDSC WILL EQUAL: MORE OF THE FOLLOWING CONDITIONS IS MET: The Participant has died 0% The Participant has incurred a disability for 0% which he is receiving Social Security payments The Participant has attained age fifty-nine 0% and one-half (59 1/2) The Participant has separated from service 0% with the Contractholder and is age fifty-five (55) The Participant has separated from service 0% with the Contractholder The Participant has demonstrated a financial 0% hardship need
17 The Participant has requested a withdrawal 0% which will not exceed twenty percent (20%) of his Participant's Account Balance and no other withdrawal has been made in that calendar year
(b) For all other amounts subject to a CDSC, the CDSC will be in accordance with the schedule below.
During Participation Year CDSC Percent 1-6 5% 7 4% 8 3% 9 2% 10 1% 11 and later 0%
Lincoln Life requires reasonable proof necessary to verify that the withdrawal meets the conditions described above in Section 7.6(a) and such proof must be submitted with the withdrawal request. If You or the Participant do not furnish the proof requested by Lincoln Life, the CDSC stated in Section 7.6(b) shall apply. The CDSC on any withdrawal may be reduced or eliminated but only to the extent that Lincoln Life anticipates that it will incur lower sales expenses or perform fewer sales services due to economies arising from (i) the size of the particular group, (ii) an existing relationship with the Contractholder, (iii) the utilization of mass enrollment procedures, or (iv) the performance of sales functions by the Contractholder or an employee organization which Lincoln Life would otherwise be required to perform. In no event will the CDSC, when added to any CDSC previously imposed due to a Participant withdrawal, exceed eight and one-half percent (8.5%) of the cumulative Contributions to a Participant's Account. 7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social Security disability benefits, or (c) is separated from service with the Contractholder may elect this option. A Participant must also have a vested Participant Account balance of at least ten thousand dollars $10,000) of pre-tax Contributions under this Contract at the date of the election. Amounts held for a spousal payee under a Qualified Domestic Relations Order (QDRO) shall be recognized as eligible for the Systematic Withdrawal Option. 18 Any spousal payee who wishes to elect this distribution option must also meet the minimum ten thousand dollars ($10,000). Account balance requirement and either the age or disability requirement as discussed above. A Participant may elect to receive monthly, quarterly, semi-annual, or annual payments in a flat amount or payments on a monthly basis for an interest equivalency amount. An interest equivalency amount is an approximation of the interest earned between each payment period based upon the interest rate in effect at the beginning of each respective payment period. This amount will be determined by Lincoln Life. (See Attachment I for illustration.) A Participant may change the frequency, payment type, or payment amount of his Systematic Withdrawal Option by submitting a request in writing on a form acceptable to Lincoln Life. A Participant may make such a change only once during each calendar year. A Participant may at any time direct Lincoln Life to cease payments under this option provided the request is made in writing. A Participant who chooses to stop receiving systematic withdrawals may not request that any systematic withdrawal payments begin again until the next calendar year. Systematic withdrawals shall be withdrawn from amounts allocated to the Guaranteed Interest Division of the Participant's Account balance. If the balance of the Guaranteed Interest Division is not sufficient to meet the payment amount requested, the Participant, in writing, may direct Lincoln Life on a form acceptable to Lincoln Life to transfer the appropriate amount to the Guaranteed Interest Division; otherwise, such payment will cease. Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated in Section 1.10 from the Participant's Account balance each time a Systematic Withdrawal Option is established. The applicable CDSC, if any, will be assessed on each systematic withdrawal payment. Payments under this option shall stop upon the earliest of the following events: (a) On the date of the Participant's death. A Beneficiary who is a spouse may elect this option by requesting it in writing on a form acceptable to Lincoln Life, unless election of this form of benefit would violate any other requirements of this contract. The spousal Beneficiary must meet the ten thousand dollar ($10,000) minimum Account balance requirement prior to electing the Systematic Withdrawal Option; or (b) When there is an insufficient Participant Account balance after deducting the applicable CDSC and Annual Administration Charge, if any, to pay the amount requested; or 19 (c) The Participant fails to meet the requirements of the Systematic Withdrawal Option as outlined above in the first (1st) paragraph of this Section. If a disabled or terminated Participant, who is currently receiving a Systematic Withdrawal Option payment, returns to service with the Contractholder, the Contractholder or Participant must notify Lincoln Life in writing within thirty (30) days from the date of return to service. Lincoln Life reserves the right to discontinue the Systematic Withdrawal Option payment under these circumstances. If a Participant wishes to exercise this option under another Lincoln Life Annuity Contract, such request shall be considered separate from this Contract and shall follow the Systematic Withdrawal Option rules under that Annuity Contract, if permitted. Lincoln Life may, at its option, discontinue the Systematic Withdrawal Option under this Contract at any time provided You are given at least thirty (30) days advance written notice. 7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or Beneficiary may elect this option for any distribution that qualifies as an Eligible Rollover Distribution as defined by Section 402(c) of the Internal Revenue Code and that meets all the following requirements: (1) The distribution must be paid directly to either a single Individual Retirement Account or to a single Tax Deferred Annuity. The check, wire, or other form of remittance shall be made payable to the trustee, custodian, or financial institution sponsoring the Individual Retirement Account or Tax Deferred Annuity. The form of remittance will not be an instrument that can be negotiated by the Participant. (2) The Participant must provide, in a form acceptable to Lincoln Life, all information necessary to make the payment to an Individual Retirement Account or Tax Deferred Annuity. (3) The Participant or Beneficiary may not revoke a request for payment under this option for any payment after Lincoln Life has received a written request for a direct rollover. 20 ARTICLE VIII - DEATH BENEFITS 8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant occurs during the Accumulation Period, Lincoln Life will pay the Beneficiary, if one is living, the greater of the following amounts: (a) The Net Contributions, or (b) The Participant's Account balance less any outstanding loan (including principal and due and accrued interest). Lincoln Life will calculate the Death Benefit as of the end of the Valuation Period during which it receives both satisfactory notification of the Participant's death, pursuant to Section 8.2, and the election of a form of benefit pursuant to Section 8.3. If no election is made pursuant to Section 8.3 within sixty (60) days following Lincoln Life's receipt of satisfactory notice of death, the Death Benefit will be calculated as of the end of the Valuation Period during which that sixtieth (60th) day occurs. If Lincoln Life makes a withdrawal payment pursuant to a Participant request prior to receiving notice that the Participant has died, but subsequent to the Participant's death, Lincoln Life will deduct that payment from each of (a) and (b) above in calculating the Death Benefit. 8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's death no later than six (6) months from the Participant's date of death in order for the Beneficiary to receive the Death Benefit amount described in Section 8.1(a) above. Such notification must be in a form satisfactory to Lincoln Life. Beneficiaries for whom notification of a Participant's death is received more than six (6) months after the Participant's date of death shall receive the Death Benefit amount described in Section 8.1(b) above. 8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln Life receives satisfactory notification of the Participant's death, the Beneficiary must make an election to have the Death Benefit applied in one of the following ways: (a) As a lump sum payment to the Beneficiary; or (b) Towards an annuity to be distributed in substantially equal installments over the life expectancy of the Beneficiary or a period certain not exceeding the life expectancy of the Beneficiary; or (c) A combination of the above. 21 A Beneficiary who does not make an election pursuant to this section within sixty (60) days after Lincoln Life receives notification of the Participant's death will receive a lump sum payment calculated in accordance with Section 8.1(b) above. If the Beneficiary is someone other than the spouse of the deceased Participant, the Code provides that the Beneficiary may not elect an annuity which would commence later than December 31 of the calendar year following the calendar year of the Participant's death. If a non-spousal Beneficiary elects to receive payment in a single lump sum, such payment must be received no later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. If the Beneficiary is the surviving spouse of the deceased Participant, under the Code, distributions are not required to begin earlier than December 31 of the calendar year in which the Participant would have attained age seventy and one-half (70-1/2). If the surviving spouse dies before the date on which annuity distributions commence, then, for purposes of the Death Benefit, the surviving spouse shall be deemed to be the Participant. If there is no living named Beneficiary on file with Lincoln Life at the time of a Participant's death, Lincoln Life will pay the Death Benefit to the Participant's estate in a single lump sum upon receipt of satisfactory proof of the Participant's death, but not later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. Valuation of the Death Benefit shall occur as of the end of the Valuation Period during which due proof of the Participant's death is received by Lincoln Life. 8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity Period, the Beneficiary, if any, or the Annuitant's estate will receive the amount payable, if any, according to the in-force annuity options. Any remaining Participant's Account balance will be paid in accordance with the provisions of this Article. 22 ARTICLE IX - PAYOUT ANNUITIES 9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a distribution under the Code or a Beneficiary of a deceased Participant may notify Lincoln Life in writing in a form acceptable to Lincoln Life that the Participant or the Beneficiary is electing to convert all or part of the Participant's Account balance or Death Benefit to a Payout Annuity option available under this Contract. Upon being notified of such an election, Lincoln Life shall calculate the amount to be converted to a Payout Annuity as either the Participant's Account balance, or a portion thereof, or the Death Benefit as of the initial Annuity Payment Calculation Date, as appropriate, less the charge for premium taxes, if any. If the Participant's Account balance or the Beneficiary's Death Benefit is less than two thousand dollars ($2,000) or if the amount of the first scheduled payment is less than twenty dollars ($20), Lincoln Life may, at its option, cancel the Payout Annuity and pay the Participant or Beneficiary his entire Account balance or Death Benefit in a lump sum. 9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. 9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable Annuity for each Sub-Account is determined by dividing his Annuity Conversion Amount in each Sub-Account as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. The amount of the Annuitant's subsequent Variable Annuity payment for each Sub-Account is determined by: (a) Dividing the Annuitant's initial Variable Annuity payment amount by the Annuity Unit Value for that Sub-Account selected for his interest rate option as described in Section 9.4 as of his initial Annuity Payment Calculation Date; and (b) Multiplying the resultant number of annuity units by the Annuity Unit Values for the Sub-Account selected for his interest rate option for his respective subsequent Annuity Payment Calculation Dates. The Annuity Unit Value for all Sub-Accounts for all interest rate options will initially be set at ten dollars ($10). Each subsequent Annuity Unit Value for a Sub-Account for an interest rate option is determined by: 23 Dividing the Accumulation Unit Value for the Sub-Account as of the subsequent Annuity Payment Calculation Date (APCD) by the Accumulation Unit Value for the Sub-Account as of the immediately preceding APCD, Dividing the resultant factor by one (1.00) plus the interest rate option to the n/365 power where n is the number of days from the immediately preceding APCD to the subsequent APCD, and Multiplying this factor times the Annuity Unit Value as of the immediately preceding APCD. 9.4 BASIS OF ANNUITY CONVERSION FACTORS: (a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may be used by Lincoln Life under this Contract are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate of three percent (3.0%). From time to time, lower conversion factors may be used by Lincoln Life. (Lowering the conversion factor will increase the amount of the annuity payment.) (b) Variable Annuities - The Annuity Conversion Factors which are used to determine the initial payments are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate in an integral percentage ranging from zero to six percent (0 to 6.00%) as selected by the Annuitant. 9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are available: (a) Life (b) Life with payments guaranteed for ten (10), fifteen (15) or twenty (20) years (c) Joint and Survivor (d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years (e) Other offered by Lincoln Life. To the extent option (d) is elected for a Variable Annuity, the Annuitant may request at any time during the payment period that the present value of any remaining installments be paid in one lump sum. However, any lump sum so elected will be treated as a withdrawal during the Accumulation Period subject to the applicable CDSC stated in Section 7.6. 9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a Participant, or the Beneficiary of a deceased Participant, Lincoln Life will issue to the Annuitant an appropriate Certificate evidencing Lincoln Life's obligations. 24 ARTICLE X - LOANS 10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if permitted by the applicable Section 403(b) Plan, may apply for a loan under this Contract by completing a loan application available from Lincoln Life. Loans are secured by the Participant's Account balance in the Guaranteed Interest Division. 10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to the restrictions imposed under Section 72(p) of the Code, as it may be amended from time to time. Additionally, the initial amount of a Participant's loan may not exceed ninety percent (90%) of the Participant's Account balance in the Guaranteed Interest Division. 10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one thousand dollars ($1,000). 10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan outstanding at any time and may not establish more than one loan in any six (6) month period. However, a Participant may renegotiate an outstanding loan balance once during the term of the loan. 10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser of (a) the rate being credited in the Guaranteed Interest Division as of the date of the loan and (b) the Moody's Corporate Bond Yield Average, rounded to the nearest five basis points (0.05%) for the first month in the calendar quarter which precedes the date of the loan. The loan interest rate will remain fixed for the term of the loan, unless the initial interest rate on a hypothetical new loan to the Participant would be lower than the Participant's actual loan rate by more than fifty basis points (0.50%). In such case, the loan interest rate will be reduced to such lower rate as of the first day that such lower rate would hypothetically be effective. 10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan, Lincoln Life will subdivide his Participant's Account balance in the Guaranteed Interest Division by establishing a loan reserve account in an amount initially equal to the initial loan amount. Funds held in the loan reserve account are held as security for the loan and will accrue interest at a rate which is three percent (3.0%) below the loan interest rate. To the extent that the loan interest rate is subsequently reduced, the rate credited to funds in the loan reserve account will also be reduced in order to maintain the three percent (3.0%) differential. As the Participant makes repayments to Lincoln Life on the loan, an amount equal to the principal component of the repayment, plus the interest accrued in the loan 25 reserve account, will be transferred from his loan reserve account back to his Participant's Account balance in the Guaranteed Interest Division. In addition, an amount equal to ten percent (10%) of the principal of the loan will be held as security to cover the interest and the CDSC, should the Participant fail to make the required quarterly payments of principal and interest. This amount will earn interest at the interest rate in effect in the Guaranteed Interest Division but will not be available for withdrawals. As the principal is reduced, the amount held as security will also be reduced. 10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly principal and interest payment within thirty (30) days of the payment due date, his loan will be in default and Lincoln Life will deduct from his loan reserve account and from his Participant's Account balance in the Guaranteed Interest Division the principal, due and accrued interest, and a loan default charge of 5% and any CDSC thereon, as of the default date. Lincoln Life will also recharacterize the principal and due and accrued interest as a withdrawal. 10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to: (a) Delay making a loan for up to six (6) months from the date the loan application is received; or (b) With ninety (90) days written notice to You, amend any portion of the loan specifications with regard to applications for new loans; or (c) With ninety (90) days written notice to You, discontinue making new loans under this Contract. 10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount specified in Section 1.7 each time a loan is established. The amount will be withdrawn from the Participant's Account balance. 26 ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT 11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this Contract by written notice to Lincoln Life. This contract will be deemed discontinued on the later of the date You specify or the date the written notice is received by Lincoln Life. 11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option, discontinue this Contract in whole or in part if (a) You fail to meet the Minimum Contribution Amount specified in Section 1.1 or (b) a modification in this Contract is necessary in order to comply with Federal or State requirements, including the Employee Retirement Income Security Act of 1974, and You refuse to accept a substantially similar contract offered by Lincoln Life that incorporates such modification. Discontinuance pursuant to this Section shall be effective as of a date specified by Lincoln Life, provided You are given at least fifteen (15) days advance written notice in which to cure any remediable defaults. Discontinuance by Lincoln Life supersedes any date established under Section 11.1. 11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued under either 11.1 or 11.2 above: (a) No further Contributions will be accepted by Lincoln Life. (b) Participants will be allowed to request withdrawals subject to the restrictions set forth in Section 403(b) of the Code and regulations thereof. (c) Participants will be allowed to request transfers from each Sub- Account of the Variable Investment Division to the Guaranteed Interest Division. Transfers from the Guaranteed Interest Division to the Variable Investment Division are not allowed. Transfers among the Sub-Accounts of the Variable Investment Division are not allowed. (d) Participants will not be allowed to request loans. (e) Lincoln Life will send written notice to each Participant's last known address stating that the Contract is discontinued and that the Participant's remaining Account balance may be distributed in either (i) a lump sum payment, (ii) a Payout Annuity conversion amount, or (iii) some combination of (i) and (ii). Such form of payment will be distributed at the earlier of: (1) the Participant's attainment of age fifty-nine and one-half (59 1/2), or 27 (2) the Participant's separation from service, or (3) the Participant has died, or (4) the Participant has incurred a disability for which he is receiving Social Security payments, or (5) the date the Participant directs Lincoln Life to transfer the entire value of the Participant's Account to another 403(b) funding vehicle. The Participant's remaining Account balance shall be the balance remaining after (i) the repayment of any, if applicable, outstanding loans including principal, due and accrued interest, and (ii) any applicable CDSC or Annual Administration Charge that applies to the Participant's Account. 11.4 CONTRACT TERMINATION: This Contract will terminate when there are no participant Account balances under this Contract. 28 ARTICLE XII - GENERAL PROVISIONS 12.1 CONTRACT: This Contract, together with Your attached Application and any riders, constitutes the entire Contract between You and Lincoln Life. Lincoln Life is not a party to any Plan document, and is not responsible for the validity of any Plan or actions taken by You under that Plan. The terms of this Contract shall govern with respect to the rights and obligations of Lincoln Life, notwithstanding any contrary provisions or conditions of any trust or plan. Lincoln Life may rely on any action or information provided by You under the terms of this Contract and shall be relieved and discharged from any further liability to any party in acting at the direction and upon the authority of You. All statements made by You shall be deemed representations and not warranties. Lincoln Life may deactivate this Contract by prohibiting new Contributions and/or new Participants after the date of deactivation. Lincoln Life will give You not less than ninety (90) days notice of the date of deactivation. 12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by amendment or replacement. Such amendments will not, without Your consent, adversely alter (a) the minimum interest rate set forth in Section 4.2, (b) the maximum annuity conversion factors under Section 9.4, or (c) the amount or terms of any annuity benefit already selected under Section 9.1 prior to the effective date of the change. No change in this Contract will adversely affect the rights of a Participant with respect to Contributions received or annuities purchased before the effective date of the change unless: (a) Such amendments are made in order to comply with rulings, regulations and laws applicable to the program provided by this Contract; or (b) Your consent to the Amendment is obtained. Lincoln Life will give You not less than ninety (90) days notice prior to the effective date of any change made in accordance with this Section. 12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural includes the singular, the singular the plural and the masculine the feminine. 12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life with such facts and information as Lincoln Life may require for the administration of this Contract, including, upon request, the original or photocopy of any pertinent records You keep. All information that You furnish to Lincoln Life pursuant to this Contract, including the information pertaining to Contributions described in Article III, shall be legible, accurate and satisfactory in 29 form to Lincoln Life. Such information shall be sent to a location designated by Lincoln Life. You shall make any determination required under this Contract pursuant to the terms of the Contract or required under ERISA and shall report that determination in writing to Lincoln Life. Such determination shall be conclusive for the purpose of this Contract. Lincoln Life shall be fully protected in relying on the reports and other information furnished by You and need not inquire as to the accuracy or completeness of such reports and information. 12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract based upon misstated or omitted information, including but not limited to misstatement of age, Lincoln Life will make adjustments to the benefit to reflect the correct information. Lincoln Life is relieved and discharged from any liability and responsibility with respect to benefits provided in reliance upon information You furnish. 12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior written consent. A Participant or Beneficiary under this Contract may not, unless permitted by law, assign or encumber any payment due under this Contract. 12.7 MARKET EMERGENCIES: If transactions are to be made to or from the Variable Investment Division, Lincoln Life may not suspend the right of redemption or delay payment for more than seven (7) calendar days after tender for redemption, except for (1) any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings); (2) any period when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the Accumulation Unit Value is not reasonably practicable; or (3) for such other periods as the Securities and Exchange Commission by order may permit for the protection of the Participants. 12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed Interest Division, Lincoln Life may defer the payment for the period permitted by the law of the state in which this Contract was delivered but not more than six (6) months after a written election is received by Lincoln Life. During the period of deferral, interest at the then current interest rate(s) will continue to be credited to a Participant's Account in the Guaranteed Interest Division. 12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant Account balances any premium tax levied as a result of the existence of Participant Accounts by any state or other governmental entity. 12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life, physically or mentally incapable of personally receiving and giving a valid receipt for any payment due him under this Contract, Lincoln Life may, unless and until 30 claim shall have been made by a duly appointed legal guardian or conservator of the person and property of such person, make such payment or any part thereof to such other person or institution which, in the judgment of Lincoln Life, is then contributing toward or providing for the care and maintenance of such person. In no event will any such payment exceed the maximum allowed under the applicable law of the state in which this Contract is delivered. Such payment shall fully discharge Lincoln Life of its obligations to the extent of the payment. Lincoln Life will make any payment which has become due to a Participant or an Annuitant and has not been paid prior to his death, to the Participant's Beneficiary or Beneficiaries, his executors or administrators. If no Beneficiary or personal representative has been named, Lincoln Life may make payment to any one or more of the surviving members of the following classes of relatives; spouse, children, grandchildren, brothers, sisters, and parents. Such payment shall fully discharge Lincoln Life for all liability to the extent of the payment. 12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the survival of any person, evidence of such person's survival must be furnished to Lincoln Life, either by such person's endorsement of the check drawn for such payment, or by other satisfactory means. 12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon the strict performance of any provision or condition of this Contract shall neither constitute a waiver of Lincoln Life's rights to perform or require performance of such provision or condition, nor stop Lincoln Life from exercising any other rights it may have in such provision, condition, or otherwise in this Contract or any Plan. 12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information establishing any right or conferring any benefit upon any Participant or Beneficiary, such receipt shall be deemed to take place on any Business Day that such information is received. 12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is determined to be invalid, the remainder of the provisions shall remain in full force and effect. 12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as a Unit Investment Trust under the Investment Company Act of 1940. As such, the assets of each Sub-Account are invested in a registered management investment company (mutual fund). The Separate Account will be legally separated from Lincoln Life's other accounts. The Separate Account's assets will, at the time during the year that adjustments in the reserves are made, have a value of at least equal to the reserves and other contract liabilities with respect to the Separate Account, and at all other 31 times, will have a value approximately equal to, or in excess of, such reserves and liabilities. The portion of the assets having a value equal to, or approximately equal to, the reserves and contract liabilities will not be chargeable with liabilities arising out of any other business which Lincoln Life may conduct. Lincoln Life reserves the right, subject to compliance with applicable law, including approval by You or the Participants if required by law, (1) to create additional Sub-Accounts, (2) to combine or eliminate Sub- Accounts, (3) to transfer assets from one Sub-Account to another, (4) to transfer assets to the General Account and other separate accounts, (5) to cause the deregistration and subsequent re-registration of the Separate Account under the Investment Company Act of 1940, (6) to operate the Separate Account under a committee and to discharge such committee at any time, and (7) to eliminate any voting rights which You or Participants may have with respect to the Separate Account, (8) to amend the Contract to meet the requirements of the Investment Company Act of 1940 or other federal securities laws and regulations, (9) to operate the Separate Account in any form permitted by law, (10) to substitute shares of another fund for the shares held by a Sub-Account, and (11) to make any change required by the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, or the Securities Act of 1933, to the extent not provided in Section 12.2. 12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under this Contract directly to a Participant or Beneficiary at the last known address on file with Lincoln Life. 12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate upon Lincoln Life's receipt of a duly completed participation enrollment form. If the Participant chooses not to participate under this Contract, he may exercise his Free-look right by sending a written notice to Lincoln Life that he does not wish to participate under this Contract within ten (10) days after the date the Certificate is received by the Participant. For purposes of determining the date on which the Participant has sent written notice, the postmark date will be used. If a Participant exercises his Free-look right in accordance with the foregoing procedure, Lincoln Life will refund in full the Participant's aggregate Contributions less aggregate withdrawals, or if greater, with respect to Contributions to the Variable Investment Division, the Participant's Account balance in the Variable Investment Division on the date the canceled Certificate is received by Lincoln Life. 32 ATTACHMENT I SYSTEMATIC WITHDRAWAL OPTION The formula for the interest equivalency amount (IEA) is: 29.5/366 IEA = ACCT.BAL x ( (1 + I ) - 1) WHERE: IEA is the Interest Equivalency Amount. ACCT. BAL. is the Participant's Account balance at the later of: the beginning of the contract year and the most recent date on which the credited interest rate changed. I is the interest rate currently being credited to the contract EXAMPLE: The Account balance at the beginning of the year is one hundred thousand dollars ($100,000) and the interest rate credited to the contract is six percent (6.00%). The Interest Equivalency Amount for each month of the current year is: 29.5/366 IEA = $100,000 x (1.06 - 1) = $470.76 33 EX-99.4.B 3 GROUP VARIABLE ANNUNITY II CONTRACT [LETTERHEAD OF LINCOLN NATIONAL LIFE INSURANCE CO.] GROUP VARIABLE ANNUITY CONTRACT NO.: EFFECTIVE DATE: CONTRACTHOLDER: (Herein referred to as "You" or "Your") THIS CONTRACT WAS DELIVERED IN THE State/Commonwealth of and is subject to the laws of that jurisdiction. Lincoln Life by this Contract agrees to provide benefits for Participants in accordance with the terms and conditions of the Contract. The entire Contract consists of the provisions on the following pages, and the Application, including any amendments, schedules, or endorsements. IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne, Indiana on this day of , 20 , and caused this Contract to be in full force as of its Effective Date as set forth above. Jon A Boscia, Kelly D. Clevenger, Jon A Boscia, President Kelly D. Clevenger, Vice President Non-Participating PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. TABLE OF CONTENTS I. CONTRACT SPECIFICATIONS II. DEFINITIONS III. CONTRIBUTIONS IV. GUARANTEED INTEREST DIVISION V. VARIABLE INVESTMENT DIVISION VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS VII. WITHDRAWALS AND DISTRIBUTIONS VIII. DEATH BENEFITS IX. PAYOUT ANNUITIES X. LOANS XI. DISCONTINUANCE AND TERMINATION OF CONTRACT XII. GENERAL PROVISIONS 2 ARTICLE I - CONTRACT SPECIFICATIONS 1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of all Participants under this Contract shall be twenty thousand dollars ($20,000). This minimum figure is for aggregate annual Contributions, not for each Participant. 1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L 1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT: A. Guaranteed Interest Division: B. Variable Investment Division: 1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD: Unlimited transfer requests may be made by a Participant each calendar year. 1.5 ANNUAL ADMINISTRATION CHARGE: Twenty-five dollars ($25) per Participant. Twenty-five dollars ($25) per Participant who allocates a contribution, during the year ending on a Participation Anniversary, to any one (1) or more of the Sub-Accounts established in the Variable Investment Division. 1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%). 1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan 1.8 PLAN NAME: 1.9 EMPLOYER: 1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the total Account balance is twenty-five thousand dollars ($25,000), or greater, such amount will be waived. 3 ARTICLE II - DEFINITIONS 2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of increases to, decreases from and accumulations in each Sub-Account during the Accumulation Period. 2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each Sub-Account on any Valuation Date. 2.3 ACCUMULATION PERIOD: The period commencing on a Participant's Participation Date and terminating when the Participant's Account balance is reduced to zero, either through withdrawal(s), conversion to an annuity, imposition of charges, payment of a Death Benefit or a combination thereof. 2.4 ANNUITANT: The person receiving annuity payments under the terms of this Contract. 2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first annuity payment to the Annuitant as required by the Retired Life Certificate. This date, as well as the date each subsequent annuity payment is made, will be the first day of a calendar month. 2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied toward the purchase of an Annuity. 2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount in determining the dollar amount of an annuitant's annuity payments for Guaranteed Annuities or the initial payment for Variable Annuities. 2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first day of a calendar month. For Variable Annuities, this is the Valuation Date ten (10) business days prior to the first day of a calendar month. 2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation Period, during which an Annuitant's annuity payments are made. 2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating the amounts of annuity payments to be made from each Sub-Account during the Annuity Period. 2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub- Account on any Valuation Date. 4 2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account balance in the event of the Participant's death during the Accumulation Period or the person(s) designated to receive any applicable remainder of an annuity in the event of the Annuitant's death during the Annuity Period. 2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange are customarily open for business. 2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant outlining the basic provisions of the Contract. A Retired Life Certificate is issued to each Annuitant outlining the basic provisions of his Annuity. 2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this Contract including any amount transferred from another contract. 2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment Division named in Section 1.3. 2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the Separate Account specified in Section 1.2 or any other separate account. 2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is reduced when a withdrawal occurs, including any applicable Contingent Deferred Sales Charge and Annual Administration Charge. 2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the amount of each payment as long as the annuity is payable. 2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for these and other contracts for which Lincoln Life guarantees the principal amount and interest credited thereto, subject to any fees and charges as set forth in this Contract. Amounts allocated to the Guaranteed Interest Division are part of the General Account. 2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office in Fort Wayne, Indiana. All correspondence and inquiries should be submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME 04101-5001. 2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant Account less any net Withdrawal Amounts, outstanding loan (including principal and due and accrued interest) and amounts converted to a Payout Annuity. 2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal occurs. 5 2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains a Participant's Account. 2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the Accumulation Period, the total balance of which equals the Participant's Account balance in the Variable Investment Division plus the Participant's Account balance in the Guaranteed Interest Division. 2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year intervals from that Participant's Participation Date. If an anniversary occurs on a non-Business Day, it is treated as occurring on the next Business Day. 2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to the date on which the first Contribution on behalf of that Participant under this Contract is received by Lincoln Life. A Participant will receive a new Participation Date if such Participant makes a Total Withdrawal as defined in Section 7.2 and Contributions on behalf of the Participant are resumed under any Contract. 2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary and ending the day before the next Participation Anniversary, except for the first Participation Year that begins with the Participation Date. 2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this Contract to a person. A Payout Annuity may be either a Guaranteed Annuity or a Variable Annuity. 2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable Investment Division that invests unallocated contributions in shares of a money market mutual fund. Lincoln Life does not guarantee the principal amount or investment results. 2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax benefits under Section 403(b) of the Internal Revenue Code of 1986 and under which this Contract is authorized. 2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a group of assets segregated from Lincoln Life's General Account whose income, gains and losses, realized or unrealized, are credited to or charged against the Separate Account without regard to other income, gains or losses of Lincoln Life. Additional information is provided in Section 12.15. 2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division that invests in shares of a corresponding mutual fund. 6 2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are computed on each Valuation Date as of the close of trading on the New York Stock Exchange. 2.35 VALUATION PERIOD: A period used in measuring the investment experience of each Sub-Account. The Valuation Period begins at the close of trading on the New York Stock Exchange on one Valuation Date and ends at the corresponding time on the next Valuation Date. 2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in accordance with the investment results of the selected Sub-Account(s). 2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that is maintained by Lincoln Life for this and other Section 403(b) Lincoln Life contracts for which Lincoln Life does not guarantee the principal amount or investment results. Amounts allocated to the Variable Investment Division are part of the Separate Account. 2.38 YOU or YOUR: The Contractholder named on the face page of this Contract. 7 ARTICLE III - CONTRIBUTIONS 3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be credited to the Participant's Account no later than two (2) Business Days after it is received by Lincoln Life if it is preceded or accompanied by a completed enrollment form containing all the information necessary for processing the Participant's Contribution. 3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated to the Divisions and Sub-Accounts according to the percentages requested by the Participant. The allocation percentage can be any whole percent and may be changed on an unlimited basis per year. You or the Participant shall notify Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life of such changes. 3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to Lincoln Life specifying the amount being contributed on behalf of each Participant. You shall forward such Contributions and provide such allocation information in accordance with procedures established by Lincoln Life. The Contributions shall be allocated among the Guaranteed Interest Division and each Sub-Account in accordance with the percentage information provided by the Participant subject to the terms of the Plan. 3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions transferred from another Contract, Lincoln Life must be provided with the following information in a form acceptable to Lincoln Life: (a) The source of the Contributions transferred (e.g., salary reduction, employer match or post-tax Contributions). Lincoln Life will record all such transferred amounts where no source information is provided as salary reduction Contributions. (b) Identification of Contributions transferred as Contributions made or earnings credited: (i) prior to January 1, 1987; (ii) during 1987 and 1988; or (iii) subsequent to December 31, 1988. Amounts not so identified will be treated as attributable to period (iii) for purposes of Sections 7.4 and 7.5. 8 3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a calendar year for a Participant are subject to the limits imposed under Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the Code), as it may be amended from time to time. Lincoln Life assumes no responsibility for monitoring these limits for a Participant. Elective deferrals made under the terms of a salary reduction agreement must not exceed the annual limits on elective deferrals as provided in IRC Section 402(g). Contributions in excess of such amounts may be distributed upon request of the Contractholder and Participant by Lincoln Life as permitted by law. 3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated as of the Business Day that Lincoln Life receives the Contribution and Lincoln Life will credit interest beginning with the next calendar day following the Business Day that Lincoln Life receives the Contribution. For a Variable Investment Division Sub-Account Contribution, Lincoln Life will credit a Participant's Account with the number of Accumulation Units for each Sub-Account selected by the Participant with the number of Accumulation Units equal to the Contribution Amount divided by the Accumulation Unit Value which is next computed following Lincoln Life's receipt of the Contribution. 3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 from each Participant's Account each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Account. When a Total Withdrawal of a Participant's Account, as defined in Section 7.2, occurs on a date other than the last Business Day of the month in which his Participation Anniversary occurs, Lincoln Life will first deduct the amount stated in Section 1.5 from his Participant's Account. ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 on a pro-rata basis from the Participant's Variable Investment Division Account balance each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Variable Investment Division Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Variable Investment Division Account. When a Participant requests, on a date other than the last Business Day of the month in which his Participation Anniversary occurs, (a) a withdrawal, or 9 (b) a transfer, from the Variable Investment Division, which would leave a remaining balance of less than the Annual Administration Charge defined in Section 1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from the Participant's Variable Investment Division Account balance prior to the Withdrawal or Transfer. 3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not been received for a Participant, Lincoln Life will deposit such Contributions to the Pending Allocation Account as described in ARTICLE II - DEFINITIONS, unless such Contributions are designated to another Account in accordance with the Plan. Lincoln Life will follow up with the Contractholder monthly for a period of ninety (90) days for enrollment information for Participants with deposits in the Pending Allocation Account. Within two (2) business days of receipt of a completed enrollment form, the Participant's Account balance in the Pending Allocation Account will be transferred to the Divisions and/or Sub-Accounts according to the percentages requested by the Participant. When the completed enrollment form is received, the Participation Date will be the date on which the first Contribution on behalf of the Participant was deposited into the Pending Allocation Account. If an enrollment form is not received after the ninety (90) day notice, a Participant's Account balance in the Pending Allocation Account will be refunded to the Contractholder within one hundred five (105) days of the date of the initial Contribution. Contributions received after a refund while there is still no allocation information, will be deposited to the Pending Allocation Account. The Pending Allocation Account will only be used for the purpose mentioned above; Participants may not direct a portion of their Contributions to this Account. Contributions deposited in the Pending Allocation Account will not be afforded the same rights as Contributions under this Contract. The following Articles and/or Sections under this Contract will not be applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v) ARTICLE X - LOANS. 10 ARTICLE IV - GUARANTEED INTEREST DIVISION 4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar value of a Participant's Account balance in the Guaranteed Interest Division as of a date will be equal to the sum of: (a) Contributions allocated, on behalf of the Participant, to the Guaranteed Interest Division on or prior to that date, and (b) Amounts transferred, on behalf of the Participant, to the Guaranteed Interest Division from the Variable Investment Division on or prior to that date, less any; (c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on behalf of the Participant, on or prior to that date; and (d) Amounts transferred, on behalf of the Participant, to the Variable Investment Division on or prior to that date; and (e) Applicable charges to the Participant's Account on or prior to that date; and (f) Annuity Conversion Amounts, on behalf of the Participant, on or prior to that date, plus any; (g) Interest credited to the Participant's Account balance in the Guaranteed Interest Division on or prior to that date. 4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the Participant's Account balance in the Guaranteed Interest Division, using the previous day's ending balance. The rate of interest credited each day, if compounded for three hundred sixty-five (365) days, yields the annual interest rate in effect for the day. Lincoln Life will declare in advance a guaranteed interest rate which will be effective for all amounts in the Participant's Account balance in the Guaranteed Interest Division during the designated year. This rate will never be less than three percent (3%). However, this minimum rate will not be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT) under this Contract. Lincoln Life may also declare in advance separate interest rate guarantees which are in excess of the guaranteed interest rate for some or all of the Participant's Account balance in the Guaranteed Interest Division for specific period(s) during the designated year. 11 ARTICLE V - VARIABLE INVESTMENT DIVISION 5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The Participant's Account balance in the Variable Investment Division is equal to the sum of the dollar value of a Participant's Account balance in each Sub-Account as of the end of a Valuation Period which will be equal to the product of: (a) The Participant's number of Accumulation Units as of the end of that Valuation Period; times (b) The Accumulation Unit Value as of the end of that Valuation Period. 5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in a Sub-Account as of the end of any Valuation Period is the number of Accumulation Units the Participant had in that Sub-Account as of the end of the preceding Valuation Period; plus (a) The number of Accumulation Units attributable to amounts deposited to or transferred to that Sub-Account during the current Valuation Period; minus (b) The number of Accumulation Units attributable to amounts transferred from, converted to an annuity, removed as a charge, paid as a death benefit, or withdrawn from that Sub-Account during the current Valuation Period. 5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account was set initially at ten dollars ($10), except for the Index Account which was set at nine and nine hundred six one thousands ($9.9060) of a dollar. Subsequent Accumulation Unit Values are determined by multiplying; (a) The Net Investment Factor for the current Valuation Period by; (b) The Accumulation Unit Value as of the end of the immediately preceding Valuation Period. 5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the investment experience of a Sub-Account net of the Mortality and Expense Risk Charge as defined in Section 5.5. The Net Investment Factor for a Valuation Period is equal to (a) divided by (b) with the result multiplied by (c) and adjusted by the amount per share of any taxes which are incurred by Lincoln Life because of the existence of the Sub-Account; 12 where (a) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the Valuation Period, plus; the amount per share of any dividend or capital gain distribution from the underlying mutual fund held by the Sub-Account during the Valuation Period, where (b) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the immediately preceding Valuation Period, where (c) is; one (1.00) minus the Annual Mortality and Expense Risk Charge shown in Section 1.6 to the n/365th power where n equals the number of calendar days since the immediately preceding Valuation Date. 5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate Lincoln Life for its assumption of mortality and expense risks under this Contract. This charge is shown on an annualized basis in Section 1.6 and is deducted on a daily basis as described in Section 5.4. This charge may not be increased without the approval of a majority of all affected Lincoln Life contractholders. 13 ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS 6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in Section 1.4, Participants may transfer all or part of their Account balance in any Division or Sub-Account to another Division or Sub-Account. You or the Participant may make a transfer request by notifying Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life. 6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of the Annuitant's Annuity Conversion Amount. 14 ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS 7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation Period, a Participant may withdraw from any or all Divisions, subject to the restrictions stated in Section 7.4, all or part of the Participant's Account balance in the Division or Sub-Accounts remaining after reductions for any applicable Annual Administration Charge (imposed on Total Withdrawals), Contingent Deferred Sales Charge (CDSC), premium taxes and outstanding loan, including the loan security thereon. Annuity Conversion Amounts are not considered withdrawals. All withdrawal requests must be submitted in a form acceptable to Lincoln Life and must indicate the amount and the Division(s) from which the withdrawal is to be made. Lincoln Life reserves the right to delay payment of Guaranteed Interest Division withdrawal amounts per Section 12.8. 7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will occur when a Participant who has no outstanding loans (a) requests the liquidation of his entire Account balance, or (b) requests an amount such that the amount requested plus any CDSC as defined in Section 7.6 results in a remaining Participant's Account balance being less than the applicable Annual Administration Charge as defined in Section 1.5, in which case, the request is treated as if it were a request for liquidation of the Participant's entire Account balance. The Participant's Active Life Certificate must be surrendered to Lincoln Life when a Total Withdrawal of a Participant's Account occurs. A Participant refund under the Free-look provisions of Section 12.17 is not considered a Total Withdrawal under this Article. 7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will occur when: (a) A Participant who has an outstanding loan makes a withdrawal; or (b) A Participant who has no outstanding loans, requests an amount less than a total withdrawal. 15 7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject to the requirements set forth in Section 403(b) of the Code and regulations thereof. (a) Withdrawal Requests for Participants under Section 403(b) Plans Subject to Title I of ERISA: You must make withdrawal requests on behalf of Participants. All withdrawal requests will require Your written authorization and written documentation specifying the portion of the Participant's Account balance which is available for distribution to the Participant. (b) Withdrawal Requests for Participants under Section 403(b) Plans not --- Subject to Title I of ERISA: Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction contribution made and/or earnings credited prior to January 1, 1989, (including transferred amounts recorded as such pursuant to Section 3.4), may be withdrawn for any reason. Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction Contribution made and/or earnings credited after December 31, 1988, (including transferred amounts recorded as such pursuant to Section 3.4), are subject to the withdrawal restrictions stated in Section 403(b) of the Code. Participants must certify to Lincoln Life (and provide supporting information, if requested), that an event permitting withdrawal has occurred and that Lincoln Life may rely on such representation in granting the withdrawal request. 7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section 403(b)(10) of the Code and regulations thereunder require that distributions be made from this Contract in a manner which satisfies requirements similar to the requirements of Section 401(a)(9) including the incidental death benefit requirements of Section 401(a)(9)(G). (1) Section 401(a)(9) requires that: (a) the Participant's Account be distributed not later than the required beginning date; or (b) the Participant's Account be distributed not later than the required beginning date, over the life of the Participant or over the lives of the Participant and a designated Beneficiary. (2) A Participant may choose to have the Participant's Account distributed in one of the following manners: (a) As a lump sum payment; 16 (b) As an annuity meeting the requirements of Section 401(a)(9) of the Code; (c) As an annual distribution where the amount distributed each calendar year is at least an amount equal to the quotient obtained by dividing: (a) the amount of the Participant's Account required to be distributed as of December 31 of the calendar year immediately preceding the calendar year for which the distribution is being made; by (b) the life expectancy of the Participant, or the life expectancy of the Participant and the Beneficiary; or (d) A combination of the above. With respect to (c) and (d) above, the life expectancy of the Participant and a surviving spouse Beneficiary may be recalculated, but not more frequently than annually. A non-spouse Beneficiary's life expectancy may not be recalculated. 7.6 CONTINGENT DEFERRED SALES CHARGE (CDSC): The following schedule of CDSC shall apply to all Withdrawal Amounts. (a) WHEN A WITHDRAWAL IS REQUESTED AND ONE OR THE CDSC WILL MORE OF THE FOLLOWING CONDITIONS IS MET: EQUAL: The Participant has died 0% The Participant has incurred a disability for 0% which he is receiving Social Security payments The Participant has attained age fifty-nine 0% and one-half (59 1/2) The Participant has separated from service 0% with the Contractholder and is age fifty-five (55) The Participant has separated from service 0% with the Contractholder The Participant has demonstrated a financial 0% hardship need 17 The Participant has requested a withdrawal 0% which will not exceed twenty percent (20%) of his Participant's Account Balance and no other withdrawal has been made in that calendar year (b) For all other amounts subject to a CDSC, the CDSC will be in accordance with the schedule below: During Participation Year CDSC Percent 1-5 6% 6-10 3% 11-15 1% 16+ 0% Lincoln Life requires reasonable proof necessary to verify that the withdrawal meets the conditions described above in Section 7.6(a) and such proof must be submitted with the withdrawal request. If You or the Participant do not furnish the proof requested by Lincoln Life, the CDSC stated in Section 7.6(b) shall apply. The CDSC on any withdrawal may be reduced or eliminated but only to the extent that Lincoln Life anticipates that it will incur lower sales expenses or perform fewer sales services due to economies arising from (i) the size of the particular group, (ii) an existing relationship with the Contractholder, (iii) the utilization of mass enrollment procedures, or (iv) the performance of sales functions by the Contractholder or an employee organization which Lincoln Life would otherwise be required to perform. In no event will the CDSC, when added to any CDSC previously imposed due to a Participant withdrawal, exceed eight and one-half percent (8.5%) of the cumulative Contributions to a Participant's Account. 7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social Security disability benefits, or (c) is separated from service with the Contractholder may elect this option. A Participant must also have a vested Participant Account balance of at least ten thousand dollars $10,000) of pre-tax Contributions under this Contract at the date of the election. Amounts held for a spousal payee under a Qualified Domestic Relations Order (QDRO) shall be recognized as eligible for the Systematic Withdrawal Option. Any spousal payee who wishes to elect this distribution option must also meet the minimum ten thousand dollars ($10,000). Account balance requirement and either the age or disability requirement as discussed above. 18 A Participant may elect to receive monthly, quarterly, semi-annual, or annual payments in a flat amount or payments on a monthly basis for an interest equivalency amount. An interest equivalency amount is an approximation of the interest earned between each payment period based upon the interest rate in effect at the beginning of each respective payment period. This amount will be determined by Lincoln Life. (See Attachment I for illustration.) A Participant may change the frequency, payment type, or payment amount of his Systematic Withdrawal Option by submitting a request in writing on a form acceptable to Lincoln Life. A Participant may make such a change only once during each calendar year. A Participant may at any time direct Lincoln Life to cease payments under this option provided the request is made in writing. A Participant who chooses to stop receiving systematic withdrawals may not request that any systematic withdrawal payments begin again until the next calendar year. Systematic withdrawals shall be withdrawn from amounts allocated to the Guaranteed Interest Division of the Participant's Account balance. If the balance of the Guaranteed Interest Division is not sufficient to meet the payment amount requested, the Participant, in writing, may direct Lincoln Life on a form acceptable to Lincoln Life to transfer the appropriate amount to the Guaranteed Interest Division; otherwise, such payment will cease. Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated in Section 1.10 from the Participant's Account balance each time a Systematic Withdrawal Option is established. The applicable CDSC, if any, will be assessed on each systematic withdrawal payment. Payments under this option shall stop upon the earliest of the following events: (a) On the date of the Participant's death. A Beneficiary who is a spouse may elect this option by requesting it in writing on a form acceptable to Lincoln Life, unless election of this form of benefit would violate any other requirements of this contract. The spousal Beneficiary must meet the ten thousand dollar ($10,000) minimum Account balance requirement prior to electing the Systematic Withdrawal Option; or (b) When there is an insufficient Participant Account balance after deducting the applicable CDSC and Annual Administration Charge, if any, to pay the amount requested; or (c) The Participant fails to meet the requirements of the Systematic Withdrawal Option as outlined above in the first (1st) paragraph of this Section. 19 If a disabled or terminated Participant, who is currently receiving a Systematic Withdrawal Option payment, returns to service with the Contractholder, the Contractholder or Participant must notify Lincoln Life in writing within thirty (30) days from the date of return to service. Lincoln Life reserves the right to discontinue the Systematic Withdrawal Option payment under these circumstances. If a Participant wishes to exercise this option under another Lincoln Life Annuity Contract, such request shall be considered separate from this Contract and shall follow the Systematic Withdrawal Option rules under that Annuity Contract, if permitted. Lincoln Life may, at its option, discontinue the Systematic Withdrawal Option under this Contract at any time provided You are given at least thirty (30) days advance written notice. 7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or Beneficiary may elect this option for any distribution that qualifies as an Eligible Rollover Distribution as defined by Section 402(c) of the Internal Revenue Code and that meets all the following requirements: (1) The distribution must be paid directly to either a single Individual Retirement Account or to a single Tax Deferred Annuity. The check, wire, or other form of remittance shall be made payable to the trustee, custodian, or financial institution sponsoring the Individual Retirement Account or Tax Deferred Annuity. The form of remittance will not be an instrument that can be negotiated by the Participant. (2) The Participant must provide, in a form acceptable to Lincoln Life, all information necessary to make the payment to an Individual Retirement Account or Tax Deferred Annuity. (3) The Participant or Beneficiary may not revoke a request for payment under this option for any payment after Lincoln Life has received a written request for a direct rollover. 20 ARTICLE VIII - DEATH BENEFITS 8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant occurs during the Accumulation Period, Lincoln Life will pay the Beneficiary, if one is living, the greater of the following amounts: (a) The Net Contributions, or (b) The Participant's Account balance less any outstanding loan (including principal and due and accrued interest). Lincoln Life will calculate the Death Benefit as of the end of the Valuation Period during which it receives both satisfactory notification of the Participant's death, pursuant to Section 8.2, and the election of a form of benefit pursuant to Section 8.3. If no election is made pursuant to Section 8.3 within sixty (60) days following Lincoln Life's receipt of satisfactory notice of death, the Death Benefit will be calculated as of the end of the Valuation Period during which that sixtieth (60th) day occurs. If Lincoln Life makes a withdrawal payment pursuant to a Participant request prior to receiving notice that the Participant has died, but subsequent to the Participant's death, Lincoln Life will deduct that payment from each of (a) and (b) above in calculating the Death Benefit. 8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's death no later than six (6) months from the Participant's date of death in order for the Beneficiary to receive the Death Benefit amount described in Section 8.1(a) above. Such notification must be in a form satisfactory to Lincoln Life. Beneficiaries for whom notification of a Participant's death is received more than six (6) months after the Participant's date of death shall receive the Death Benefit amount described in Section 8.1(b) above. 8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln Life receives satisfactory notification of the Participant's death, the Beneficiary must make an election to have the Death Benefit applied in one of the following ways: (a) As a lump sum payment to the Beneficiary; or (b) Towards an annuity to be distributed in substantially equal installments over the life expectancy of the Beneficiary or a period certain not exceeding the life expectancy of the Beneficiary; or (c) A combination of the above. 21 A Beneficiary who does not make an election pursuant to this section within sixty (60) days after Lincoln Life receives notification of the Participant's death will receive a lump sum payment calculated in accordance with Section 8.1(b) above. If the Beneficiary is someone other than the spouse of the deceased Participant, the Code provides that the Beneficiary may not elect an annuity which would commence later than December 31 of the calendar year following the calendar year of the Participant's death. If a non-spousal Beneficiary elects to receive payment in a single lump sum, such payment must be received no later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. If the Beneficiary is the surviving spouse of the deceased Participant, under the Code, distributions are not required to begin earlier than December 31 of the calendar year in which the Participant would have attained age seventy and one-half (70-1/2). If the surviving spouse dies before the date on which annuity distributions commence, then, for purposes of the Death Benefit, the surviving spouse shall be deemed to be the Participant. If there is no living named Beneficiary on file with Lincoln Life at the time of a Participant's death, Lincoln Life will pay the Death Benefit to the Participant's estate in a single lump sum upon receipt of satisfactory proof of the Participant's death, but not later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. Valuation of the Death Benefit shall occur as of the end of the Valuation Period during which due proof of the Participant's death is received by Lincoln Life. 8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity Period, the Beneficiary, if any, or the Annuitant's estate will receive the amount payable, if any, according to the in-force annuity options. Any remaining Participant's Account balance will be paid in accordance with the provisions of this Article. 22 ARTICLE IX - PAYOUT ANNUITIES 9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a distribution under the Code or a Beneficiary of a deceased Participant may notify Lincoln Life in writing in a form acceptable to Lincoln Life that the Participant or the Beneficiary is electing to convert all or part of the Participant's Account balance or Death Benefit to a Payout Annuity option available under this Contract. Upon being notified of such an election, Lincoln Life shall calculate the amount to be converted to a Payout Annuity as either the Participant's Account balance, or a portion thereof, or the Death Benefit as of the initial Annuity Payment Calculation Date, as appropriate, less the charge for premium taxes, if any. If the Participant's Account balance or the Beneficiary's Death Benefit is less than two thousand dollars ($2,000) or if the amount of the first scheduled payment is less than twenty dollars ($20), Lincoln Life may, at its option, cancel the Payout Annuity and pay the Participant or Beneficiary his entire Account balance or Death Benefit in a lump sum. 9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. 9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable Annuity for each Sub-Account is determined by dividing his Annuity Conversion Amount in each Sub-Account as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. The amount of the Annuitant's subsequent Variable Annuity payment for each Sub-Account is determined by: (a) Dividing the Annuitant's initial Variable Annuity payment amount by the Annuity Unit Value for that Sub-Account selected for his interest rate option as described in Section 9.4 as of his initial Annuity Payment Calculation Date; and (b) Multiplying the resultant number of annuity units by the Annuity Unit Values for the Sub-Account selected for his interest rate option for his respective subsequent Annuity Payment Calculation Dates. The Annuity Unit Value for all Sub-Accounts for all interest rate options will initially be set at ten dollars ($10). Each subsequent Annuity Unit Value for a Sub-Account for an interest rate option is determined by: 23 Dividing the Accumulation Unit Value for the Sub-Account as of the subsequent Annuity Payment Calculation Date (APCD) by the Accumulation Unit Value for the Sub-Account as of the immediately preceding APCD, Dividing the resultant factor by one (1.00) plus the interest rate option to the n/365 power where n is the number of days from the immediately preceding APCD to the subsequent APCD, and Multiplying this factor times the Annuity Unit Value as of the immediately preceding APCD. 9.4 BASIS OF ANNUITY CONVERSION FACTORS: (a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may be used by Lincoln Life under this Contract are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate of three percent (3.0%). From time to time, lower conversion factors may be used by Lincoln Life. (Lowering the conversion factor will increase the amount of the annuity payment.) (b) Variable Annuities - The Annuity Conversion Factors which are used to determine the initial payments are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate in an integral percentage ranging from zero to six percent (0 to 6.00%) as selected by the Annuitant. 9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are available: (a) Life (b) Life with payments guaranteed for ten (10), fifteen (15) or twenty (20) years (c) Joint and Survivor (d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years (e) Other offered by Lincoln Life. To the extent option (d) is elected for a Variable Annuity, the Annuitant may request at any time during the payment period that the present value of any remaining installments be paid in one lump sum. However, any lump sum so elected will be treated as a withdrawal during the Accumulation Period subject to the applicable CDSC stated in Section 7.6. 9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a Participant, or the Beneficiary of a deceased Participant, Lincoln Life will issue to the Annuitant an appropriate Certificate evidencing Lincoln Life's obligations. 24 ARTICLE X - LOANS 10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if permitted by the applicable Section 403(b) Plan, may apply for a loan under this Contract by completing a loan application available from Lincoln Life. Loans are secured by the Participant's Account balance in the Guaranteed Interest Division. 10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to the restrictions imposed under Section 72(p) of the Code, as it may be amended from time to time. Additionally, the initial amount of a Participant's loan may not exceed ninety percent (90%) of the Participant's Account balance in the Guaranteed Interest Division. 10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one thousand dollars ($1,000). 10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan outstanding at any time and may not establish more than one loan in any six (6) month period. However, a Participant may renegotiate an outstanding loan balance once during the term of the loan. 10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser of (a) the rate being credited in the Guaranteed Interest Division as of the date of the loan and (b) the Moody's Corporate Bond Yield Average, rounded to the nearest five basis points (0.05%) for the first month in the calendar quarter which precedes the date of the loan. The loan interest rate will remain fixed for the term of the loan, unless the initial interest rate on a hypothetical new loan to the Participant would be lower than the Participant's actual loan rate by more than fifty basis points (0.50%). In such case, the loan interest rate will be reduced to such lower rate as of the first day that such lower rate would hypothetically be effective. 10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan, Lincoln Life will subdivide his Participant's Account balance in the Guaranteed Interest Division by establishing a loan reserve account in an amount initially equal to the initial loan amount. Funds held in the loan reserve account are held as security for the loan and will accrue interest at a rate which is three percent (3.0%) below the loan interest rate. To the extent that the loan interest rate is subsequently reduced, the rate credited to funds in the loan reserve account will also be reduced in order to maintain the three percent (3.0%) differential. As the Participant makes repayments to Lincoln Life on the loan, an amount equal to the principal component of the repayment, plus the interest accrued in the loan 25 reserve account, will be transferred from his loan reserve account back to his Participant's Account balance in the Guaranteed Interest Division. In addition, an amount equal to ten percent (10%) of the principal of the loan will be held as security to cover the interest and the CDSC, should the Participant fail to make the required quarterly payments of principal and interest. This amount will earn interest at the interest rate in effect in the Guaranteed Interest Division but will not be available for withdrawals. As the principal is reduced, the amount held as security will also be reduced. 10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly principal and interest payment within thirty (30) days of the payment due date, his loan will be in default and Lincoln Life will deduct from his loan reserve account and from his Participant's Account balance in the Guaranteed Interest Division the principal, due and accrued interest, and a loan default charge of 5% and any CDSC thereon, as of the default date. Lincoln Life will also recharacterize the principal and due and accrued interest as a withdrawal. 10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to: (a) Delay making a loan for up to six (6) months from the date the loan application is received; or (b) With ninety (90) days written notice to You, amend any portion of the loan specifications with regard to applications for new loans; or (c) With ninety (90) days written notice to You, discontinue making new loans under this Contract. 10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount specified in Section 1.7 each time a loan is established. The amount will be withdrawn from the Participant's Account balance. 26 ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT 11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this Contract by written notice to Lincoln Life. This contract will be deemed discontinued on the later of the date You specify or the date the written notice is received by Lincoln Life. 11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option, discontinue this Contract in whole or in part if (a) You fail to meet the Minimum Contribution Amount specified in Section 1.1 or (b) a modification in this Contract is necessary in order to comply with Federal or State requirements, including the Employee Retirement Income Security Act of 1974, and You refuse to accept a substantially similar contract offered by Lincoln Life that incorporates such modification. Discontinuance pursuant to this Section shall be effective as of a date specified by Lincoln Life, provided You are given at least fifteen (15) days advance written notice in which to cure any remediable defaults. Discontinuance by Lincoln Life supersedes any date established under Section 11.1. 11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued under either 11.1 or 11.2 above: (a) No further Contributions will be accepted by Lincoln Life. (b) Participants will be allowed to request withdrawals subject to the restrictions set forth in Section 403(b) of the Code and regulations thereof. (c) Participants will be allowed to request transfers from each Sub- Account of the Variable Investment Division to the Guaranteed Interest Division. Transfers from the Guaranteed Interest Division to the Variable Investment Division are not allowed. Transfers among the Sub-Accounts of the Variable Investment Division are not allowed. (d) Participants will not be allowed to request loans. (e) Lincoln Life will send written notice to each Participant's last known address stating that the Contract is discontinued and that the Participant's remaining Account balance may be distributed in either (i) a lump sum payment, (ii) a Payout Annuity conversion amount, or (iii) some combination of (i) and (ii). Such form of payment will be distributed at the earlier of: (1) the Participant's attainment of age fifty-nine and one-half (59 1/2), or 27 (2) the Participant's separation from service [and age fifty-five (55)], or (3) the Participant has died, or (4) the Participant has incurred a disability for which he is receiving Social Security payments, or (5) the date the Participant directs Lincoln Life to transfer the entire value of the Participant's Account to another 403(b) funding vehicle. The Participant's remaining Account balance shall be the balance remaining after (i) the repayment of any, if applicable, outstanding loans including principal, due and accrued interest, and (ii) any applicable CDSC or Annual Administration Charge that applies to the Participant's Account. 11.4 CONTRACT TERMINATION: This Contract will terminate when there are no participant Account balances under this Contract. 28 ARTICLE XII - GENERAL PROVISIONS 12.1 CONTRACT: This Contract, together with Your attached Application and any riders, constitutes the entire Contract between You and Lincoln Life. Lincoln Life is not a party to any Plan document, and is not responsible for the validity of any Plan or actions taken by You under that Plan. The terms of this Contract shall govern with respect to the rights and obligations of Lincoln Life, notwithstanding any contrary provisions or conditions of any trust or plan. Lincoln Life may rely on any action or information provided by You under the terms of this Contract and shall be relieved and discharged from any further liability to any party in acting at the direction and upon the authority of You. All statements made by You shall be deemed representations and not warranties. Lincoln Life may deactivate this Contract by prohibiting new Contributions and/or new Participants after the date of deactivation. Lincoln Life will give You not less than ninety (90) days notice of the date of deactivation. 12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by amendment or replacement. Such amendments will not, without Your consent, adversely alter (a) the minimum interest rate set forth in Section 4.2, (b) the maximum annuity conversion factors under Section 9.4, or (c) the amount or terms of any annuity benefit already selected under Section 9.1 prior to the effective date of the change. No change in this Contract will adversely affect the rights of a Participant with respect to Contributions received or annuities purchased before the effective date of the change unless: (a) Such amendments are made in order to comply with rulings, regulations and laws applicable to the program provided by this Contract; or (b) Your consent to the Amendment is obtained. Lincoln Life will give You not less than ninety (90) days notice prior to the effective date of any change made in accordance with this Section. 12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural includes the singular, the singular the plural and the masculine the feminine. 12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life with such facts and information as Lincoln Life may require for the administration of this Contract, including, upon request, the original or photocopy of any pertinent records You keep. All information that You furnish to Lincoln Life pursuant to this Contract, including the information pertaining to Contributions described in Article III, shall be legible, accurate and satisfactory in 29 form to Lincoln Life. Such information shall be sent to a location designated by Lincoln Life. You shall make any determination required under this Contract pursuant to the terms of the Contract or required under ERISA and shall report that determination in writing to Lincoln Life. Such determination shall be conclusive for the purpose of this Contract. Lincoln Life shall be fully protected in relying on the reports and other information furnished by You and need not inquire as to the accuracy or completeness of such reports and information. 12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract based upon misstated or omitted information, including but not limited to misstatement of age, Lincoln Life will make adjustments to the benefit to reflect the correct information. Lincoln Life is relieved and discharged from any liability and responsibility with respect to benefits provided in reliance upon information You furnish. 12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior written consent. A Participant or Beneficiary under this Contract may not, unless permitted by law, assign or encumber any payment due under this Contract. 12.7 MARKET EMERGENCIES: If transactions are to be made to or from the Variable Investment Division, Lincoln Life may not suspend the right of redemption or delay payment for more than seven (7) calendar days after tender for redemption, except for (1) any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings); (2) any period when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the Accumulation Unit Value is not reasonably practicable; or (3) for such other periods as the Securities and Exchange Commission by order may permit for the protection of the Participants. 12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed Interest Division, Lincoln Life may defer the payment for the period permitted by the law of the state in which this Contract was delivered but not more than six (6) months after a written election is received by Lincoln Life. During the period of deferral, interest at the then current interest rate(s) will continue to be credited to a Participant's Account in the Guaranteed Interest Division. 12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant Account balances any premium tax levied as a result of the existence of Participant Accounts by any state or other governmental entity. 30 12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life, physically or mentally incapable of personally receiving and giving a valid receipt for any payment due him under this Contract, Lincoln Life may, unless and until claim shall have been made by a duly appointed legal guardian or conservator of the person and property of such person, make such payment or any part thereof to such other person or institution which, in the judgment of Lincoln Life, is then contributing toward or providing for the care and maintenance of such person. In no event will any such payment exceed the maximum allowed under the applicable law of the state in which this Contract is delivered. Such payment shall fully discharge Lincoln Life of its obligations to the extent of the payment. Lincoln Life will make any payment which has become due to a Participant or an Annuitant and has not been paid prior to his death, to the Participant's Beneficiary or Beneficiaries, his executors or administrators. If no Beneficiary or personal representative has been named, Lincoln Life may make payment to any one or more of the surviving members of the following classes of relatives; spouse, children, grandchildren, brothers, sisters, and parents. Such payment shall fully discharge Lincoln Life for all liability to the extent of the payment. 12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the survival of any person, evidence of such person's survival must be furnished to Lincoln Life, either by such person's endorsement of the check drawn for such payment, or by other satisfactory means. 12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon the strict performance of any provision or condition of this Contract shall neither constitute a waiver of Lincoln Life's rights to perform or require performance of such provision or condition, nor stop Lincoln Life from exercising any other rights it may have in such provision, condition, or otherwise in this Contract or any Plan. 12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information establishing any right or conferring any benefit upon any Participant or Beneficiary, such receipt shall be deemed to take place on any Business Day that such information is received. 12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is determined to be invalid, the remainder of the provisions shall remain in full force and effect. 12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as a Unit Investment Trust under the Investment Company Act of 1940. As such, the assets of each Sub-Account are invested in a registered management investment company (mutual fund). 31 The Separate Account will be legally separated from Lincoln Life's other accounts. The Separate Account's assets will, at the time during the year that adjustments in the reserves are made, have a value of at least equal to the reserves and other contract liabilities with respect to the Separate Account, and at all other times, will have a value approximately equal to, or in excess of, such reserves and liabilities. The portion of the assets having a value equal to, or approximately equal to, the reserves and contract liabilities will not be chargeable with liabilities arising out of any other business which Lincoln Life may conduct. Lincoln Life reserves the right, subject to compliance with applicable law, including approval by You or the Participants if required by law, (1) to create additional Sub-Accounts, (2) to combine or eliminate Sub- Accounts, (3) to transfer assets from one Sub-Account to another, (4) to transfer assets to the General Account and other separate accounts, (5) to cause the deregistration and subsequent re-registration of the Separate Account under the Investment Company Act of 1940, (6) to operate the Separate Account under a committee and to discharge such committee at any time, and (7) to eliminate any voting rights which You or Participants may have with respect to the Separate Account, (8) to amend the Contract to meet the requirements of the Investment Company Act of 1940 or other federal securities laws and regulations, (9) to operate the Separate Account in any form permitted by law, (10) to substitute shares of another fund for the shares held by a Sub-Account, and (11) to make any change required by the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, or the Securities Act of 1933, to the extent not provided in Section 12.2. 12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under this Contract directly to a Participant or Beneficiary at the last known address on file with Lincoln Life. 12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate upon Lincoln Life's receipt of a duly completed participation enrollment form. If the Participant chooses not to participate under this Contract, he may exercise his Free-look right by sending a written notice to Lincoln Life that he does not wish to participate under this Contract within ten (10) days after the date the Certificate is received by the Participant. For purposes of determining the date on which the Participant has sent written notice, the postmark date will be used. If a Participant exercises his Free-look right in accordance with the foregoing procedure, Lincoln Life will refund in full the Participant's aggregate Contributions less aggregate withdrawals, or if greater, with respect to Contributions to the Variable Investment Division, the Participant's Account balance in the Variable Investment Division on the date the canceled Certificate is received by Lincoln Life. 32 ATTACHMENT I SYSTEMATIC WITHDRAWAL OPTION The formula for the interest equivalency amount (IEA) is: 29.5/366 IEA = ACCT.BAL x ( (1 + I ) - 1) WHERE: IEA is the Interest Equivalency Amount. ACCT. BAL. is the Participant's Account balance at the later of: the beginning of the contract year and the most recent date on which the credited interest rate changed. I is the interest rate currently being credited to the contract EXAMPLE: The Account balance at the beginning of the year is one hundred thousand dollars ($100,000) and the interest rate credited to the contract is six percent (6.00%). The Interest Equivalency Amount for each month of the current year is: 29.5/366 IEA = $100,000 x (1.06 - 1) = $470.76 33 EX-99.4.C 4 GROUP VARIABLE ANNUNITY III CONTRACT [LETTERHEAD OF LINCOLN NATIONAL LIFE INSURANCE CO.] ------------------------------------------------- GROUP VARIABLE ANNUITY CONTRACT NO.: EFFECTIVE DATE: CONTRACTHOLDER: (Herein referred to as "You" or "Your") THIS CONTRACT WAS DELIVERED IN THE [State/Commonwealth of ] and is subject to the laws of that jurisdiction. Lincoln Life by this Contract agrees to provide benefits for Participants in accordance with the terms and conditions of the Contract. The entire Contract consists of the provisions on the following pages, and the Application, including any amendments, schedules, or endorsements. IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne, Indiana on this day of , 20 , and caused this Contract to be in full force as of its Effective Date as set forth above. /s/ Jon A. Boscia /s/ Kelley D. Clevenger Jon Boscia, President Kelly D. Clevenger, Vice President Non-Participating PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. 1 TABLE OF CONTENTS I. CONTRACT SPECIFICATIONS II. DEFINITIONS III. CONTRIBUTIONS IV. GUARANTEED INTEREST DIVISION V. VARIABLE INVESTMENT DIVISION VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS VII. WITHDRAWALS AND DISTRIBUTIONS VIII. DEATH BENEFITS IX. PAYOUT ANNUITIES X. LOANS XI. DISCONTINUANCE AND TERMINATION OF CONTRACT XII. GENERAL PROVISIONS 2 ARTICLE I - CONTRACT SPECIFICATIONS 1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of all Participants under this Contract shall be twenty thousand dollars ($20,000). This minimum figure is for aggregate annual Contributions, not for each Participant. 1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L 1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT: A. Guaranteed Interest Division B. Variable Investment Division 1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD: Unlimited transfer requests may be made between Sub-Accounts by a Participant each calendar year. During any one (1) calendar year, a Participant may make one (1) transfer from the Guaranteed Interest Division to the Variable Investment Division, or one (1) withdrawal from the Guaranteed Interest Division in an amount not to exceed twenty percent (20%) of the Participant's Account balance in the Guaranteed Interest Division. 1.5 ANNUAL ADMINISTRATION CHARGE: Twenty-five dollars ($25) per Participant. Twenty-five dollars ($25) per Participant who allocates a contribution, during the year ending on a Participation Anniversary, to any one (1) or more of the Sub-Accounts established in the Variable Investment Division. 1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%). 1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan 1.8 PLAN NAME: 1.9 EMPLOYER: 1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the total Account balance is twenty-five thousand dollars ($25,000), or greater, such amount will be waived. 3 ARTICLE II - DEFINITIONS 2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of increases to, decreases from and accumulations in each Sub-Account during the Accumulation Period. 2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each Sub-Account on any Valuation Date. 2.3 ACCUMULATION PERIOD: The period commencing on a Participant's Participation Date and terminating when the Participant's Account balance is reduced to zero, either through withdrawal(s), conversion to an annuity, imposition of charges, payment of a Death Benefit or a combination thereof. 2.4 ANNUITANT: The person receiving annuity payments under the terms of this Contract. 2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first annuity payment to the Annuitant as required by the Retired Life Certificate. This date, as well as the date each subsequent annuity payment is made, will be the first day of a calendar month. 2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied toward the purchase of an Annuity. 2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount in determining the dollar amount of an annuitant's annuity payments for Guaranteed Annuities or the initial payment for Variable Annuities. 2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first day of a calendar month. For Variable Annuities, this is the Valuation Date ten (10) business days prior to the first day of a calendar month. 2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation Period, during which an Annuitant's annuity payments are made. 2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating the amounts of annuity payments to be made from each Sub-Account during the Annuity Period. 2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub- Account on any Valuation Date. 4 2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account balance in the event of the Participant's death during the Accumulation Period or the person(s) designated to receive any applicable remainder of an annuity in the event of the Annuitant's death during the Annuity Period. 2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange are customarily open for business. 2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant outlining the basic provisions of the Contract. A Retired Life Certificate is issued to each Annuitant outlining the basic provisions of his Annuity. 2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this Contract including any amount transferred from another contract. 2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment Division named in Section 1.3. 2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the Separate Account specified in Section 1.2 or any other separate account. 2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is reduced when a withdrawal occurs, including any applicable Annual Administration Charge. 2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the amount of each payment as long as the annuity is payable. 2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for these and other contracts for which Lincoln Life guarantees the principal amount and interest credited thereto, subject to any fees and charges as set forth in this Contract. Amounts allocated to the Guaranteed Interest Division are part of the General Account. 2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office in Fort Wayne, Indiana. All correspondence and inquiries should be submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME 04101-5001. 2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant Account less any net Withdrawal Amounts, outstanding loan (including principal and due and accrued interest) and amounts converted to a Payout Annuity. 2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal occurs. 2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains a Participant's Account. 5 2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the Accumulation Period, the total balance of which equals the Participant's Account balance in the Variable Investment Division plus the Participant's Account balance in the Guaranteed Interest Division. 2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year intervals from that Participant's Participation Date. If an anniversary occurs on a non-Business Day, it is treated as occurring on the next Business Day. 2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to the date on which the first Contribution on behalf of that Participant under this Contract is received by Lincoln Life. A Participant will receive a new Participation Date if such Participant makes a Total Withdrawal as defined in Section 7.2 and Contributions on behalf of the Participant are resumed under any Contract. 2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary and ending the day before the next Participation Anniversary, except for the first Participation Year that begins with the Participation Date. 2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this Contract to a person. A Payout Annuity may be either a Guaranteed Annuity or a Variable Annuity. 2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable Investment Division that invests unallocated contributions in shares of a money market mutual fund. Lincoln Life does not guarantee the principal amount or investment results. 2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax benefits under Section 403(b) of the Internal Revenue Code of 1986 and under which this Contract is authorized. 2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a group of assets segregated from Lincoln Life's General Account whose income, gains and losses, realized or unrealized, are credited to or charged against the Separate Account without regard to other income, gains or losses of Lincoln Life. Additional information is provided in Section 12.15. 2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division that invests in shares of a corresponding mutual fund. 2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are computed on each Valuation Date as of the close of trading on the New York Stock Exchange. 2.35 VALUATION PERIOD: A period used in measuring the investment experience of each Sub-Account. The Valuation Period begins at the close of trading on the New York Stock Exchange on one Valuation Date and ends at the corresponding time on the next Valuation Date. 6 2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in accordance with the investment results of the selected Sub-Account(s). 2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that is maintained by Lincoln Life for this and other Section 403(b) Lincoln Life contracts for which Lincoln Life does not guarantee the principal amount or investment results. Amounts allocated to the Variable Investment Division are part of the Separate Account. 2.38 YOU or YOUR: The Contractholder named on the face page of this Contract. 7 ARTICLE III - CONTRIBUTIONS 3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be credited to the Participant's Account no later than two (2) Business Days after it is received by Lincoln Life if it is preceded or accompanied by a completed enrollment form containing all the information necessary for processing the Participant's Contribution. 3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated to the Divisions and Sub-Accounts according to the percentages requested by the Participant. The allocation percentage can be any whole percent and may be changed on an unlimited basis per year. You or the Participant shall notify Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life of such changes. 3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to Lincoln Life specifying the amount being contributed on behalf of each Participant. You shall forward such Contributions and provide such allocation information in accordance with procedures established by Lincoln Life. The Contributions shall be allocated among the Guaranteed Interest Division and each Sub-Account in accordance with the percentage information provided by the Participant subject to the terms of the Plan. 3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions transferred from another Contract, Lincoln Life must be provided with the following information in a form acceptable to Lincoln Life: (a) The source of the Contributions transferred (e.g., salary reduction, employer match or post-tax Contributions). Lincoln Life will record all such transferred amounts where no source information is provided as salary reduction Contributions. (b) Identification of Contributions transferred as Contributions made or earnings credited: (i) prior to January 1, 1987; (ii) during 1987 and 1988; or (iii) subsequent to December 31, 1988. Amounts not so identified will be treated as attributable to period (iii) for purposes of Sections 7.4 and 7.5. 3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a calendar year for a Participant are subject to the limits imposed under Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the Code), as it may be amended from time to time. Lincoln Life assumes no responsibility for monitoring these limits for a Participant. 8 Elective deferrals made under the terms of a salary reduction agreement must not exceed the annual limits on elective deferrals as provided in IRC Section 402(g). Contributions in excess of such amounts may be distributed upon request of the Contractholder and Participant by Lincoln Life as permitted by law. 3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated as of the Business Day that Lincoln Life receives the Contribution and Lincoln Life will credit interest beginning with the next calendar day following the Business Day that Lincoln Life receives the Contribution. For a Variable Investment Division Sub-Account Contribution, Lincoln Life will credit a Participant's Account with the number of Accumulation Units for each Sub-Account selected by the Participant with the number of Accumulation Units equal to the Contribution Amount divided by the Accumulation Unit Value which is next computed following Lincoln Life's receipt of the Contribution. 3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 from each Participant's Account each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Account. When a Total Withdrawal of a Participant's Account, as defined in Section 7.2, occurs on a date other than the last Business Day of the month in which his Participation Anniversary occurs, Lincoln Life will first deduct the amount stated in Section 1.5 from his Participant's Account. ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in Section 1.5 on a pro-rata basis from the Participant's Variable Investment Division Account balance each year on the last Business Day of the month in which his Participation Anniversary occurs unless the Contractholder pays the charge in a single payment. If the Participant's Variable Investment Division Account balance is less than this amount on that day, Lincoln Life will deduct the entire balance from his Variable Investment Division Account. When a Participant requests, on a date other than the last Business Day of the month in which his Participation Anniversary occurs, (a) a withdrawal, or (b) a transfer, from the Variable Investment Division, which would leave a remaining balance of less than the Annual Administration Charge defined in Section 1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from the Participant's Variable Investment Division Account balance prior to the Withdrawal or Transfer. 3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not been received for a Participant, Lincoln Life will deposit such Contributions to the 9 Pending Allocation Account as described in ARTICLE II- DEFINITIONS, unless such Contributions are designated to another Account in accordance with the Plan. Lincoln Life will follow up with the Contractholder monthly for a period of ninety (90) days for enrollment information for Participants with deposits in the Pending Allocation Account. Within two (2) business days of receipt of a completed enrollment form, the Participant's Account balance in the Pending Allocation Account will be transferred to the Divisions and/or Sub-Accounts according to the percentages requested by the Participant. When the completed enrollment form is received, the Participation Date will be the date on which the first Contribution on behalf of the Participant was deposited into the Pending Allocation Account. If an enrollment form is not received after the ninety (90) day notice, a Participant's Account balance in the Pending Allocation Account will be refunded to the Contractholder within one hundred five (105) days of the date of the initial Contribution. Contributions received after a refund while there is still no allocation information, will be deposited to the Pending Allocation Account. The Pending Allocation Account will only be used for the purpose mentioned above; Participants may not direct a portion of their Contributions to this Account. Contributions deposited in the Pending Allocation Account will not be afforded the same rights as Contributions under this Contract. The following Articles and/or Sections under this Contract will not be applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v) ARTICLE X - LOANS. 10 ARTICLE IV - GUARANTEED INTEREST DIVISION 4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar value of a Participant's Account balance in the Guaranteed Interest Division as of a date will be equal to the sum of: (a) Contributions allocated, on behalf of the Participant, to the Guaranteed Interest Division on or prior to that date, and (b) Amounts transferred, on behalf of the Participant, to the Guaranteed Interest Division from the Variable Investment Division on or prior to that date, less any; (c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on behalf of the Participant, on or prior to that date; and (d) Amounts transferred, on behalf of the Participant, to the Variable Investment Division on or prior to that date; and (e) Applicable charges to the Participant's Account on or prior to that date; and (f) Annuity Conversion Amounts, on behalf of the Participant, on or prior to that date, plus any; (g) Interest credited to the Participant's Account balance in the Guaranteed Interest Division on or prior to that date. 4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the Participant's Account balance in the Guaranteed Interest Division, using the previous day's ending balance. The rate of interest credited each day, if compounded for three hundred sixty-five (365) days, yields the annual interest rate in effect for the day. Lincoln Life will declare in advance a guaranteed interest rate which will be effective for all amounts in the Participant's Account balance in the Guaranteed Interest Division during the designated year. This rate will never be less than three percent (3%). However, this minimum rate will not be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT) under this Contract. Lincoln Life may also declare in advance separate interest rate guarantees which are in excess of the guaranteed interest rate for some or all of the Participant's Account balance in the Guaranteed Interest Division for specific period(s) during the designated year. 11 ARTICLE V - VARIABLE INVESTMENT DIVISION 5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The Participant's Account balance in the Variable Investment Division is equal to the sum of the dollar value of a Participant's Account balance in each Sub-Account as of the end of a Valuation Period which will be equal to the product of: (a) The Participant's number of Accumulation Units as of the end of that Valuation Period; times (b) The Accumulation Unit Value as of the end of that Valuation Period. 5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in a Sub-Account as of the end of any Valuation Period is the number of Accumulation Units the Participant had in that Sub-Account as of the end of the preceding Valuation Period; plus (a) The number of Accumulation Units attributable to amounts deposited to or transferred to that Sub-Account during the current Valuation Period; minus (b) The number of Accumulation Units attributable to amounts transferred from, converted to an annuity, removed as a charge, paid as a death benefit, or withdrawn from that Sub-Account during the current Valuation Period. 5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account was set initially at ten dollars ($10), except for the Index Account which was set at nine and nine hundred six one thousands ($9.9060) of a dollar. Subsequent Accumulation Unit Values are determined by multiplying; (a) The Net Investment Factor for the current Valuation Period by; (b) The Accumulation Unit Value as of the end of the immediately preceding Valuation Period. 5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the investment experience of a Sub-Account net of the Mortality and Expense Risk Charge as defined in Section 5.5. The Net Investment Factor for a Valuation Period is equal to (a) divided by (b) with the result multiplied by (c) and adjusted by the amount per share of any taxes which are incurred by Lincoln Life because of the existence of the Sub-Account; 12 where (a) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the Valuation Period, plus; the amount per share of any dividend or capital gain distribution from the underlying mutual fund held by the Sub-Account during the Valuation Period, where (b) is; the net asset value per share of the underlying mutual fund held by the Sub-Account as of the end of the immediately preceding Valuation Period, where (c) is; one (1.00) minus the Annual Mortality and Expense Risk Charge shown in Section 1.6 to the n/365th power where n equals the number of calendar days since the immediately preceding Valuation Date. 5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate Lincoln Life for its assumption of mortality and expense risks under this Contract. This charge is shown on an annualized basis in Section 1.6 and is deducted on a daily basis as described in Section 5.4. This charge may not be increased without the approval of a majority of all affected Lincoln Life contractholders. 13 ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS 6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in Section 1.4, Participants may transfer all or part of their Account balance in any Division or Sub-Account to another Division or Sub-Account. You or the Participant may make a transfer request by notifying Lincoln Life in writing in a form acceptable to Lincoln Life or by telephone in accordance with procedures published by Lincoln Life. 6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of the Annuitant's Annuity Conversion Amount. 14 ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS 7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation Period, a Participant may withdraw from any or all Divisions, subject to the limitations stated in Section 7.6, and to the restrictions stated in Section 7.4, all or part of the Participant's Account balance in the Division or Sub-Accounts remaining after reductions for any applicable Annual Administration Charge (imposed on Total Withdrawals), premium taxes and outstanding loan, including the loan security thereon. Annuity Conversion Amounts are not considered withdrawals. All withdrawal requests must be submitted in a form acceptable to Lincoln Life and must indicate the amount and the Division(s) from which the withdrawal is to be made. Lincoln Life reserves the right to delay payment of Guaranteed Interest Division withdrawal amounts per Section 12.8. 7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will occur when a Participant who has no outstanding loans (a) requests the liquidation of his entire Account balance, or (b) requests an amount such that the amount requested results in a remaining Participant's Account balance being less than the applicable Annual Administration Charge as defined in Section 1.5, in which case, the request is treated as if it were a request for liquidation of the Participant's entire Account balance. The Participant's Active Life Certificate must be surrendered to Lincoln Life when a Total Withdrawal of a Participant's Account occurs. A Participant refund under the Free-look provisions of Section 12.17 is not considered a Total Withdrawal under this Article. 7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will occur when: (a) A Participant who has an outstanding loan makes a withdrawal; or (b) A Participant who has no outstanding loans, requests an amount less than a total withdrawal. 15 7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject to the requirements set forth in Section 403(b) of the Code and regulations thereof. (a) Withdrawal Requests for Participants under Section 403(b) Plans Subject to Title I of ERISA: You must make withdrawal requests on behalf of Participants. All withdrawal requests will require Your written authorization and written documentation specifying the portion of the Participant's Account balance which is available for distribution to the Participant. (b) Withdrawal Requests for Participants under Section 403(b) Plans not --- Subject to Title I of ERISA: Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction contribution made and/or earnings credited prior to January 1, 1989, (including transferred amounts recorded as such pursuant to Section 3.4), may be withdrawn for any reason. Any portion of the Participant's Account balance that has been recorded by Lincoln Life as a salary reduction Contribution made and/or earnings credited after December 31, 1988, (including transferred amounts recorded as such pursuant to Section 3.4), are subject to the withdrawal restrictions stated in Section 403(b) of the Code. Participants must certify to Lincoln Life (and provide supporting information, if requested), that an event permitting withdrawal has occurred and that Lincoln Life may rely on such representation in granting the withdrawal request. 7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section 403(b)(10) of the Code and regulations thereunder require that distributions be made from this Contract in a manner which satisfies requirements similar to the requirements of Section 401(a)(9) including the incidental death benefit requirements of Section 401(a)(9)(G). (1) Section 401(a)(9) requires that: (a) the Participant's Account be distributed not later than the required beginning date; or (b) the Participant's Account be distributed not later than the required beginning date, over the life of the Participant or over the lives of the Participant and a designated Beneficiary. (2) A Participant may choose to have the Participant's Account distributed in one of the following manners: (a) As a lump sum payment; (b) As an annuity meeting the requirements of Section 401(a)(9) of theCode; 16 (c) As an annual distribution where the amount distributed each calendar year is at least an amount equal to the quotient obtained by dividing: (a) the amount of the Participant's Account required to be distributed as of December 31 of the calendar year immediately preceding the calendar year for which the distribution is being made; by (b) the life expectancy of the Participant, or the life expectancy of the Participant and the Beneficiary; or (d) A combination of the above. With respect to (c) and (d) above, the life expectancy of the Participant and a surviving spouse Beneficiary may be recalculated, but not more frequently than annually. A non-spouse Beneficiary's life expectancy may not be recalculated. 7.6 LIMITATIONS ON WITHDRAWALS FROM THE GUARANTEED INTEREST DIVISION: A Participant may make a withdrawal from the Guaranteed Interest Division for a specified percentage of their Participants Account balance based on the following schedule:
(a) WHEN A WITHDRAWAL IS REQUESTED THE PERCENTAGE OF AND ONE OR MORE OF THE THE PARTICIPANT'S FOLLOWING CONDITIONS IS MET: ACCOUNT BALANCE AVAILABLE IS: The Participant has died 100% The Participant has incurred a disability for 100% which he is receiving Social Security payments The Participant has attained age fifty-nine and 100% one-half (59 1/2) The Participant has separated from service with 100% the Contractholder and is age fifty-five (55) The Participant has separated from service with 100% the Contractholder The Participant has demonstrated a financial 100% hardship need
(b) In addition, during one (1) calendar year, a Participant may make one (1) withdrawal or transfer from the Guaranteed Interest Division in an amount not to exceed twenty percent (20%) of the Guaranteed Interest Division Account Balance. Any Participant stating their intention to liquidate their Guaranteed Interest Division Account balance, however, may make one (1) withdrawal or transfer for (5) consecutive calendar years from their Guaranteed Interest Division Account balance in the following percentage: 17 Year Request Received Percentage of Guaranteed by Lincoln Life Interest Division Available 1 20% 2 25% 3 33 1/3% 4 50% 5 The five (5) consecutive withdrawal or transfers may not be submitted more frequently than twelve (12) months apart. Lincoln Life also reserves the right to require that any Participant stating their intention to liquidate their Guaranteed Interest Division Account balance stop contributions to the Contract. (c) There are no limitations on withdrawals from the Variable Investment Division. Lincoln Life requires reasonable proof necessary to verify that the withdrawal meets the conditions described above in Section 7.6(a) and such proof must be submitted with the withdrawal request. 7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social Security disability benefits, or (c) is separated from service with the Contractholder may elect this option. A Participant must also have a vested Participant Account balance of at least ten thousand dollars ($10,000) of pre-tax Contributions under this Contract at the date of the election. Amounts held for a spousal payee under a Qualified Domestic Relations Order (QDRO) shall be recognized as eligible for the Systematic Withdrawal Option. Any spousal payee who wishes to elect this distribution option must also meet the minimum ten thousand dollars ($10,000). Account balance requirement and either the age or disability requirement as discussed above. A Participant may elect to receive monthly, quarterly, semi-annual, or annual payments in a flat amount or payments on a monthly basis for an interest equivalency amount. An interest equivalency amount is an approximation of the interest earned between each payment period based upon the interest rate in effect at the beginning of each respective payment period. This amount will be determined by Lincoln Life. (See Attachment I for illustration.) A Participant may change the frequency, payment type, or payment amount of his Systematic Withdrawal Option by submitting a request in writing on a form acceptable to Lincoln Life. A Participant may make such a change only once during each calendar year. 18 A Participant may at any time direct Lincoln Life to cease payments under this option provided the request is made in writing. A Participant who chooses to stop receiving systematic withdrawals may not request that any systematic withdrawal payments begin again until the next calendar year. Systematic withdrawals shall be withdrawn from amounts allocated to the Guaranteed Interest Division of the Participant's Account balance. If the balance of the Guaranteed Interest Division is not sufficient to meet the payment amount requested, the Participant, in writing, may direct Lincoln Life on a form acceptable to Lincoln Life to transfer the appropriate amount to the Guaranteed Interest Division; otherwise, such payment will cease. Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated in Section 1.10 from the Participant's Account balance each time a Systematic Withdrawal Option is established. Payments under this option shall stop upon the earliest of the following events: (a) On the date of the Participant's death. A Beneficiary who is a spouse may elect this option by requesting it in writing on a form acceptable to Lincoln Life, unless election of this form of benefit would violate any other requirements of this contract. The spousal Beneficiary must meet the ten thousand dollar ($10,000) minimum Account balance requirement prior to electing the Systematic Withdrawal Option; or (b) When there is an insufficient Participant Account balance after deducting the Annual Administration Charge, if any, to pay the amount requested; or (c) The Participant fails to meet the requirements of the Systematic Withdrawal Option as outlined above in the first (1st) paragraph of this Section. If a disabled or terminated Participant, who is currently receiving a Systematic Withdrawal Option payment, returns to service with the Contractholder, the Contractholder or Participant must notify Lincoln Life in writing within thirty (30) days from the date of return to service. Lincoln Life reserves the right to discontinue the Systematic Withdrawal Option payment under these circumstances. If a Participant wishes to exercise this option under another Lincoln Life Annuity Contract, such request shall be considered separate from this Contract and shall follow the Systematic Withdrawal Option rules under that Annuity Contract, if permitted. Lincoln Life may, at its option, discontinue the Systematic Withdrawal Option under this Contract at any time provided You are given at least thirty (30) days advance written notice. 19 7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or Beneficiary may elect this option for any distribution that qualifies as an Eligible Rollover Distribution as defined by Section 402(c) of the Internal Revenue Code and that meets all the following requirements: (1) The distribution must be paid directly to either a single Individual Retirement Account or to a single Tax Deferred Annuity. The check, wire, or other form of remittance shall be made payable to the trustee, custodian, or financial institution sponsoring the Individual Retirement Account or Tax Deferred Annuity. The form of remittance will not be an instrument that can be negotiated by the Participant. (2) The Participant must provide, in a form acceptable to Lincoln Life, all information necessary to make the payment to an Individual Retirement Account or Tax Deferred Annuity. (3) The Participant or Beneficiary may not revoke a request for payment under this option for any payment after Lincoln Life has received a written request for a direct rollover. 20 ARTICLE VIII - DEATH BENEFITS 8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant occurs during the Accumulation Period, Lincoln Life will pay the Beneficiary, if one is living, the greater of the following amounts: (a) The Net Contributions, or (b) The Participant's Account balance less any outstanding loan (including principal and due and accrued interest). Lincoln Life will calculate the Death Benefit as of the end of the Valuation Period during which it receives both satisfactory notification of the Participant's death, pursuant to Section 8.2, and the election of a form of benefit pursuant to Section 8.3. If no election is made pursuant to Section 8.3 within sixty (60) days following Lincoln Life's receipt of satisfactory notice of death, the Death Benefit will be calculated as of the end of the Valuation Period during which that sixtieth (60th) day occurs. If Lincoln Life makes a withdrawal payment pursuant to a Participant request prior to receiving notice that the Participant has died, but subsequent to the Participant's death, Lincoln Life will deduct that payment from each of (a) and (b) above in calculating the Death Benefit. 8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's death no later than six (6) months from the Participant's date of death in order for the Beneficiary to receive the Death Benefit amount described in Section 8.1(a) above. Such notification must be in a form satisfactory to Lincoln Life. Beneficiaries for whom notification of a Participant's death is received more than six (6) months after the Participant's date of death shall receive the Death Benefit amount described in Section 8.1(b) above. 8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln Life receives satisfactory notification of the Participant's death, the Beneficiary must make an election to have the Death Benefit applied in one of the following ways: (a) As a lump sum payment to the Beneficiary; or (b) Towards an annuity to be distributed in substantially equal installments over the life expectancy of the Beneficiary or a period certain not exceeding the life expectancy of the Beneficiary; or (c) A combination of the above. A Beneficiary who does not make an election pursuant to this section within sixty (60) days after Lincoln Life receives notification of the Participant's death will receive a lump sum payment calculated in accordance with Section 8.1(b) above. 21 If the Beneficiary is someone other than the spouse of the deceased Participant, the Code provides that the Beneficiary may not elect an annuity which would commence later than December 31 of the calendar year following the calendar year of the Participant's death. If a non-spousal Beneficiary elects to receive payment in a single lump sum, such payment must be received no later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. If the Beneficiary is the surviving spouse of the deceased Participant, under the Code, distributions are not required to begin earlier than December 31 of the calendar year in which the Participant would have attained age seventy and one-half (70-1/2). If the surviving spouse dies before the date on which annuity distributions commence, then, for purposes of the Death Benefit, the surviving spouse shall be deemed to be the Participant. If there is no living named Beneficiary on file with Lincoln Life at the time of a Participant's death, Lincoln Life will pay the Death Benefit to the Participant's estate in a single lump sum upon receipt of satisfactory proof of the Participant's death, but not later than December 31 of the fourth (4th) calendar year following the calendar year of the Participant's death. Valuation of the Death Benefit shall occur as of the end of the Valuation Period during which due proof of the Participant's death is received by Lincoln Life. 8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity Period, the Beneficiary, if any, or the Annuitant's estate will receive the amount payable, if any, according to the in-force annuity options. Any remaining Participant's Account balance will be paid in accordance with the provisions of this Article. 22 ARTICLE IX - PAYOUT ANNUITIES 9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a distribution under the Code or a Beneficiary of a deceased Participant may notify Lincoln Life in writing in a form acceptable to Lincoln Life that the Participant or the Beneficiary is electing to convert all or part of the Participant's Account balance or Death Benefit to a Payout Annuity option available under this Contract. Upon being notified of such an election, Lincoln Life shall calculate the amount to be converted to a Payout Annuity as either the Participant's Account balance, or a portion thereof, or the Death Benefit as of the initial Annuity Payment Calculation Date, as appropriate, less the charge for premium taxes, if any. If the Participant's Account balance or the Beneficiary's Death Benefit is less than two thousand dollars ($2,000) or if the amount of the first scheduled payment is less than twenty dollars ($20), Lincoln Life may, at its option, cancel the Payout Annuity and pay the Participant or Beneficiary his entire Account balance or Death Benefit in a lump sum. 9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. 9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable Annuity for each Sub-Account is determined by dividing his Annuity Conversion Amount in each Sub-Account as of the initial Annuity Payment Calculation Date by the applicable Annuity Conversion Factor as defined in Section 9.4. The amount of the Annuitant's subsequent Variable Annuity payment for each Sub-Account is determined by: (a) Dividing the Annuitant's initial Variable Annuity payment amount by the Annuity Unit Value for that Sub-Account selected for his interest rate option as described in Section 9.4 as of his initial Annuity Payment Calculation Date; and (b) Multiplying the resultant number of annuity units by the Annuity Unit Values for the Sub-Account selected for his interest rate option for his respective subsequent Annuity Payment Calculation Dates. The Annuity Unit Value for all Sub-Accounts for all interest rate options will initially be set at ten dollars ($10). Each subsequent Annuity Unit Value for a Sub-Account for an interest rate option is determined by: Dividing the Accumulation Unit Value for the Sub-Account as of the subsequent Annuity Payment Calculation Date (APCD) by the Accumulation Unit Value for the Sub-Account as of the immediately preceding APCD, 23 Dividing the resultant factor by one (1.00) plus the interest rate option to the n/365 power where n is the number of days from the immediately preceding APCD to the subsequent APCD, and Multiplying this factor times the Annuity Unit Value as of the immediately preceding APCD. 9.4 BASIS OF ANNUITY CONVERSION FACTORS: (a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may be used by Lincoln Life under this Contract are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate of three percent (3.0%). From time to time, lower conversion factors may be used by Lincoln Life. (Lowering the conversion factor will increase the amount of the annuity payment.) (b) Variable Annuities - The Annuity Conversion Factors which are used to determine the initial payments are based on the 1983 Individual Annuity Mortality Table, set back four (4) years, and an interest rate in an integral percentage ranging from zero to six percent (0 to 6.00%) as selected by the Annuitant. 9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are available: (a) Life (b) Life with payments guaranteed for ten (10), fifteen (15) or twenty (20) years (c) Joint and Survivor (d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years (e) Other offered by Lincoln Life. To the extent option (d) is elected for a Variable Annuity, the Annuitant may request at any time during the payment period that the present value of any remaining installments be paid in one lump sum. 9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a Participant, or the Beneficiary of a deceased Participant, Lincoln Life will issue to the Annuitant an appropriate Certificate evidencing Lincoln Life's obligations. 24 ARTICLE X - LOANS 10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if permitted by the applicable Section 403(b) Plan, may apply for a loan under this Contract by completing a loan application available from Lincoln Life. Loans are secured by the Participant's Account balance in the Guaranteed Interest Division. 10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to the restrictions imposed under Section 72(p) of the Code, as it may be amended from time to time. Additionally, the initial amount of a Participant's loan may not exceed ninety percent (90%) of the Participant's Account balance in the Guaranteed Interest Division. 10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one thousand dollars ($1,000). 10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan outstanding at any time and may not establish more than one loan in any six (6) month period. However, a Participant may renegotiate an outstanding loan balance once during the term of the loan. 10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser of (a) the rate being credited in the Guaranteed Interest Division as of the date of the loan and (b) the Moody's Corporate Bond Yield Average, rounded to the nearest five basis points (0.05%) for the first month in the calendar quarter which precedes the date of the loan. The loan interest rate will remain fixed for the term of the loan, unless the initial interest rate on a hypothetical new loan to the Participant would be lower than the Participant's actual loan rate by more than fifty basis points (0.50%). In such case, the loan interest rate will be reduced to such lower rate as of the first day that such lower rate would hypothetically be effective. 10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan, Lincoln Life will subdivide his Participant's Account balance in the Guaranteed Interest Division by establishing a loan reserve account in an amount initially equal to the initial loan amount. Funds held in the loan reserve account are held as security for the loan and will accrue interest at a rate which is three percent (3.0%) below the loan interest rate. To the extent that the loan interest rate is subsequently reduced, the rate credited to funds in the loan reserve account will also be reduced in order to maintain the three percent (3.0%) differential. As the Participant makes repayments to Lincoln Life on the loan, an amount equal to the principal component of the repayment, plus the interest accrued in the loan reserve account, will be transferred from his loan reserve account back to his Participant's Account balance in the Guaranteed Interest Division. In addition, an amount equal to ten percent (10%) of the principal of the loan will be held as security to cover the interest should the Participant fail to make the required quarterly 25 payments of principal and interest. This amount will earn interest at the interest rate in effect in the Guaranteed Interest Division but will not be available for withdrawals. As the principal is reduced, the amount held as security will also be reduced. 10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly principal and interest payment within thirty (30) days of the payment due date, his loan will be in default and Lincoln Life will deduct from his loan reserve account and from his Participant's Account balance in the Guaranteed Interest Division the principal, due and accrued interest, and a loan default charge of 5%, as of the default date. Lincoln Life will also recharacterize the principal and due and accrued interest as a withdrawal. 10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to: (a) Delay making a loan for up to six (6) months from the date the loan application is received; or (b) With ninety (90) days written notice to You, amend any portion of the loan specifications with regard to applications for new loans; or (c) With ninety (90) days written notice to You, discontinue making new loans under this Contract. 10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount specified in Section 1.7 each time a loan is established. The amount will be withdrawn from the Participant's Account balance. 26 ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT 11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this Contract by written notice to Lincoln Life. This contract will be deemed discontinued on the later of the date You specify or the date the written notice is received by Lincoln Life. 11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option, discontinue this Contract in whole or in part if (a) You fail to meet the Minimum Contribution Amount specified in Section 1.1 or (b) a modification in this Contract is necessary in order to comply with Federal or State requirements, including the Employee Retirement Income Security Act of 1974, and You refuse to accept a substantially similar contract offered by Lincoln Life that incorporates such modification. Discontinuance pursuant to this Section shall be effective as of a date specified by Lincoln Life, provided You are given at least fifteen (15) days advance written notice in which to cure any remediable defaults. Discontinuance by Lincoln Life supersedes any date established under Section 11.1. 11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued under either 11.1 or 11.2 above: (a) No further Contributions will be accepted by Lincoln Life. (b) Participants will be allowed to request withdrawals subject to the restrictions set forth in Section 403(b) of the Code and regulations thereof. (c) Participants will be allowed to request transfers from each Sub- Account of the Variable Investment Division to the Guaranteed Interest Division. Transfers from the Guaranteed Interest Division to the Variable Investment Division are not allowed. Transfers among the Sub-Accounts of the Variable Investment Division are not allowed. (d) Participants will not be allowed to request loans. (e) Lincoln Life will send written notice to each Participant's last known address stating that the Contract is discontinued and that the Participant's remaining Account balance may be distributed in either a payout annuity conversion amount or subject to the five (5) consecutive year payout schedule in accordance with Section 7.6(b) with any remaining Account balance being distributed at the earlier of: (1) the Participant's attainment of age fifty-nine and one-half (59 1/2), or (2) the Participant's separation from service, or 27 (3) the Participant has died, or (4) the Participant has incurred a disability for which he is receiving Social Security Payments. 11.4 CONTRACT TERMINATION: This Contract will terminate when there are no participant Account balances under this Contract. 28 ARTICLE XII - GENERAL PROVISIONS 12.1 CONTRACT: This Contract, together with Your attached Application and any riders, constitutes the entire Contract between You and Lincoln Life. Lincoln Life is not a party to any Plan document, and is not responsible for the validity of any Plan or actions taken by You under that Plan. The terms of this Contract shall govern with respect to the rights and obligations of Lincoln Life, notwithstanding any contrary provisions or conditions of any trust or plan. Lincoln Life may rely on any action or information provided by You under the terms of this Contract and shall be relieved and discharged from any further liability to any party in acting at the direction and upon the authority of You. All statements made by You shall be deemed representations and not warranties. Lincoln Life may deactivate this Contract by prohibiting new Contributions and/or new Participants after the date of deactivation. Lincoln Life will give You not less than ninety (90) days notice of the date of deactivation. 12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by amendment or replacement. Such amendments will not, without Your consent, adversely alter (a) the minimum interest rate set forth in Section 4.2, (b) the maximum annuity conversion factors under Section 9.4, or (c) the amount or terms of any annuity benefit already selected under Section 9.1 prior to the effective date of the change. No change in this Contract will adversely affect the rights of a Participant with respect to Contributions received or annuities purchased before the effective date of the change unless: (a) Such amendments are made in order to comply with rulings, regulations and laws applicable to the program provided by this Contract; or (b) Your consent to the Amendment is obtained. Lincoln Life will give You not less than ninety (90) days notice prior to the effective date of any change made in accordance with this Section. 12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural includes the singular, the singular the plural and the masculine the feminine. 12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life with such facts and information as Lincoln Life may require for the administration of this Contract, including, upon request, the original or photocopy of any pertinent records You keep. All information that You furnish to Lincoln Life pursuant to this Contract, including the information pertaining to Contributions described in Article III, shall be legible, accurate and satisfactory in form to Lincoln Life. Such information shall be sent to a location designated by Lincoln Life. You shall make any determination required under this Contract pursuant to the terms of the Contract or required under ERISA and shall report that determination in writing to 29 Lincoln Life. Such determination shall be conclusive for the purpose of this Contract. Lincoln Life shall be fully protected in relying on the reports and other information furnished by You and need not inquire as to the accuracy or completeness of such reports and information. 12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract based upon misstated or omitted information, including but not limited to misstatement of age, Lincoln Life will make adjustments to the benefit to reflect the correct information. Lincoln Life is relieved and discharged from any liability and responsibility with respect to benefits provided in reliance upon information You furnish. 12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior written consent. A Participant or Beneficiary under this Contract may not, unless permitted by law, assign or encumber any payment due under this Contract. 12.7 MARKET EMERGENCIES: If transactions are to be made to or from the Variable Investment Division, Lincoln Life may not suspend the right of redemption or delay payment for more than seven (7) calendar days after tender for redemption, except for (1) any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings); (2) any period when trading in the markets normally utilized is restricted, or an emergency exists as determined by the Securities and Exchange Commission, so that disposal of investments or determination of the Accumulation Unit Value is not reasonably practicable; or (3) for such other periods as the Securities and Exchange Commission by order may permit for the protection of the Participants. 12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed Interest Division, Lincoln Life may defer the payment for the period permitted by the law of the state in which this Contract was delivered but not more than six (6) months after a written election is received by Lincoln Life. During the period of deferral, interest at the then current interest rate(s) will continue to be credited to a Participant's Account in the Guaranteed Interest Division. 12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant Account balances any premium tax levied as a result of the existence of Participant Accounts by any state or other governmental entity. 12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life, physically or mentally incapable of personally receiving and giving a valid receipt for any payment due him under this Contract, Lincoln Life may, unless and until claim shall have been made by a duly appointed legal guardian or conservator of the person and property of such person, make such payment or any part thereof to such other person or institution which, in the judgment of Lincoln Life, is then contributing toward or providing for the care and maintenance of such person. In no event will any such payment exceed the maximum allowed under the applicable law of the state in which this Contract is delivered. Such payment shall fully discharge Lincoln Life of its obligations to the extent of the payment. 30 Lincoln Life will make any payment which has become due to a Participant or an Annuitant and has not been paid prior to his death, to the Participant's Beneficiary or Beneficiaries, his executors or administrators. If no Beneficiary or personal representative has been named, Lincoln Life may make payment to any one or more of the surviving members of the following classes of relatives; spouse, children, grandchildren, brothers, sisters, and parents. Such payment shall fully discharge Lincoln Life for all liability to the extent of the payment. 12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the survival of any person, evidence of such person's survival must be furnished to Lincoln Life, either by such person's endorsement of the check drawn for such payment, or by other satisfactory means. 12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon the strict performance of any provision or condition of this Contract shall neither constitute a waiver of Lincoln Life's rights to perform or require performance of such provision or condition, nor stop Lincoln Life from exercising any other rights it may have in such provision, condition, or otherwise in this Contract or any Plan. 12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information establishing any right or conferring any benefit upon any Participant or Beneficiary, such receipt shall be deemed to take place on any Business Day that such information is received. 12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is determined to be invalid, the remainder of the provisions shall remain in full force and effect. 12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as a Unit Investment Trust under the Investment Company Act of 1940. As such, the assets of each Sub-Account are invested in a registered management investment company (mutual fund). The Separate Account will be legally separated from Lincoln Life's other accounts. The Separate Account's assets will, at the time during the year that adjustments in the reserves are made, have a value of at least equal to the reserves and other contract liabilities with respect to the Separate Account, and at all other times, will have a value approximately equal to, or in excess of, such reserves and liabilities. The portion of the assets having a value equal to, or approximately equal to, the reserves and contract liabilities will not be chargeable with liabilities arising out of any other business which Lincoln Life may conduct. Lincoln Life reserves the right, subject to compliance with applicable law, including approval by You or the Participants if required by law, (1) to create additional Sub-Accounts, (2) to combine or eliminate Sub- Accounts, (3) to transfer assets from one Sub-Account to another, (4) to transfer assets to the General Account and other separate accounts, (5) to cause the deregistration and subsequent re-registration of the Separate Account under the Investment Company Act of 1940, (6) to operate the Separate Account under a committee and to discharge such committee at any time, and (7) to eliminate any voting rights which You or Participants may have with respect to the Separate Account, 31 (8) to amend the Contract to meet the requirements of the Investment Company Act of 1940 or other federal securities laws and regulations, (9) to operate the Separate Account in any form permitted by law, (10) to substitute shares of another fund for the shares held by a Sub-Account, and (11) to make any change required by the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, or the Securities Act of 1933, to the extent not provided in Section 12.2. 12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under this Contract directly to a Participant or Beneficiary at the last known address on file with Lincoln Life. 12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate upon Lincoln Life's receipt of a duly completed participation enrollment form. If the Participant chooses not to participate under this Contract, he may exercise his Free-look right by sending a written notice to Lincoln Life that he does not wish to participate under this Contract within ten (10) days after the date the Certificate is received by the Participant. For purposes of determining the date on which the Participant has sent written notice, the postmark date will be used. If a Participant exercises his Free-look right in accordance with the foregoing procedure, Lincoln Life will refund in full the Participant's aggregate Contributions less aggregate withdrawals, or if greater, with respect to Contributions to the Variable Investment Division, the Participant's Account balance in the Variable Investment Division on the date the canceled Certificate is received by Lincoln Life. 32 ATTACHMENT I SYSTEMATIC WITHDRAWAL OPTION The formula for the interest equivalency amount (IEA) is: 29.5/366 IEA = ACCT.BAL x ( (1 + I ) - 1) WHERE: IEA is the Interest Equivalency Amount. ACCT. BAL. is the Participant's Account balance at the later of: the beginning of the contract year and the most recent date on which the credited interest rate changed. I is the interest rate currently being credited to the contract EXAMPLE: The Account balance at the beginning of the year is one hundred thousand dollars ($100,000) and the interest rate credited to the contract is six percent (6.00%). The Interest Equivalency Amount for each month of the current year is: 29.5/366 IEA = $100,000 x (1.06 - 1) = $470.76 33 EX-99.4.D 5 ENDORSEMENT TO GROUP ANNUNITY CONTRACT ENDORSEMENT (ENDORSEMENTS MAY BE MADE ONLY BY LINCOLN NATIONAL LIFE INSURANCE COMPANY AT ITS HOME OFFICE) The provisions of this Group Annuity Endorsement shall be effective [August 6, 1999]. This Group Annuity Endorsement is deemed to be attached to and made a part of Your [Contract] [Certificate]. Whenever the terms of this Group Annuity Endorsement and Your [Contract] [Certificate] conflict, the terms of this Endorsement will apply. It is hereby agreed and understood that the following funds will no longer be available under Your [Contract] [Certificate]: Socially Responsible Account (Calvert Social Balanced Portfolio) Growth II Account (VP Capital Appreciation) The Lincoln National Life Insurance Company /s/ Gabriel L. Shaheen ----------------------------- Gabriel L. Shaheen, President EX-99.4.E 6 GROUP ANNUNITY AMENDMENT TO THE CONTRACT Group Annuity Amendment Made a part of the contract to which it is attached The provisions of this Group Annuity Amendment will be effective January 1,1999. The first paragraph of Section 11.3 (e) of Article XI will be amended to read as follows: "(e) Lincoln Life will send written notice to each Participant's last known address stating that the Contract is discontinued and that the Participant's Account balance may be distributed in either a payout annuity conversion amount, or subject to Section 7.6(c) and to the five (5) consecutive year payout schedule in accordance with Section 7.6(b), with any remaining Account balance being distributed at the earlier of:" The following wording is being added at the end of Section 11.3 (e): "In addition, if the Contract is discontinued under Section 11.1 above, the Participant's Account balance in the Guaranteed Interest Division may be distributed under either of the following options: (1) According to the schedule in Section 7.6(b), where the following provision applies: Any Account balance remaining after the first withdrawal will continue to receive interest in the same manner as before the consecutive withdrawals began, but at no less than the Guaranteed Interest Division is earning on the date of the first withdrawal less 1.50%. (2) In a lump sum payment, where Lincoln Life will determine the amount payable in the Guaranteed Interest Division as follows: The amount payable will be the value in the Guaranteed Interest Division, less any applicable Annual Administration Charge as specified in Section 3.7, times a market value factor. The market value factor is the lesser of 1.00 or the ratio of: Current Bond Price ------------------ Par Value of that Bond Lincoln Life calculates at the time of contract discontinuance the Current Bond Price to equal the price of a bond: 1. issued with a maturity of 6.5 years; 2. bearing interest at the declared interest rate in effect as of the discontinuance date; 3. calculated to yield the Merrill Lynch Baa Intermediate Industrial Average for the week in which the notice of discontinuance is received. If such average ceases to be published, Lincoln Life will select a comparable survey. If the amount payable, as determined above, is less than the principal in the Guaranteed Interest Division, then the amount payable will be changed to equal the principal. For purposes of this paragraph, principal is defined as contributions and transfers to the Guaranteed Interest Division minus withdrawals and transfers from the Guaranteed Interest Division and minus any applicable Annual Administration Charge, but no less than zero." The Lincoln National Life Insurance Company Gabriel L. Shaheen, President EX-99.4.F 7 ENDORSEMENT TO CERTIFICATE ENDORSEMENT (ENDORSEMENTS MAY BE MADE ONLY BY LINCOLN NATIONAL LIFE INSURANCE COMPANY (Herein Referred To As "LINCOLN LIFE") AT ITS HOME OFFICE) The provisions of the Endorsement shall be effective on June 29, 1999. This Endorsement is deemed attached to and made a part of Your Certificate. Lincoln Life and the Contractholder hereby mutually agree to the terms of this Endorsement. Effective June 29, 1999, The Annual Mortality and Expense Risk Charge Applicable to Variable Investment Division Sub-Accounts will be lowered from 1.00% to 0.75%. /s/ Gabriel L. Shaheen ----------------------------- Gabriel L. Shaheen, President EX-99.5.A 8 APPLICATION FOR GROUP ANNUNITY CONTRACT [LINCOLN LETTERHEAD APPEARS HERE] LINCOLN NATIONAL LIFE INSURANCE COMPANY APPLICATION FOR GROUP ANNUITY CONTRACT WITH LINCOLN NATIONAL LIFE INSURANCE COMPANY FORT WAYNE, INDIANA __________________________________________ of ________________________________ (herein termed the "Contractholder") (address) hereby authorizes Lincoln National Life Insurance Company (Lincoln Life) to issue a Group Annuity Contract providing retirement benefits for the Contractholder's Employees, members of an Association, or the Employees of the Company on whose behalf the above designated Contractholder serves as Trustee. Plan Type: ___ 403(b) ____ 401(a) ____ other _______________ It is understood that Participants under the Contract may be subject to the restrictions on withdrawals imposed by the Internal Revenue Code of 1986, as amended. Contributions to the Contract and transfers of value within the Contract shall be subject to the limitations imposed by the Plan, if any, named in the Contract. If a deposit is not made to the Contract within ninety (90) days after the later of: (1) the date the Application is signed, or (2) the Effective Date of the Contract, Lincoln Life may, at its option, declare the Contract invalid and deem it null and void for all purposes, notwithstanding any provision to the contrary in the Contract. Lincoln Life will provide the Contractholder thirty (30) days notice prior to declaring this Contract invalid. It is agreed that this Application together with the Contract comprise the entire agreement between the Applicant and Lincoln Life. By signing this Application the Contractholder designates _____________________________ of __________________________________ (name) (address) as Broker for said Contract, and as such to receive any commissions payable with respect to deposits made to the Company in accordance with the terms and provisions of the Contract. Dated at ____________________ this ________ day of _______________ By __________________________________ (Contractholder) __________________________________ (Official Title) By __________________________________ (Broker) Applicable to Variable Annuity Contracts only: It is acknowledged that the Contractholder has received a Prospectus relating to this Group Variable Annuity Contract prior to the date of this Application. _____ Check here to request a Statement of Additional Information. VARIABLE ANNUITY PRODUCT Current Crediting Rate: _____________% Guaranteed Through __________________ (Date) 100% of Account Balance available at: ____ Death ____ Disability ____ Age 59 1/2 ____ Separation from Service ____ Separation from Service and age 55 ____ Hardship Other Withdrawals subject to: ____ Reducing charge based on years of participation ____ 20% annual maximum withdrawal or transfer from the Guaranteed Interest Division Annual Administration Fee paid by: _________ Participant _________ Contractholder ____ $25 per participant ____ $25 per participant contributing to one or more Sub-Accounts ____ Not applicable Loan Set-up Fee: ____ $50 per loan ____ Not applicable Variable Investment Division Sub-Accounts (Underlying Institutional Funds): ____ Asset Manager Account (Fidelity's VIPF II: Asset Manager Portfolio) ____ Balanced Account (American Century Variable Portfolios, Inc.: VP Balanced) ____ Growth I Account (Fidelity's VIPF: Growth Portfolio) ____ Growth II Account (American Century Variable Portfolios, Inc.: VP Capital Appreciation) ____ Index Account (Dreyfus Stock Index Fund) ____ International Stock Account (T. Rowe Price International Series, Inc.) ____ Socially Responsible Account (Calvert Social Balanced) ____ Equity-Income Account (Fidelity's VIPF: Equity-Income Portfolio) ____ Small Cap Account (Dreyfus Variable Investment Fund: Small Cap Portfolio) ____ Global Growth Account ____ Mid Cap Value Account ____ Mid Cap Growth I Account ____ Social Awareness Account ____ Small Cap Growth Account ____ All fourteen Sub-Accounts EX-99.5.B 9 PARTICIPANT ENROLLMENT PLAN [LOGO] Lincoln --------------- Financial Group Enrollment/Change Request & Salary Reduction Agreement The Lincoln National Life Insurance Company Variable Annuity PO Box 9740 Portland ME 04104-5001 Phone 800 341-0441
- ---------------------------------------------------------------------------------------------------------------------------------- Participant Employee's name Soc. Sec. no. Information ---------------------------------------------------------------------------------------------------------- Address ---------------------------------------------------------------------------------------------------------- * Proof required, City, State, ZIP refer to the back ---------------------------------------------------------------------------------------------------------- of this form. [ ] Male [ ] Female Marital status Daytime phone ---------------------------------------------------------------------------------------------------------- Your personal Date of birth Date of hire/rehire Evening phone investment elections ---------------------------------------------------------------------------------------------------------- should be consistent Employer's name with your primary ---------------------------------------------------------------------------------------------------------- investment GP/ER ID number Group Annuity Contract nos. objectives. ---------------------------------------------------------------------------------------------------------- [ ] New enrollment Change of: [ ] Name* [ ] Beneficiary Refer to your [ ] Allocation election [ ] Address/phone [ ] Salary Reduction variable annuity Select one primary investment objective for your retirement plan. brochure for [ ] Stability of Principal [ ] Growth & Income [ ] Growth [ ] Aggressive Growth investment Number of dependents Occupation objective ---------------------------- --------------------------------------------- information. Total family income $ Estimated net worth $ --------------------------- ----------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Salary Reduction Check with your payroll department to determine which option they use per pay period. Information Salary reduction $ or % of pay Date of reduction ---------------------------------------------------------------------------------------------------------- Percentages must be You may select up to ten investment funds. in whole numbers % Asset Manager % Guaranteed % Mid Cap Value only and must total ---------- ---------- ---------- 100%. % Balanced % Index % Small Cap ---------- ---------- ---------- % Equity Income % International % Small Cap Growth ---------- ---------- ---------- % Global Growth % Mid Cap Growth I % Social Awareness ---------- ---------- ---------- % Growth I ---------- - ---------------------------------------------------------------------------------------------------------------------------------- Beneficiary Complete the following information for each beneficiary. (You must have at least one primary.) Designation Primary's name Soc. Sec. no. ---------------------------------------------------------------------------------------------------------- Percentages must be Relationship Date of birth Percentage in whole numbers ---------------------------------------------------------------------------------------------------------- only. The total of Address percentages for ---------------------------------------------------------------------------------------------------------- primary and City, State, ZIP contingent ---------------------------------------------------------------------------------------------------------- beneficiaries must [ ] Primary [ ] Contingent each equal 100%. Name Soc. Sec. no. ---------------------------------------------------------------------------------------------------------- Relationship Date of birth Percentage ---------------------------------------------------------------------------------------------------------- Address ---------------------------------------------------------------------------------------------------------- City, State, ZIP ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Authorization and By signing below, you certify that you have read, understand and agree to the terms of the Salary Signatures Reduction Information and Agreement sections on this form and have received an Active Life Certificate. The signature of the employer authorized representative certifies that he/she also agrees to the Salary Reduction Information section. Participant's signature Date ---------------------------------------------------------------------------------------------------------- Employer authorized representative's signature Date ---------------------------------------------------------------------------------------------------------- Plan administrator's signature (if ERISA) Date ---------------------------------------------------------------------------------------------------------- Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. continued on back Form L1282-94 1/00 Enrollment White copy - TDA Client Services Yellow copy - Payroll Pink copy - Broker Goldenrod copy - Participant
- -------------------------------------------------------------------------------- Agreement You agree that: Variable Annuity Information .. You have read the prospectus for the insurer's variable annuity and the underlying funds. You also understand that the underlying funds supporting the insurer's variable annuity are not public funds, but are available only through insurance contracts. .. The investment objectives and policies are stated in each of the underlying fund's prospectus. .. You will review your investment selections on a regular basis as your lifestyle or investment goals may change as you near retirement. As part of this review you should read current fund prospectuses and financial reports. You may contact Lincoln Life at any time to receive up-to-date information about your variable annuity. .. Withdrawals are restricted to the requirements of Section 403(b) of the Internal Revenue Code as described in the insurer's current variable annuity prospectus. Withdrawals must also be in accordance with any restrictions described in your tax deferred annuity plan sponsored by your employer. .. If contributions are received by the insurer without complete and accurate information, your contributions will be allocated to the Pending Allocation Account. Once this information is received, the insurer will allocate your contributions as indicated on the form. After the third monthly notice, if the insurer has not received this information, the account value will be returned to the contractholder. .. If you transfer assets to the insurer without a transfer form indicating an allocation split, the insurer will deposit these assets based on the most recent investment elections on file. .. Confirmations will be generated once the insurer receives complete enrollment information. Please review the confirmation carefully and notify the insurer immediately if any changes are desired. The insurer may elect to send any confirmations of transactions relating to your account directly to your employer. .. Any changes to your name and/or beneficiary designations must be in writing. Proof is required for name changes. Sumbit a copy of a marriage license, divorce decree, or other court document. .. Returns on the variable accounts are based upon the investment experience of the insurer's separate account. These amounts will fluctuate and are not guaranteed as to the dollar amount. Salary Reduction .. The employer shall reduce your salary by the amount indicated per pay period. The employer shall forward this amount to the insurer as contributions toward a 403(b) annuity. .. Payroll reductions will begin on the date indicated. Any change in allocation election will be effective with the next contribution after receiving this form in the Portland, Maine office. .. This agreement is legally binding and irrevocable regarding the amounts already deferred by both you and the employer while employment continues for amounts earned while it is in effect. .. This agreement will apply only to amounts earned after this agreement becomes effective. It will not apply to any amounts earned after it is terminated. Beneficiary Designation .. If additional space is needed, attach a separate sheet. .. If you are married or will be married and if your tax deferred annuity plan provides, the primary beneficiary will be your spouse unless he/she completes and signs a waiver form provided by your employer. .. If your plan is subject to ERISA, your beneficiary designation must be in compliance with all provisions of the Retirement Equity Act of 1984 and the applicable tax deferred annuity plan, which requires a plan administrator's signature. .. Your beneficiary designation on this form supersedes any prior designation made in regards to the coverage under this contract. .. If no beneficiary is selected, or if no beneficiary survives you, all death benefits will be paid according to the contract and any applicable tax deferred annuity plan. .. Your primary beneficiary will be entitled to the entire value of the account. Multiple surviving primary beneficiaries will be entitled to equal portions of the account unless specified otherwise. .. Your contingent beneficiary will be entitled to the entire value of the account if no primary beneficiary is living. Multiple surviving contingent beneficiaries will be entitled to equal portions of the account unless specified otherwise. - -------------------------------------------------------------------------------- Customer Service If you have any questions, please contact Lincoln Life at 800 341-0441. Form L1282-94 1/00 EX-99.1 10 EXHIBIT 99.1 FUND PARTICIPATION AGREEMENT THIS FUND PARTICIPATION AGREEMENT is made and entered into as of September 26, 1996 by and between LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and TWENTIETH CENTURY SECURITIES, INC. (the "Distributor"). WHEREAS, the Company offers to the public certain group variable annuity contracts and group variable life insurance contracts (the "Contracts"); and WHEREAS, the Company wishes to offer as investment options under the Contracts, TCI Balanced and TCI Growth (the "Funds"), both of which are a series of mutual fund shares registered under the Investment Company Act of 1940, as amended, and issued by TCI Portfolios, Inc. (the "Issuer"); and WHEREAS, on the terms and conditions hereinafter set forth, Distributor and the Issuer desire to make shares of the Funds available as investment options under the Contracts and to retain the Company to perform certain administrative services on behalf of the Funds; WHEREAS, the Funds are open-end management investment companies that were established for the purpose of serving as the investment vehicles for separate accounts established for variable life insurance policies and variable annuity contracts (collectively referred to as "Variable Insurance Products", the owners of such products being referred to as "Contract Owners") to be offered by insurance companies which have entered into participation agreements with the Fund ("Participating Insurance Companies"); and WHEREAS, the Issuer filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Fund Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Fund Prospectus") on Form N-1A to register itself as an open-end management investment company (File No. 40-811-5188) under the Investment Company Act of 1940, as amended (the " 1940 Act"), and the Fund shares (File No. 33-14567) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has filed a registration statement with the SEC to register under the 1933 Act certain variable annuity contracts described in Schedule A to this Agreement as in effect at the time this Agreement is executed and such other variable annuity contracts and variable life insurance policies which may be added to Schedule A from time to time (each such registration statement for a class or classes of contracts listed on Schedule A being referred to as the "Contracts Registration Statement" and the prospectus for each such class or classes being referred to herein as the "Contracts Prospectus"); and WHEREAS, each Account (defined in Section 7(a) below), a validly existing separate account, duly authorized by resolution of the Board of Directors of the Company, set forth on 1 Schedule B sets aside and invests assets attributable to the Contracts; and WHEREAS, the Company has registered or will have registered each Account with the SEC as a unit investment trust under the 1940 Act before any Contracts are issued by that Account; and WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, the Distributor and the Issuer have entered into an agreement (the "Distribution Agreement") pursuant to which the Distributor will distribute Fund shares; and WHEREAS, Investors Research Corporation (the "Investment Advisor") is registered as an investment adviser under the 1940 Act and any applicable state securities laws and serves as an investment manager to the Issuer and the Funds pursuant to an agreement; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase Fund shares on behalf of each Account to fund its Contracts and the Distributor is authorized to sell such Fund shares to purchasers such as the Accounts at net asset value; NOW, THEREFORE, the Company and Distributor agree as follows: 1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of this Agreement, the Distributor will cause the Issuer to make shares of the Funds available to be purchased, exchanged, or redeemed, by the Company on behalf of the Accounts through a single account per Fund at the net asset value applicable to each order. The Funds' shares shall be purchased and redeemed on a net basis in such quantity and at such time as determined by the Company to satisfy the requirements of the Contracts for which the Funds serve as underlying investment media. Dividends and capital gains distributions will be automatically reinvested in full and fractional shares of the Funds. 2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible for providing all administrative services for the Contract Owners. The Company agrees that it will maintain and preserve all records as required by law to be maintained and preserved, and will otherwise comply with all laws, rules and regulations applicable to the marketing of the Contracts and the provision of administrative services to the Contract Owners. 3. TIMING OF TRANSACTIONS. Distributor hereby appoints the Company as its agent and/or agent for the Funds for the limited purpose of accepting purchase and redemption orders for Fund shares from the Accounts and/or Contract Owners, as applicable. On each day the New York Stock Exchange (the "Exchange") is open for trading (each, a "Business Day"), the Company may receive instructions from the Accounts and/or Contract Owners for the purchase or redemption of shares of the Funds ("Orders"). Orders received and accepted by the Company prior to the close of regular trading on the Exchange (the "Close of 2 Trading") on any given Business Day (currently, 4:00 p.m. Eastern time) and transmitted to the Issuers by 10:00 a.m. Eastern time on the next following Business Day will be executed at the net asset value determined as of the Close of Trading on the previous Business Day. Any Orders received by the Company after the Close of Trading, and all Orders that are transmitted to the Issuers after 10:00 a.m. Eastern time on the next following Business Day, will be executed by the Issuers at the net asset value next determined following receipt of such Order. The day as of which an Order is executed by the Issuers pursuant to the provisions set forth above is referred to herein as the "Trade Date". 4. PROCESSING OF TRANSACTIONS. (a) By 7:00 p.m. Eastern time on each Business Day, Distributor will provide to the Company, via facsimile or other electronic transmission acceptable to the Company, the Funds' net asset value, dividend and capital gain information and, in the case of income funds, the daily accrual for interest rate factor (mil rate), determined at the Close of Trading. (b) By 10:00 a.m. Eastern time on each Business Day, the Company will provide to Distributor via facsimile or other electronic transmission acceptable to Distributor a report stating whether the Orders received by the Company from Contract Owners by the Close of Trading on the preceding Business Day resulted in the Accounts being a net purchaser or net seller of shares of the Funds. As used in this Agreement the phrase "other electronic transmission acceptable to Distributor" includes the use of remote computer terminals located at the premises of the Company, its agents or affiliates, which terminals may be linked electronically to the computer system of Distributor, its agents or affiliates (hereinafter, "Remote Computer Terminals"). (c) Upon the timely receipt from the Company of the report described in (b) above, the Funds' transfer agent will execute the purchase or redemption transactions (as the case may be) at the net asset value computed as of the Close of Trading on the Trade Date. Payment for net purchase transactions shall be made by wire transfer to the applicable Fund custodial account designated by the Distributor on the Business Day next following the Trade Date. Such wire transfers shall be initiated by the Company's bank prior to 4:00 p.m. Eastern time and received by the Funds prior to 6:00 p.m. Eastern time on the Business Day next following the Trade Date ("T + 1 "). If payments for a purchase Order is not timely received, such Order will be executed at the net asset value next computed following receipt of payment. Payments for net redemption transactions shall be made by wire transfer by the Issuer to the account designated by the Company on T + 1; PROVIDED, HOWEVER, the Issuer reserves the right to settle redemption transactions within the time period set forth in the applicable Fund's then-current prospectus. On any Business Day when the Federal Reserve Wire Transfer System is closed, all communication and processing rules will be suspended for the settlement of Orders. Orders will be settled on the next Business Day on which the Federal Reserve Wire Transfer System is open and the original Trade Date will apply. 5. PROSPECTUS, PROXY MATERIALS AND OTHER INFORMATION. (a) Distributor shall provide the Company with copies of the Issuer's proxy materials, periodic fund reports to shareholders and other materials that are required by law to be sent to the 3 Issuer's shareholders. In addition, Distributor shall provide the Company with a sufficient quantity of prospectuses and Statements of Additional Information of the Funds to be used in conjunction with the transactions contemplated by this Agreement, together with such additional copies of the Issuer's prospectuses and Statements of Additional Information as may be reasonably requested by Company. If the Company provides for pass-through voting by the Contract Owners, Distributor will provide the Company with a sufficient quantity of proxy materials for each Contract Owner. (b) The cost of preparing, printing and shipping of the prospectuses, proxy materials, periodic fund reports and other materials of the Issuer to the Company shall be paid by Distributor or its agents or affiliates; provided, that if at any time Distributor or its agent reasonably deems the usage by the Company of such items to be excessive, it may, prior to the delivery of any quantity of materials in excess of what is deemed reasonable, request that the Company demonstrate the reasonableness of such usage. If the Distributor believes the reasonableness of such usage has not been adequately demonstrated, it may request that the Company pay the cost of printing (including press time) and delivery of any excess copies of such materials. Unless the Company agrees to make such payments, Distributor may refuse to supply such additional materials and Distributor shall be deemed in compliance with this SECTION 5 if it delivers to the Company at least the number of prospectuses and other materials as may be required by the Issuers under applicable law. (c) The cost of distribution, if any, of any prospectuses, proxy materials, periodic fund reports and other materials of the Issuer to the Contract Owners shall be paid by the Company and shall not be the responsibility of Distributor or the Issuer. (d) Except with the prior written permission of the Company, the Fund shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account or the Contracts other than the information or representations contained in the Contracts Registration Statement or Contracts Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in published reports of the Account which are in the public domain or approved in writing by the Company for distribution to Contract Owners, or in Company sales literature or other promotional material. The Company agrees to respond to any request for permission on a prompt and timely basis. If the Company fails to respond within 10 business days of a request by the Fund or the Distributor, then the Fund is relieved of the obligation to obtain the prior written permission of the Company. (e) For purposes of this SECTION 5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, computer net site, signs or billboards, motion pictures or other public media), sales literature (I.E., any written communication distributed or made generally available to customers or the public, in print or electronically, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, Statements of Additional Information, shareholder reports and proxy materials, and any other material constituting sales 4 literature or advertising under NASD rules, the 1940 Act or the 1933 Act. 6. COMPENSATION AND EXPENSES. (a) The Accounts shall be the sole shareholder of Fund shares purchased for the Contract Owners pursuant to this Agreement (the "Record Owners"). The Company and the Record Owners shall properly complete any applications or other forms required by Distributor or the Issuer from time to time. (b) Distributor acknowledges that it will derive a substantial savings in administrative expenses, such as a reduction in expenses related to postage, shareholder communications and recordkeeping, by virtue of having a single shareholder account per Fund for the Accounts rather than having each Contract Owner as a shareholder In consideration of the Administrative Services and performance of all other obligations under this Agreement by the Company, Distributor will pay the Company a fee (the "Administrative Services fee") equal to 20 basis points (0.20%) per annum of the average aggregate amount invested by the Company under this Agreement. Distributor's obligation to pay the Administrative Services Fee shall be suspended with respect to any month during which the Company's average aggregate investment in the Funds drops below $10 million. Notwithstanding the above, if the Company's average investment in a single Fund during a month exceeds $5 million, Distributor will pay the Company the Administrative Services Fee with respect to all amounts invested in such Fund. If the Company's investment in such Fund drops below $5 million, the Distributor's obligation to pay the Administrative Services Fee shall be suspended until the Company's average investment in the Fund exceeds $5 million or average aggregate investment in the Funds exceeds $10 million. For purposes of this SECTION 6(b), the average aggregate investment amount of Company's investment shall include assets of UNUM Life Insurance Company of America and First UNUM Life Insurance Company acquired by Company. (c) The payments received by the Company under this Agreement are for administrative and shareholder services only and do not constitute payment in any manner for investment advisory services or for costs of distribution. (d) For the purposes of computing the payment to the Company contemplated by this SECTION 6, the average aggregate amount invested by the Accounts in the Funds over a one month period shall be computed by totaling the Company's aggregate investment (share net asset value multiplied by total number of shares of the Funds held by the Company) on each Business Day during the month and dividing by the total number of Business Days during such month. (e) Distributor will calculate the amount of the payment to be made pursuant to this Section 6 at the end of each calendar quarter and will make such payment to the Company within 30 days thereafter. The check for such payment will be accompanied by a statement showing the calculation of the amounts being paid by Distributor for the relevant months and such other supporting data as may be reasonably requested by the Company and shall be mailed to: 5 Lincoln National Life Insurance Company 1300 South Clinton Street Ft. Wayne, Indiana 46802 Attention: Kelly D. Clevenger (f) In the event Distributor reduces its management fee with respect to any Fund after the date hereof, Distributor may amend the Administrative Services fee payable with regard to such Fund by providing the Company 30 days' advance written notice of any such adjustment. The revised Administrative Services fee shall become effective as of the latter of 30 days from the date of delivery of the notice or the date prescribed in the notice. 7. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and warrants that: (i) this Agreement has been duly authorized by all necessary corporate action and, when executed and delivered, shall constitute the legal, valid and binding obligation of the Company, enforceable in accordance with its terms; (ii) it has established the Separate Accounts listed on Schedule B (the "Accounts"), each of which is a separate account under Indiana Insurance law, and has registered each Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") to serve as an investment vehicle for the Contracts; (iii) each Contract provides for the allocation of net amounts received by the Company to an Account for investment in the shares of one of more specified investment companies selected among those companies available through the Account to act as underlying investment media; (iv) selection of a particular investment company is made by the Contract Owner under a particular Contract, who may change such selection from time to time in accordance with the terms of the applicable Contract; and (v) the activities of the Company contemplated by this Agreement comply with all provisions of federal and state insurance, securities, and tax laws applicable to such activities. (b) Distributor represents and warrants that: (i) this Agreement has been duly authorized by all necessary corporate action and, when executed and delivered, shall constitute the legal, valid and binding obligation of Distributor, enforceable in accordance with its terms; and (ii) the investments of the Funds will at all times be adequately diversified within the meaning of Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the "Code"), and the regulations thereunder, and that at all times while this Agreement is in effect, all beneficial interests in each of the Funds will be owned by one or more insurance companies or by any other party permitted under Section 1.817-5(f)(3) of the Regulations promulgated under the Code; and (iii) each Fund currently qualifies as a Regulated Investment Company under Subchapter M of the Code. The Distributor further represents and warrants that it will make every effort to cause the Funds to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future and (iv) that it is registered as a Broker-Dealer under the 1934 Act. 6 (c) The Distributor represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund shares are sold. The Distributor further represents and warrants that the Issuer is a corporation duly organized and in good standing under the laws of Maryland. (d) The Distributor represents and warrants that the Funds have and maintains a fidelity bond in accordance with Rule 17g- I under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. 8. ADDITIONAL COVENANTS AND AGREEMENTS. (a) Each party shall comply with all provisions of federal and state laws applicable to its respective activities under this Agreement. All obligations of each party under this Agreement are subject to compliance with applicable federal and state laws. (b) Each party shall promptly notify the other parties in the event that it is, for any reason, unable to perform any of its obligations under this Agreement. (c) The Company covenants and agrees that all Orders accepted and transmitted by it hereunder with respect to each Account on any Business Day will be based upon instructions that it received from the Contract Owners in proper form prior to the Close of Trading of the Exchange on that Business Day. The Company shall time stamp all Orders or otherwise maintain records that will enable the Company to demonstrate compliance with SECTION 8(c) hereof (d) The Company covenants and agrees that all Orders transmitted to the Issuers, whether by telephone, telecopy, or other electronic transmission acceptable to Distributor, shall be sent by or under the authority and direction of a person designated by the Company as being duly authorized to act on behalf of the owner of the Accounts. Absent actual knowledge to the contrary, Distributor shall be entitled to rely on the existence of such authority and to assume that any person transmitting Orders for the purchase, redemption or transfer of Fund shares on behalf of the Company is "an appropriate person" as used in Sections 8-308 and 8-404 of the Uniform Commercial Code with respect to the transmission of instructions regarding Fund shares on behalf of the owner of such Fund shares. The Company shall maintain the confidentiality of all passwords and security procedures issued, installed or otherwise put in place with respect to the use of Remote Computer Terminals and assumes full responsibility for the security therefor. The Company further agrees to be responsible for the accuracy, propriety and consequences of all data transmitted to Distributor by the Company by telephone, telecopy or other electronic transmission acceptable to Distributor. (e) The Company agrees to make every reasonable effort to market its Contracts. It will use its best efforts to give equal emphasis and promotion to shares of the Funds as is given to other underlying investments of the Accounts. (f) The Company shall not, without the written consent of Distributor, make 7 representations concerning the Issuer or the shares of the Funds except those contained in the thencurrent prospectus and in current printed sales literature approved by Distributor or the Issuer. (g) Advertising and sales literature with respect to the Issuer or the Funds prepared by the Company or its agents, if any, for use in marketing shares of the Funds as underlying investment media to Contract Owners shall be submitted to Distributor for review and approval before such material is used. All such materials shall be directed to Dina Tantra, Distributor's advertising compliance manager (or such other person as Distributor may designate in writing) by mail at 4500 Main Street Kansas City, Missouri 64111, or by fax at (816) 3404074. Such materials shall be accompanied by a request for approval or comments within a reasonable amount of time, which shall not be less than 10 business days from the date delivered to Distributor. The Company agrees to use reasonable efforts to notify Distributor's advertising compliance manager of the delivery of such materials (which includes leaving a voice mail message). If Distributor fails, to respond within the time period set forth in the request for review, Company may use such material as submitted without further approval by Distributor. If subsequent to approval by Distributor (or the expiration of the time period set forth in the request for approval), Distributor reasonably determines any such material is or has become inaccurate, misleading or otherwise inappropriate, it may request that the Company modify such advertising and sales literature, which the Company will do at the next reprinting of any such materials. If Distributor determines that such material should be modified immediately, Distributor shall notify the Company of such fact and Company shall accommodate Distributor's reasonable requests. In such instances, Distributor shall pay the Company's reasonable out-of-pocket expenses in reprinting any such advertising and sales materials. Notwithstanding anything contained herein, Company shall be responsible for the compliance of all advertising and sales literature prepared by the Company with all applicable federal, state and NASD requirements (h) The Company will provide to Distributor at least one complete copy of all registration statements, prospectuses, statements of additional information, annual and semi-annual reports, proxy statements, and all amendments or supplements to any of the above that include a description of or information regarding the Funds promptly after the filing of such document with the SEC or other regulatory authority. (i) Each party will comply with reasonable requests for information and documents regarding the Funds or the other party's compliance with its obligations under this Agreement made by the other party, by the Funds' Board of Directors or by any appropriate governmental entity or self regulatory organization. 9. USE OF NAMES. Except as otherwise expressly provided for in this Agreement, neither Distributor nor the Funds shall use any trademark, trade name, service mark or logo of the Company, or any variation of any such trademark, trade name, service mark or logo; without the Company's prior written consent, the granting of which shall be at the Company's sole option. Except as otherwise expressly provided for in this Agreement the Company shall not use any trademark, trade name, service mark or logo of the Issuer or Distributor, or any variation of any such trademarks, trade names, service marks, or logos, without the prior written consent of either the Issuer or Distributor, as appropriate, the granting of which shall be at the sole option of Distributor and/or the Issuer. 8 10. PROXY VOTING. (a) The Company shall provide pass-through voting privileges to all Contract Owners so long as the SEC continues to interpret the 1940 Act as requiring such privileges. It shall be the responsibility of the Company to assure that it and the separate accounts of the other Participating Companies (as defined in SECTION 12(a) below) participating in any Fund calculate voting privileges in a consistent manner. (b) The Company will distribute to Contract Owners all proxy material furnished by Distributor and will vote shares in accordance with instructions received from such Contract Owners. The Company shall vote Fund shares for which no instructions have been received in the same proportion as shares for which such instructions have been received. The Company shall not oppose or interfere with the solicitation of proxies for Fund shares held for such Contract Owners. 11. INDEMNITY. 11.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Fund, the Distributor and each person who controls or is associated with the Fund (other than another Participating Insurance Company) or the Distributor within the meaning of such terms under the .federal securities laws and any officer, trustee, director, employee or agent of the foregoing, against any and all losses, claims, expenses, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Distributor (or a person authorized in writing to do so on behalf of the Fund or the Distributor) for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact by or on behalf of the Company (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other 9 promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund Registration Statement Fund Prospectus or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Distributor by or on behalf of the Company; or (d) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (e) arise out of any material breach by the Company of this Agreement, including but not limited to any failure to transmit a request for redemption or purchase of Fund shares on a timely basis in accordance with the procedures set forth in SECTION 3; or (f) arise as a result of the Company's providing the Distributor with inaccurate information, which causes the Distributor to calculate its Net Asset Values incorrectly. This indemnification will be in addition to any liability which the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 1.1.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify and hold harmless the Company and each person who controls or is associated with the Company within the meaning of such terms under the federal securities laws and any officer, director, employee or agent of the foregoing, against any and all losses, claims, expenses, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, expenses, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing by 10 the Company to the Distributor or its affiliates for use in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Distributor (other than statements or representations contained in the Fund Registration Statement Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Distributor or persons under their control) or gross negligence, willful misfeasance or bad faith of the Distributor or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Contracts Registration Statement Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Distributor to the Company (or a person authorized in writing to do so on behalf of the Fund or the Distributor); or (d) arise as a result of any failure by the Distributor to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) to comply with the diversification requirements specified in SECTION 7(b) of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the this Agreement); or (e) arise out of any material breach by the Distributor of this Agreement. This indemnification will be in addition to any liability which the Distributor may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the wilful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 11.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to indemnification ("indemnified party") under this Section 11 of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Section 11 ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Section 11, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel 11 reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this SECTION 11. The indemnification provisions contained in this SECTION 11 shall survive any termination of this Agreement. 12. POTENTIAL CONFLICTS. (a) The Company has received a copy of an application for exemptive relief, as amended, filed by Investors Research and the Issuer on December 21, 1987, with the SEC and the order issued by the SEC in response thereto (the "Shared Funding Exemptive Order"). The Company has reviewed the conditions to the requested relief set forth in such application for exemptive relief As set forth in such application, the Board of Directors of the Issuer (the "Board") will monitor the Issuer for the existence of any material irreconcilable conflict between the interests of the Contract Owners of all separate accounts ("Participating Companies") investing in funds of the Issuer. An irreconcilable material conflict may arise for a variety of reasons, including: (i) an action by any state insurance regulatory authority; (ii) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar actions by insurance, tax or securities regulatory authorities; (iii) an administrative or judicial decision in any relevant proceeding; (iv) the manner in which the investments of any portfolio are being managed; (v) a difference in voting instructions given by variable annuity Contract Owners and variable life insurance Contract Owners; or (vi) a decision by an insurer to disregard the voting instructions of Contract Owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. (b) The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract Owner voting instructions are disregarded. (c) If a majority of the Board, or a majority of its disinterested Board members, determines 12 that a material irreconcilable conflict exists with regard to Contract Owner investments in a Fund, the Board shall give prompt notice to all Participating Companies. If the Board determines that the Company is responsible for causing or creating said conflict, the Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include but shall not be limited to (i) withdrawing the assets allocable to the Accounts from the Fund and reinvesting such assets in a different investment medium or submitting the question of whether such segregation should be implemented to a vote of all affected Contract Owners and as appropriate, segregating the assets of any appropriate group (i.e., annuity Contract Owners, life insurance Contract Owners, or variable Contract Owners of one or more Participating Companies) that votes in favor of such segregation, or offering to the affected Contract Owners the option of making such a change and (ii) establishing a new registered management investment company or managed separate account. Nothing in this SECTION 12(c) shall be construed to waive any cause of action which may be available to Company against any other Participating Insurance Company or Companies, or against any other person or entity, in the event Company determines in good faith that it (Company) is not responsible (or is not solely responsible) for the material irreconcilable conflict. (d) If a material irreconcilable conflict arises as a result of a decision by the Company to disregard its Contract Owner voting instructions and said decision represents a minority position or would preclude a majority vote by all of its Contract Owners having an interest in the Issuer, the Company at its sole cost, may be required, at the Board's election, to withdraw an Accounts investment in the Issuer and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. (e) For the purpose of this SECTION 12, a majority of the disinterested Board members shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Issuer be required to establish a new funding medium for any Contract. The Company shall not be required by this SECTION 12 to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contract Owners materially adversely affected by the irreconcilable material conflict. 13. APPLICABLE LAW. This agreement shall be subject to the provisions of all applicable securities law, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. 14. TERMINATION. This agreement shall terminate as to the sale and issuance of new Contracts: (a) at the option of either the Company, Distributor or the Issuer upon six months' advance written notice to the other; 13 (b) at the option of the Company if the Funds' shares are not available for any reason to meet the requirement of Contracts as determined by the Company. Reasonable advance notice of election to terminate shall be furnished by Company; (c) at the option of either party upon institution of formal proceedings against the other party or against the Investment Advisor by the National Association of Securities Dealers, Inc. (the "NASD"), the SEC or any other regulatory body which the terminating party reasonably believes will result in a material harm to the terminating party or the Funds or the Accounts or the Contract Owners; (d) upon termination of the Distribution Agreement between the Issuer and Distributor or the Management Agreement between Investors Research and the Funds. Notice of such termination shall be promptly furnished to the Company. This subsection (d) shall not be deemed to apply if contemporaneously with such termination a new contract of substantially similar terms is entered into between the Issuer and Distributor with respect to the Distribution Agreement or the Issuer and the Funds with respect to the Management Agreement; (e) upon the requisite vote of Contract Owners having an interest in the Issuer to substitute for the Issuer's shares the shares of another investment company in accordance with the terms of Contracts for which the Issuer's shares had been selected to serve as the underlying investment medium. The Company will give 60 days' written notice to the Issuer and Distributor of any proposed vote to replace the Funds' shares; (f) upon assignment of this Agreement unless made with the written consent of all other parties hereto; (g) if the Issuer's shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of Fund shares as an underlying investment medium of Contracts issued or to be issued by the Company. Prompt notice shall be given by either party should such situation occur, (h) at the option of the Issuer, if the Issuer reasonably determines in good faith that the Company is not offering shares of the Fund in conformity with the terms of this Agreement or applicable law; (i) at the option of any party hereto upon a determination that continuing to perform under this Agreement would, in the reasonable opinion of the terminating party's counsel, violate any applicable federal or state law, rule, regulation or judicial order; (j) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any Contract Owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; 14 (k) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; (l) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder, (m) at the option of either the Fund or the Distributor if the Fund or the Distributor, respectively, shall determine, in their sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of either the Fund or the Distributor; or (n) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that either: (1) the investment Advisor or Distributor shall have suffered a material adverse change in their respective businesses or financial condition; or (2) the Investment Advisor or Distributor shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company. 15. CONTINUATION OF AGREEMENT. (a) Termination as the result of any cause listed in SECTION 14 shall not affect the Issuers obligation to furnish its shares to Contracts then in force for which its shares serve or may serve as the underlying medium (unless such further sale of Fund shares is proscribed by law or the SEC or other regulatory body). Following termination, Distributor shall not have any Administrative Services payment obligation to the Company (except for payment obligations accrued but not yet paid as of the termination date). (b) Notwithstanding any termination of this Agreement pursuant to SECTION 14 of this Agreement, the Fund will, at the option of the Company, continue to make available additional Fund shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to redeem investments in the Fund and/or invest in the Fund. (c) If Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except as set forth in SECTION 14(a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this SECTION 15, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. 15 (d) The parties agree that this Section 15 shall not apply to any termination made pursuant to Section 12 or any conditions or undertakings incorporated by reference in Section 12, and the effect of such Section 12 termination shall be governed by the provisions set forth or incorporated by reference therein. 16. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this Agreement and the arrangement described herein are intended to be non-exclusive and that each of the parties is free to enter into similar agreements and arrangements with other entities. 17. SURVIVAL. The provisions of SECTION 9 (use of names) and Section 11 (indemnity) of this Agreement shall survive termination of this Agreement. 18. AMENDMENT. Neither this Agreement, nor any provision hereof, may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by all of the parties hereto. 19. NOTICES. All notices and other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by telex, telecopier, express delivery or registered or certified mail, postage prepaid, return receipt requested, to the party or parties to whom they are directed at the following addresses, or at such other addresses as may be designated by notice from such party to all other parties. To the Company: Lincoln National Life Insurance Company 1300 South Clinton Street Ft. Wayne, Indiana 46802 Attention: Kelly D. Clevenger (219) 455-5119 (office number) (219) 455-1773 (telecopy number) To the Issuer or Distributor: Twentieth Century Mutual Funds 4500 Main Street Kansas City, Missouri 64111 Attention: Charles A. Etherington, Esq. (816) 3404051 (office number) (816) 3404964 (telecopy number) Any notice, demand or other communication given in a manner prescribed in this Section 18 shall be deemed to have been delivered on receipt. 16 20. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the written consent of all parties to the Agreement at the time of such assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. 21. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any party hereto may execute this Agreement by signing any such counterpart. 22. SEVERABILITY. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 23. ENTIRE AGREEMENT. This Agreement, including the Attachments hereto, constitutes the entire agreement between the parties with respect to the matters dealt with herein, and supersedes all previous agreements, written or oral, with respect to such matters. 17 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above. TWENTIETH CENTURY SECURITIES, INC. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: By: William M. Lyons Executive Vice PRESIDENT Name: Title: 18 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity I Contracts Group Variable Annuity II Contracts Group Variable Annuity III Contracts 19 SCHEDULE B SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY INVESTING IN THE FUND Lincoln National Variable Annuity Account L 20 EX-99.2 11 EXHIBIT 99.2 AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT (the "Amendment') is effective as of February 1, 1999, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company'), AMERICAN CENTURY INVESTMENT MANAGEMENT, INC ("ACDX), and AMERICAN CENTURY INVESTMENT SERVICES, INC., F/K/A TWENTIETH CENTURY SECURITIES, INC. (the "ACIS"). Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement (defined below). RECITALS WHEREAS, the Company and ACIS are parties to that certain Fund Participation Agreement dated September 26, 1996 (the "Agreement") in connection with the participation by the Funds in Contracts offered by the Company to its clients and the parties wish to supplement the Agreement as provided herein; WHEREAS, since the date of the Agreement, Twentieth Century Securities, Inc. has changed its name to American Century Investment Services, Inc.; and WHEREAS, since the date of the Agreement, the Funds have changed their names; and WHEREAS, since the date of the Agreement, ACIS has ceased being the Distributor of the Funds; and NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. FUNDS UTILIZE . The second "Whereas" clause of the Agreement is hereby deleted in its entirety and replaced with the following language: "WHEREAS, the Company wishes to offer as investment options under certain of the Contracts, those mutual funds (each a "Fund" and collectively, the "Funds") listed on Schedule B hereto, each such Fund a series of mutual fund shares registered under the Investment Company Act of 1940, as amended, and issued by American Century Variable Portfolios, Inc.; and" 2. ASSIGNMENT BY COMPANY. . ACIS hereby assigns all of its rights and obligations under the Agreement to ACIM, and ACIM hereby accepts such assignment. The Company hereby consents to such assignment. After the date of this Amendment, all references to "Distributor" in the Agreement shall be deemed to refer to ACIM. 3. COMPENSATION AND EXPENSES. Section 6(b) of the Agreement is hereby deleted in its entirety and replaced with the following language: (b) ACIM acknowledges that it derives a substantial savings in administrative expenses, such as a reduction in expenses related to postage, shareholder communications and recordkeeping, by virtue of having a single shareholder account per Fund for the Accounts rather than having each Contract Owner as a shareholder. In consideration of the Administrative Services and performance of all other obligations under this Agreement by the, Company, ACIM will pay the Company a fee (the "Administrative Services Fee') equal to 25 basis points (0.25%) per annum of the average aggregate amount invested by the Company under this Agreement, for as long as the average aggregate market value of the investments by the Company in the Funds exceeds $50 million. In the event the average aggregate AMOUNT INVESTED BY THE COMPANY DROPS BELOW $50 million, ACIM shall pay Company 20 basis points (0.20%) per annum of the average aggregate amount invested by the Company. For purposes of this Section 6(b), the average aggregate investment amount of Company's investment shall include assets of UNUM Life Insurance Company of America and First UNUM Life Insurance Company acquired by Company. 4. SCHEDULES. Schedules A and B to the Agreement are hereby deleted and replaced in their entirety with Schedules A and B attached hereto. 5 RATIFICATION AND CONFIRMATION OF AGREEMENT. In the event of a conflict between the terms of this Amendment and the Agreement, it is the intention of the parties that the terms of this Amendment shall control and the Agreement shall be interpreted on that basis. To the extent the provisions of the Agreement have not been amended by this Amendment, the parties hereby confirm and ratify the Agreement. 6. COUNTERPARTS. This Amendment may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one instrument. 7. FULL FORCE AND EFFECT. . Except as expressly supplemented, amended or consented to hereby, all of the representations, warranties, terms, covenants and conditions of the Agreement shall remain unamended and shall continue to be in full force and effect. IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the date first above written. LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. INSURANCE COMPANY By: Name: Title: AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. By: William M. Lyons Executive Vice President AMERICAN CENTURY INVESTMENT SERVICES, INC. By: William M. Lyons Executive Vice President AS AMENDED EFFECTIVE FEBRUARY 1, 1999 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity I Group Variable Annuity II Group Variable Annuity III e-Annuity Variable Annuity Multi Fund Individual Variable Annuity Multi Fund Group Variable Annuity CVUL Variable Life AS AMENDED EFFECTIVE February 1, 1999 SCHEDULE B SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY INVESTING IN CERTAIN FUNDS SEPARATE ACCOUNT NAME AMERICAN CENTURY VP FUND(S) UTILIZED Lincoln National Variable Annuity Account L VP Balanced; VP Capital Appreciation Lincoln National Variable Annuity Account C VP International Lincoln Life Variable Annuity Account Q VP International Lincoln National Variable Annuity Account 53 VP International Lincoln Life Flexible Premium Variable Life VP International; VP Income and Growth Account S
EX-99.1 12 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 13 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 14 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 15 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 16 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 17 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 18 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 19 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 20 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 21 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 22 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 23 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 24 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 25 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 26 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 27 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 28 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 29 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 30 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 31 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 32 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 33 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 34 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 35 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 36 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-99.10.A 37 CONSENT OF INDEPENDENT AUDITORS Exhibit 10(a) Consent of Ernst & Young LLP, Independent Auditors We consent to the reference to our firm under the caption "Independent Auditors" in the Post Effective Amendment No. 7 to the Registration Statement (Form N-4 No. 333-5827) and the related Statement of Additional Information appearing therein and pertaining to Lincoln National Variable Annuity Account L, and to the use therein of our reports dated (a) January 31, 2000, with respect to the statutory-basis financial statements of The Lincoln National Life Insurance Company, and (b) March 24, 2000, with respect to the financial statements of Lincoln National Variable Annuity Account L. /s/ Ernst & Young LLP Fort Wayne, Indiana April 24, 2000 EX-99.1 38 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-99.15.B 39 MEMORANDUM CONCERNING BOOKS & RECORDS BOOKS AND RECORDS LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940 Records to Be Maintained by Registered Investment Companies, Certain Majority- Owned Subsidiaries Thereof, and Other Persons Having Transactions with Registered Investment Companies. Reg. 270.31a-1. (a) Every registered investment company, and every underwriter, broker, dealer, or investment advisor which is a majority-owned subsidiary of such a company, shall maintain and keep current the accounts, books, and other documents relating to its business which constitute the record forming the basis for financial statements required to be filed pursuant to Section 30 of the Investment Company Act of 1940 and of the auditor's reports relating thereto.
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 Kathleen Adamson Permanently, the first two of securities (Portland) years in an easily accessible transactions Finance Eric Jones place Portfolio Securities - -------------------- C-Port Purchase/ Finance Eric Jones Permanently, the first two Sales Reports years in an easily accessible place
LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Receipts and Deliveries of Securities (units) - --------------------------------------------- Not Applicable. Portfolio Securities. - -------------------- Not Applicable. Receipts and Disbursements of Cash and other Debits and Credits. - --------------------------------------------------------------- Daily Journals CSRM (Portland) Kathleen Adamson Permanently, the Finance Eric Jones first two years in an easily accessible place (2) General and auxiliary ledgers (or other record) reflecting all asset, liability, reserve, capital, income and expense accounts, including: (i) Separate ledger accounts (or other records) reflecting the following: (a) Securities in transfer; (b) Securities in physical possession; (c) Securities borrowed and securities loaned; (d) Monies borrowed and monies loaned (together with a record of the collateral therefore and substitutions in such collateral); (e) Dividends and interest received; (f) Dividends receivable and interest accrued. Instructions. (a) and (b) shall be stated in terms of securities quantities only; (c) and (d) shall be stated in dollar amounts and securities quantities as appropriate; (e) and (f) shall be stated in dollar amounts only. General Ledger - -------------- LNL trial Finance Eric Jones Permanently, the Balance (5000 first two years series) in an easily accessible place Securities in Transfer - ---------------------- Not Applicable. Securities in Physical Possession - --------------------------------- Not Applicable. Securities Borrowed and Loaned - ------------------------------ Not Applicable. Monies Borrowed and Loaned - -------------------------- Not Applicable. Dividends and Interest Received - ------------------------------- LNL Trial Finance Eric Jones Permanently, the Balance (5000 first two years series) in an easily accessible place LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Dividends Receivable and Interest Accrued - ----------------------------------------- LNL Trial Finance Eric Jones Permanently, the Balance (5000 first two years series) in an easily accessible place (ii) Separate ledger accounts (or other records) for each portfolio security, showing (as of trade dates), (a) the quantity and unit and aggregate price for each purchase, sale, receipt, and delivery of securities and commodities for such accounts, and (b) all other debits and credits for such accounts. Securities positions and money balances in such ledger accounts (or other records) shall be brought forward periodically but not less frequently than at the end of fiscal quarters. Any portfolio security, the salability of which is conditioned, shall be so noted. A memorandum record shall be available setting forth, with respect to each portfolio security accounts, the amount and declaration, ex-dividend, and payment dates of each dividend declared thereon. Ledger Account for each portfolio Security - ------------------------------------------ Daily Report Finance Eric Jones Permanently, the Of Securities first two years Transactions (Daily in an easily Trade File) accessible place (iii) Separate ledger accounts (or other records) for each broker-dealer, bank or other person with or through which transactions in portfolio securities are affected, showing each purchase or sale of securities with or through such persons, including details as to the date of the purchase or sale, the quantity and unit and aggregate prices of such securities, and the commissions or other compensation paid to such persons. Purchases or sales effected during the same day at the same price may be aggregated. Not Applicable. (iv) Separate ledger accounts (or other records), which may be maintained by a transfer agent or registrar, showing for each shareholder of record of the investment company the number of shares of capital stock of the company held. in respect of share accumulation accounts (arising from periodic investment plans, dividend reinvestment plans, deposit of issued shares by the owner thereof, etc.), details shall be available as to the dates and number of shares of each accumulation, and except with respect to already issued shares deposited by the owner thereof, prices of each such accumulation. Shareholder Accounts - -------------------- Master file Finance Eric Jones Permanently, the Record (Daily CSRM (Portland) Kathleen Adamson first two years Trade File & Leg in an easily Syst Client Rpt) accessible place (3) A securities record or ledger reflecting separately for each portfolio security as of trade date all "long" and "short" positions carried by the investment company for its own account and showing the location of all securities long and the off-setting position to all securities short. The record called for by this paragraph shall not be required in circumstances under which all portfolio securities are maintained by a bank or banks or a member or members of a national securities exchange as custodian under a custody agreement or as agent for such custodian. LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Not Applicable (4) Corporate charters, certificates of incorporation or trust agreements, and bylaws, and minute books of stockholders' and directors' or trustees' meetings; and minute books of directors' or trustees' committee and advisory board or advisory committee meetings. Corporate Documents - ------------------- Memorandum Legal Janet Lindenberg Permanently, the Establishing SA first two years in an easily accessible place (5) A record of each brokerage order given by or in behalf of the investment company for, or in connection with, the purchase or sale of securities, whether executed or unexecuted. Such record shall include the name of the broker, the terms and conditions of the order and of any modification or cancellation thereof, the time of entry or cancellation, the price at which executed, and the time of receipt of report of execution. The record shall indicate the name of the person who placed the order in behalf of the investment company. Order Tickets - ------------- UIT applica- CSRM (Portland) Kathleen Adamson Six years, the tions and Finance Eric Jones first two years daily reports in an easily of securities accessible place transactions (6) A record of all other portfolio purchase or sales showing details comparable to those prescribed in paragraph 5 above. Commercial Paper - ---------------- Not Applicable. (7) A record of all puts, calls, spreads, straddles, and other options in which the investment company has any direct or indirect interest or which the investment company has granted or guaranteed; and a record of any contractual commitments to purchase, sell, receive or deliver securities or other property (but not including open orders placed with broker-dealers for the purchase or sale of securities, which may be cancelled by the company on notices without penalty or cost of any kind); containing at least an identification of the security, the number of units involved, the option price, the date of maturity, the date of issuance, and the person to whom issued. Record of Puts, Calls, Spreads, Etc. - ------------------------------------ Not Applicable. (8) A record of the proof of money balances in all ledger accounts (except shareholder accounts), in the form of trial balances. Such trial balances shall be prepared currently at least once a month. LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Trial Balance - ------------- LNL Trial Finance Eric Jones Permanently, the first Balance (5000 two years in an easily series) accessible place (9) A record for each fiscal quarter, which shall be completed within 10 days after the end of such quarter, showing specifically the basis or bases upon which the allocation of orders for the purchase and sale of portfolio securities to named brokers or dealers and the division of brokerage commissions or other compensation on such purchase and sale orders among named persons were made during such quarter. The record shall indicate the consideration given to (a) sales of shares of the investment company by brokers or dealers, (b) the supplying of services or benefits by brokers or dealers to the investment company, its investment advisor or principal underwriter or any persons affiliated therewith, and (c) any other considerations other than the technical qualifications of the brokers and the dealers as such. The record shall show the nature of their services or benefits made available, and shall describe in detail the application of any general or specific formula or other determinant used in arriving at such allocation of purchase and sales orders and such division of brokerage commissions or other compensation. The record shall also include the identifies of the person responsible for the determination of such allocation and such division of brokerage commissions or other compensation. Not Applicable. (10) A record in the form of an appropriate memorandum identifying the person or persons, committees, or groups authorizing the purchase or sale of portfolio securities. Where an authorization is made by a committee or group, a record shall be kept in the names of its members who participated in the authorization. There shall be retained a part of the record required by this paragraph any memorandum, recommendation, or instruction supporting or authorizing the purchase or sale of portfolio securities. The requirements of this paragraph are applicable to the extent they are not met by compliance with the requirements of paragraph 4 of this Rule 31a1(b). Advisory Legal Products and Six years, the first two Agreements Distribution, years in an easily LNL Law Division accessible place (11) Files of all advisory material received from the investment advisor, any advisory board or advisory committee, or any other persons from whom the investment company accepts investment advice publications distributed generally. Not Applicable. (12) The term "other records" as used in the expressions "journals (or other records of original entry)" and "ledger accounts (or other records)" shall be construed to include, where appropriate, copies of voucher checks, confirmations, or similar documents which reflect the information required by the applicable rule or rules in appropriate sequence and in permanent form, including similar records developed by the use of automatic data processing systems. Correspondence CSRM (Portland) Kathleen Adamson Six years, the first two years in an easily accessible place LN-Record Location Person to Contact Retention - --------- -------- ----------------- --------- Proxy State- CSRM (Portland) Kathleen Adamson Six years, the first two ments and years in an easily Proxy Cards accessible place Pricing Sheets Finance Eric Jones Permanently, the first two years in an easily accessible place Bank State- Treasurers Rusty Summers Six years, the first two ments years in an easily accessible place March 24, 2000 EX-99.16.A 40 POWERS OF ATTORNEY POWER OF ATTORNEY I undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account L (Group Variable Annuity II), which were previously executed by me and do hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M. Kluever, my true and lawful attorneys-in-fact, with full power in each of them to sign for me, in my name and in the capacities indicated below, any and all amendments to Registration Statement No. 333-5827 filed with the Securities and Exchange Commission under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming my signature as it may be signed by any of my attorneys-in-fact to any such amendment to that Registration Statement. The power of attorney was signed on April 30, 1999. Signature Title - --------- ----- /s/ Todd R. Stephenson Senior Vice President, Chief Financial Officer - ------------------------- and Assistant Treasurer Todd R. Stephenson (Principal Financial Officer) STATE OF INDIANA ) ) ss. COUNTY OF ALLEN ) Subscribed and sworn to before me this 30th day of April, 1999 /s/ Kimberly J. DeLong ------------------------------------- Notary public Commission Expires: 1-29-2007 --------- EX-99.16.C 41 POWERS OF ATTORNEY POWER OF ATTORNEY I undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account L (Group Variable Annuity II), which were previously executed by me and do hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M. Kluever, my true and lawful attorneys-in-fact, with full power in each of them to sign for me, in my name and in the capacities indicated below, any and all amendments to Registration Statement No. 333-5827 filed with the Securities and Exchange Commission under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming my signature as it may be signed by any of my attorneys-in-fact to any such amendment to that Registration Statement. The power of attorney was signed on April 29, 1999. Signature Title - --------- ----- /s/ Keith J. Ryan Vice President and Controller - --------------------------- (Principal Accounting Officer) Keith J. Ryan STATE OF INDIANA) )ss: COUNTY OF ALLEN ) Subscribed and sworn to before me this 29th day of April, 1999. /s/ Janet L. Lindenberg --------------------------------------- Notary public Commission Expires: 7-10-2001 --------- EX-99.16.F 42 POWERS OF ATTORNEY POWER OF ATTORNEY I undersigned officer of The Lincoln National Life Insurance Company, hereby revoke all powers of attorney authorizing any person to act as attorney-in-fact relative to Lincoln National Variable Annuity Account L (Group Variable Annuity II), which were previously executed by me and do hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M. Kluever, my true and lawful attorneys-in-fact, with full power in each of them to sign for me, in my name and in the capacities indicated below, any and all amendments to Registration Statement No. 333-5827 filed with the Securities and Exchange Commission under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming my signature as it may be signed by any of my attorneys-in-fact to any such amendment to that Registration Statement. The power of attorney was signed on January 6, 2000. Signature Title - --------- ----- /s/ Jon A. Boscia President and Director - -------------------------- (Principal Executive Officer) Jon A. Boscia STATE OF PENNSYLVANIA ) )ss: COUNTY OF PHILADELPHIA) Subscribed and sworn to before me this 6th day of January, 2000. Judith M. Callihan ---------------------------------------- Notary public Commission Expires: Oct. 18, 2003 -----END PRIVACY-ENHANCED MESSAGE-----