-----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, OXV2ZPZXjrIp44FRAgET4DfEKO1WRYeh1/Krc1nhi74jVgi4cxt/RptuoPqE6AzZ eSHQ96bJqOZ4sfLODLFY7A== 0001047469-08-003934.txt : 20080401 0001047469-08-003934.hdr.sgml : 20080401 20080401164002 ACCESSION NUMBER: 0001047469-08-003934 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 21 FILED AS OF DATE: 20080401 DATE AS OF CHANGE: 20080401 EFFECTIVENESS DATE: 20080501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M CENTRAL INDEX KEY: 0001048607 IRS NUMBER: 350472300 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-139960 FILM NUMBER: 08729883 BUSINESS ADDRESS: STREET 1: 1300 S CLINTON ST STREET 2: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M CENTRAL INDEX KEY: 0001048607 IRS NUMBER: 350472300 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08557 FILM NUMBER: 08729884 BUSINESS ADDRESS: STREET 1: 1300 S CLINTON ST STREET 2: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46801 0001048607 S000001625 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M C000046733 Lincoln VULone2007 Elite Series 485BPOS 1 a2183147z485bpos.txt 485POS As filed with the Securities and Exchange Commission on April 1, 2008 1933 Act Registration No. 333-139960 1940 Act Registration No. 811-08557 CIK No. 0001048607 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 1 REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 88 Lincoln Life Flexible Premium Variable Life Account M (Exact Name of Registrant) Lincoln VULone2007 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Exact Name of Depositor) 1300 South Clinton Street Fort Wayne, Indiana 46802 (Address of Depositor's Principal Executive Offices) Depositor's Telephone Number, Including Area Code: (260) 455-2000 Dennis L. Schoff, Esquire The Lincoln National Life Insurance Company 1300 South Clinton Street Ft. Wayne, Indiana 46802 (Name and Address of Agent for Service) Copy To: Lawrence A. Samplatsky, Esquire The Lincoln National Life Insurance Company 350 Church Street Hartford, CT 06103 Approximate Date of Proposed Public Offering: Continuous Title of Securities being registered: Indefinite Number of Units of Interest in Variable Life Insurance Contracts. An indefinite amount of the securities being offered by the Registration Statement has been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. The Form 24F-2 for the Registrant for the fiscal year ending December 31, 2007 was filed March 27, 2008. It is proposed that this filing will become effective: / / immediately upon filing pursuant to paragraph (b) /x/ on May 1, 2008 pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(1) / / on __________________ pursuant to paragraph (a)(1) of Rule 485. / / This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. Lincoln Life Flexible Premium Variable Life Account M The Lincoln National Life Insurance Company Home Office Location: 1300 South Clinton Street P.O. Box 1110 Fort Wayne, IN 46802 (800) 454-6265 Administrative Office: Customer Service Center One Granite Place Concord, NH 03301 (800) 444-2363 - -------------------------------------------------------------------------------- A Flexible Premium Variable Life Insurance Policy - -------------------------------------------------------------------------------- This prospectus describes Lincoln VULONE2007, a flexible premium variable life insurance contract (the "policy"), offered by The Lincoln National Life Insurance Company ("Lincoln Life", "the Company", "we", "us", "our"). The policy provides for death benefits and policy values that may vary with the performance of the underlying investment options. Read this prospectus carefully to understand the policy being offered. You, as the owner, may allocate net premiums to the variable Sub-Accounts of our Flexible Premium Variable Life Account M ("Separate Account"), or to the Fixed Account. Each Sub-Account invests in shares of a certain fund. Comprehensive information on the funds may be found in the funds prospectus which is furnished with this prospectus. Those funds are known as the Elite Series of funds (the "funds"), and such funds are offered by the following fund families. o AllianceBernstein Variable Products Series Fund, Inc. o American Century Investments Variable Portfolios, Inc. o American Funds Insurance Series o Delaware VIP Trust o Fidelity Variable Insurance Products o Franklin Templeton Variable Insurance Products Trust o Lincoln Variable Insurance Products Trust o MFS (Reg. TM) Variable Insurance Trust Additional information on Lincoln Life, the Separate Account and this policy may be found in the Statement of Additional Information (the "SAI"). See the last page of this prospectus for information on how you may obtain the SAI. To be valid, this prospectus must have the current funds' prospectuses with it. Keep all prospectuses for future reference. The Securities and Exchange Commission has not approved or disapproved these securities or determined this prospectus is accurate or complete. It is a criminal offense to state otherwise. This policy may not be available in all states, and this prospectus only offers the policy for sale in jurisdictions where such offer and sale are lawful. Prospectus Dated: May 1, 2008 Table of Contents
Contents Page - ---------------------------------------------------- ----- POLICY SUMMARY ..................................... 3 Benefits of Your Policy ........................ 3 Risks of Your Policy ........................... 4 Charges and Fees ............................... 5 LINCOLN LIFE, THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT .............................. 10 Fund Participation Agreements .................. 10 Distribution of the Policies and Compensation ................................. 11 Sub-Accounts and Funds ......................... 12 Sub-Account Availability and Substitution of Funds ........................................ 16 Voting Rights .................................. 16 POLICY CHARGES AND FEES ............................ 16 Premium Load; Net Premium Payment .............. 17 Surrender Charges .............................. 17 Partial Surrender Fee .......................... 18 Transfer Fee ................................... 18 Mortality and Expense Risk Charge .............. 18 Fixed Account Asset Charge ..................... 18 Cost of Insurance Charge ....................... 18 Administrative Fee ............................. 19 Policy Loan Interest ........................... 19 Rider Charges .................................. 19 YOUR INSURANCE POLICY .............................. 20 Application .................................... 21 Owner .......................................... 21 Right to Examine Period ........................ 21 Initial Specified Amount ....................... 22 Transfers ...................................... 22 Market Timing .................................. 22 Optional Sub-Account Allocation Programs ....... 24 Riders ......................................... 25
Contents Page - ---------------------------------------------------- ----- Continuation of Coverage ....................... 34 Termination of Coverage ........................ 35 State Regulation ............................... 35 PREMIUMS ........................................... 35 Allocation of Net Premium Payments ............. 35 Planned Premiums; Additional Premiums .......... 35 Policy Values .................................. 36 Persistency Bonus .............................. 37 DEATH BENEFITS ..................................... 37 Death Benefit Options .......................... 37 Changes to the Initial Specified Amount and Death Benefit Options ........................ 38 Death Benefit Proceeds ......................... 39 POLICY SURRENDERS .................................. 39 Partial Surrender .............................. 39 POLICY LOANS ....................................... 40 LAPSE AND REINSTATEMENT ............................ 41 No-Lapse Protection ............................ 41 Reinstatement of a Lapsed Policy ............... 42 TAX ISSUES ......................................... 42 Taxation of Life Insurance Contracts in General ...................................... 42 Policies That Are MECs ......................... 44 Policies That Are Not MECs ..................... 44 Other Considerations ........................... 45 Fair Value of Your Policy ...................... 46 Tax Status of Lincoln Life ..................... 46 RESTRICTIONS ON FINANCIAL TRANSACTIONS ..................................... 46 LEGAL PROCEEDINGS .................................. 46 FINANCIAL STATEMENTS ............................... 47 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ........................... 48
2 POLICY SUMMARY Benefits of Your Policy Death Benefit Protection. The policy this prospectus describes is a variable life insurance policy which provides death benefit protection. Variable life insurance is a flexible tool for financial and investment planning for persons needing death benefit protection. You should consider other forms of investments if you do not need death benefit protection, as there are additional costs and expenses in providing the insurance. Benefits of the policy will be impacted by a number of factors discussed in this prospectus, including adverse investment performance and the amount and timing of premium payments. Tax Deferred Accumulation. Variable life insurance has significant tax advantages under current tax law. Policy values accumulate on a tax-deferred basis. A transfer of values from one Sub-Account to another within the policy currently generates no current taxable gain or loss. Any investment income and realized capital gains within a Sub-Account or interest from the Fixed Account are automatically reinvested without being taxed to the policy owner. Access to Your Policy Values. Variable life insurance offers access to policy values. You may borrow against your policy or surrender all or a portion of your policy. Your policy can support a variety of personal and business financial planning needs. Flexibility. The policy is a flexible premium variable life insurance policy in which flexible premium payments are permitted. You may select death benefit options and policy riders. You may increase or decrease the amount of death benefit. You are able to select, monitor, and change investment Sub-Account choices within your policy. With the wide variety of investment Sub-Accounts available, it is possible to fine tune an investment mix to meet changing personal objectives or investment conditions. Premium payments and cash values you choose to allocate to Sub-Accounts are used by us to purchase shares of underlying funds which follow investment objectives similar to the investment objectives of the corresponding Sub-Account. You should refer to this prospectus and the prospectus for each underlying fund for comprehensive information on the Sub-Accounts and the underlying funds. You may also allocate premiums and accumulation values to the Fixed Account. No-Lapse Protection. Your policy will include two riders which may help you manage some of the risk of policy lapse. The No-Lapse Enhancement Rider may prevent a policy from lapsing where the net accumulation value under your policy is insufficient to cover the monthly deductions if the requirements of the rider, including requirements as to timing and amount of premium payments, are met. The net accumulation value of your policy is defined in the policy values section of the prospectus. The duration of lapse protection provided will be determined monthly, and it will vary based on the calculations described in detail in the rider. Those calculations credit the actual amounts of net premium payments made, deduct for the actual amount of any partial surrenders you make, and then adjust the net of those actual amounts by a formula which increases the net of premiums less surrenders by an assumed interest crediting rate and reduces that net amount by certain assumed charges rates and fees referred to by the rider as "reference rates". All assumed rates, charges, and fees are set forth in the rider. Payment of premiums higher than the planned premium and assumed interest credited by the rider's formula on net premiums will increase the duration of lapse protection. Partial surrenders and rider reference charges, rates, and fees deducted by the rider formula will reduce the duration of lapse protection. In addition, if the provisions of this rider are invoked to prevent lapse of the policy, the death benefit provided by this rider will be different from the death benefit otherwise in effect under the policy. Refer to the section headed "No-Lapse Enhancement Rider" in the Riders section of this prospectus for more information about the amount of the death benefit which would be provided by the rider as well as the determination of the duration of protection. Finally, the rider reserves to us the right to restrict your allocations to certain Sub-Accounts to a maximum of 40% of the policy accumulation value. The decision to enforce this restriction will be based on an annual review of the Separate Account investments for this 3 product. If we determine that the allocations by all owners of this product are highly concentrated in certain Sub-Accounts, then Sub-Accounts with higher concentrations than anticipated will be subject to the restriction. You must maintain automatic rebalancing and comply with these investment restrictions in order to keep this rider in effect. The Premium Reserve Rider allows you to pay premiums in addition to those you plan to pay for the base policy and to have such amounts accumulate in the same manner as if they had been allocated to your policy. This rider's accumulation value generated by these additional premiums will automatically be transferred to your policy at the end of the grace period to help keep your policy in force in the event (i) the net accumulation value under your policy is insufficient to cover the monthly deductions and your policy's No-Lapse Enhancement Rider described above is not at the time preventing your policy from lapsing, and (ii) you do not respond to the lapse notice by paying at least the amount set forth in that notice. If the Premium Reserve Rider accumulation value on the day the grace period ends is insufficient to meet the amount then due, your policy and this rider will lapse without value. You may also request us to transfer this rider's accumulation value to your policy at any time. As with your policy, you bear the risk that investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Adverse investment results will impact the accumulation value of the rider, and, therefore, the amount of the rider accumulation value which may be available to prevent your policy from lapsing or for providing policy benefits. Refer to the section headed "Premium Reserve Rider" in the Riders section of this prospectus for more information about the benefits of this rider. Risks of Your Policy Fluctuating Investment Performance. A Sub-Account is not guaranteed and will increase and decrease in value according to investment performance of the underlying fund. Policy values in the Sub-Accounts are not guaranteed. If you put money into the Sub-Accounts, you assume all the investment risk on that money. A comprehensive discussion of each Sub-Account's and underlying fund's objective and risk is found in this prospectus and in each fund's prospectus, respectively. You should review these prospectuses before making your investment decision. Your choice of Sub-Accounts and the performance of the funds underlying each Sub-Account will impact the policy's Accumulation Value and will impact how long the policy remains in force, its tax status, and the amount of premium you need to pay to keep the policy in force. Unsuitable for Short-Term Investment. This policy is intended for long-term financial and investment planning for persons needing death benefit protection, and it is unsuitable for short-term goals. Your policy is not designed to serve as a vehicle for frequent trading. Policy Lapse. Sufficient premiums must be paid to keep a policy in force. There is a risk of lapse if premiums are too low in relation to the insurance amount and if investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Outstanding policy loans and partial surrenders will increase the risk of lapse. In addition to paying sufficient premiums and being cognizant of the impact of outstanding policy loans and partial surrenders on your policy values, you also have the No-Lapse Enhancement Rider and the Premium Reserve Rider, briefly noted above and discussed in more detail in the Riders section of this prospectus, to help you manage some of the risk of policy lapse. Decreasing Death Benefit. Any outstanding policy loans and any amount that you have surrendered or withdrawn will reduce your policy's death benefit. Depending upon your choice of Death Benefit Option, adverse performance of the Sub-Accounts you choose may also decrease your policy's death benefit. Consequences of Surrender. Surrender charges are assessed if you surrender your policy within the first 10-15 policy years. Depending on the amount of premium paid, or any reduction in specified amount, there may be little or no surrender value available. Partial surrenders may reduce the policy value and death benefit, and may increase the risk of lapse. To avoid lapse, you may be required to make additional premium payments. Full or partial surrenders may result in tax consequences. 4 Tax Consequences. You should always consult a tax adviser about the application of federal and state tax rules to your individual situation. The federal income tax treatment of life insurance is complex and current tax treatment of life insurance may change. There are other federal tax consequences such as estate, gift and generation skipping transfer taxes, as well as state and local income, estate and inheritance tax consequences. Charges and Fees This section describes the fees and expenses that you will pay when buying, owning and surrendering your policy. Refer to the "Policy Charges and Fees" section later in this prospectus for more information. Table I describes the fees and expenses that you will pay at the time you purchase your policy, surrender your policy, or transfer accumulation values between Sub-Accounts.
Table I: Transaction Fees When Charge Amount Charge is Deducted Deducted Maximum sales charge When you pay a premium. 7.0% of each premium payment in policy years imposed on premiums 1-20 and 4.0% in policy years 21 and later. (load) Surrender Charge* Upon full surrender of your policy (years 1-15). When you make certain specified amount decreases (years 1-10). Maximum Charge $60.00 per $1,000 of specified amount. Minimum Charge $0.00 per $1,000 of specified amount. Charge for a For a male, age 45, standard non-tobacco, in Representative Insured year one the maximum surrender charge is $30.27 per $1,000 of specified amount. For a female, age 45, standard non-tobacco, in year one the maximum surrender charge is $27.39 per $1,000 of specified amount. Transfer Fee Applied to any transfer request $25 in excess of 24 made during any policy year.
* These charges and costs vary based on individual characteristics. The charges and costs shown in the table may not be representative of the charges and costs that a particular policy owner will pay. You may obtain more information about the particular charges that would apply to you by requesting a personalized policy illustration from your financial adviser. 5 Table II describes the fees and expenses that you will pay periodically during the time that you own your policy, not including the fund operating expenses shown in Table III.
Table II: Periodic Charges Other Than Fund Operating Expenses When Charge Amount Charge is Deducted Deducted Cost of Insurance* Monthly Maximum Charge $83.33 per month per $1,000 of Net Amount at Risk. Minimum Charge $0.00 per month per $1,000 of Net Amount at Risk. Individuals with a higher mortality risk than standard issue individuals can be charged from 125% to 800% of the standard rate. Charge for a For a male, age 45, standard non-tobacco, in Representative Insured year one the guaranteed maximum monthly cost of insurance rate is $0.19 per month per $1,000 of Net Amount at Risk. For a female, age 45, standard non-tobacco, in year one the guaranteed maximum monthly cost of insurance rate is $0.14 per month per $1,000 of Net Amount at Risk. Mortality and Expense Daily (at the end of each Daily charge as a percentage of the value of the Risk Charge ("M&E") valuation day). Separate Account, guaranteed not to exceed an effective annual rate of 0.60%.1 Fixed Account Asset Daily Daily charge as a percentage of the value of the Charge Fixed Account, guaranteed not to exceed an effective annual rate of 0.50%. Administrative Fee* Monthly A flat fee of $10 per month in all years. In addition to the flat fee of $10 per month, for the first ten policy years from issue date or increase in specified amount, a monthly fee per dollar of initial specified amount or increase in specified amount as follows: Maximum Charge $2.56 per month per $1,000 of initial specified amount or increase in specified amount. Minimum Charge $0.01 per month per $1,000 of initial specified amount or increase in specified amount. Charge for a For a male or female age 45, standard non- Representative Insured tobacco, the maximum additional monthly charge is $0.24 per month per $1,000 of specified amount. Policy Loan Interest Annually 5.0% annually of the amount held in the loan account.2
6
Table II: Periodic Charges Other Than Fund Operating Expenses (continued) When Charge Amount Charge is Deducted Deducted Interest on Accelerated Annually Benefit Lien Accelerated Benefit Up 5.0% annually of amount of Accelerated Benefit to Surrender Value up to Surrender Value.3 Accelerated Benefit Rate not to exceed higher of (i) published Exceeding Surrender monthly average of Moody's Corporate Bond Value Yield Average - Monthly Average Corporates (determined 30 days in advance of beginning of policy year) and (ii) the rate used to compute the Accumulation Value of the Fixed Account plus 1.0%.3 No-Lapse Enhancement N/A There is no charge for this rider.4 Rider Overloan Protection Rider One-time charge when you Maximum charge of 5% of the then current elect to use the benefit. accumulation value.5 Optional Rider Charges Individualized based on whether optional Rider(s) selected. Premium Reserve Rider When you allocate a premium 4.0% of each premium payment allocated to the payment to this rider rider.6 When Rider Accumulation 3.0% of amount transferred Value is transferred to Policy during policy years 1-106 Waiver of Monthly Monthly Rate factor is percent of all other covered Deduction Rider7 monthly charges. Maximum Charge 12.0% of all other covered monthly charges. Minimum Charge 2.0% of all other covered monthly charges. Charge for a For a male, age 45, standard non-tobacco, the Representative Insured maximum rate factor is 3.5% of all other covered monthly charges. For a female, age 45, standard non-tobacco, the maximum rate factor is 5% of all other covered monthly charges. Accelerated Benefits When any benefit payment is $250 (deducted from amount of benefit paid) Riders8 made Change of Insured N/A There is no charge for this rider. Rider Enhanced Surrender Monthly (in policy years 2-5 Charge is $0.05 per $1,000 of initial specified Value Rider only) amount. Estate Tax Repeal One-time charge at issue $250 Rider
7 * These charges and costs vary based on individual characteristics. The charges and costs shown in the table may not be representative of the charges and costs that a particular policy owner will pay. You may obtain more information about the particular charges that would apply to you by requesting a personalized policy illustration from your financial adviser. 1 Guaranteed at an effective annual rate of 0.60% in policy years 1-10 and 0.20% in policy years 11 and beyond. 2 Effective annual interest rate of 5.0% in years 1-10 and 4.0% in years 11 and later. Although deducted annually, interest accrues daily. As described in the section headed "Policy Loans", when you request a policy loan, amounts equal to the amount of the loan you request are withdrawn from the Sub-Accounts and the Fixed Account in proportion to their respective values. Such amount is transferred to the Loan Account, which is part of the Company's general account. Amounts in the Loan Account are credited interest at an effective annual rate guaranteed not to be less than 4.0%. 3 Under the Accelerated Benefits Riders, payments of benefits are considered as liens, which as described more fully in the section headed "Policy Loans", are charged interest on amounts not exceeding the Surrender Value of the policy at an effective annual interest rate of 5.0% in years 1-10 and 4.0% in years 11 and later. To the extent the Accelerated Benefit paid exceeds the Surrender Value of the policy, the interest rate charged will vary as described in the table above and in the section headed "Policy Loans". Although deducted annually, interest accrues daily. As described in the section headed "Policy Loans", when you request an Accelerated Benefit, amounts equal to the amount of the Accelerated Benefit you request are withdrawn from the Sub-Accounts and the Fixed Account in proportion to their respective values. Such amount is transferred to the Loan Account, which is part of the Company's general account. Amounts in the Loan Account are credited interest at an effective annual rate guaranteed not to be less than 4.0%. 4 There is no separate charge for the No-Lapse Enhancement Rider. The Cost of Insurance Charge for the policy has been adjusted to reflect the addition of the rider to the policy. See No-Lapse Enhancement Rider section for further discussion. 5 Accumulation Value of the policy is the sum of the Fixed Account value, the Separate Account value, and the Loan Account value. See Policy Values section for detailed discussion of how each value is calculated. 6 Allocations of premium payments to the rider are at your discretion. Allocations of premium payments to the rider are subject to the 4.0% charge shown in Table II and are not subject to the "Maximum Sales Charge Imposed on Premiums" shown in Table I. This 4.0% charge is called the premium reserve rider premium load. Rider accumulation value allocated to the Separate Account is subject to the mortality and expense risk charge (which does not exceed 0.60% for policy years 1-10 and 0.20% for policy years 11 and later) and rider accumulation value allocated to the Fixed Account is subject to the Fixed Account Asset Charge which does not exceed 0.50% for all policy years). Transfers of Accumulation Value from the rider to the policy are not subject to the "Maximum Sales Charge Imposed on Premiums" shown in Table I, but are subject to a charge of 3.0% of the accumulation value transferred if such transfers are made during the first 10 policy years. In addition, if you request a loan from the accumulation value of this rider, interest is charged at the same rate as for policy loans. See Premium Reserve Rider section for further discussion. 7 These charges and costs vary based on individual characteristics. The charges and costs shown in the tables may not be representative of the charges and costs that a particular policy owner will pay. You may obtain more information about the particular charges, cost of insurance, and the cost of certain riders that would apply to you by requesting a personalized policy illustration from your financial adviser. 8 There are two versions of this rider; see Riders section for detailed discussion of the terms of each rider, and note that the payment of a benefit under either version of the Rider is considered a loan against the policy. Table III shows the annual fund fees and expenses that are deducted daily from your Sub-Account values, on a pro rata basis. The table shows the minimum and maximum total operating expenses charged by the funds that you may pay during the time you own your policy. More detail concerning each fund's fees and expenses is contained in the prospectus for each fund. These fees and expenses may change at any time.
Table III: Total Annual Fund Operating Expenses (expenses that are deducted from fund assets) Total Annual Operating Expense Maximum Minimum Total management fees, distribution and/or service 6.06% 9 0.32% (12b-1) fees, and other expenses.
8 9 The Total Annual Operating Expenses shown in the table do not reflect waivers and reductions. Funds may offer waivers and reductions to lower their fees. Currently such waivers and reductions range from 0.00% to 4.89%. These waivers and reductions generally extend through April 30, 2009 but may be terminated at any time by the fund. Refer to the funds prospectus for specific information on any waivers or reductions in effect. The minimum and maximum percentages shown in the table include Fund Operating Expenses of mutual funds, if any, which may be acquired by the underlying funds, as well as Fund Operating Expenses of mutual funds which are acquired by any of the underlying funds which operate as fund of funds. Refer to the funds prospectus for details concerning Fund Operating Expenses of mutual fund shares acquired by underlying funds, if any. 9 LINCOLN LIFE, THE SEPARATE ACCOUNT AND THE GENERAL ACCOUNT The Lincoln National Life Insurance Company (Lincoln Life, the Company, we, us, our) (EIN 35-0472300), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance contracts and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to policy owners under the policies. Death Benefit Proceeds and Rider benefits to the extent those proceeds and benefits exceed the then current accumulation value of your policy are backed by the claims-paying ability of Lincoln Life. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. Lincoln Financial Group sells a wide variety of financial products and solutions through financial advisors: mutual funds, managed accounts, retirement solutions, life insurance, 401(k) and 403(b) plans, savings plans, institutional investments and comprehensive financial planning and advisory services. Lincoln Life Flexible Premium Variable Life Account M (Separate Account) is a separate account of the Company which was established on December 2, 1997. The investment performance of assets in the Separate Account is kept separate from that of the Company's general account. Separate Account assets attributable to the policies are not charged with the general liabilities of the Company. Separate Account income, gains and losses are credited to or charged against the Separate Account without regard to the Company's other income, gains or losses. The Separate Account's values and investment performance are not guaranteed. It is registered with the Securities and Exchange Commission (the "Commission") as a unit investment trust under the Investment Company Act of 1940 ("1940 Act") and meets the definition of "separate account." Any changes in the investment policy of the Separate Account must be approved by the Indiana Department of Insurance. You may also allocate your premium payments and accumulation values in whole or in part to the Fixed Account. In the Fixed Account, we guarantee a minimum interest rate and assume the risk of investment gain or loss. The general account is secured by Lincoln Life's general assets. Fund Participation Agreements In order to make the funds in which the Sub-Accounts invest available, Lincoln Life has entered into agreements with the trusts or corporations and their advisers or distributors. In some of these agreements, we must perform certain administrative services for the fund advisers or distributors. For these administrative functions, we may be compensated at annual rates of between 0.00% and 0.46% based upon assets of an underlying fund attributable to the policies. We (or our affiliates) may profit from these fees or use these fees to defray the costs of distributing the contract. Additionally, a fund's adviser and/or distributor (or its affiliates) may provide us with certain services that assist us in the distribution of the contracts and may pay us and/or certain affiliates amounts to participate in sales meetings. The compensation may come from 12b-1 fees, or be paid by the advisers or distributors. The funds offered by the following trusts or corporations make payments to Lincoln Life under their distribution plans in consideration of the administrative functions Lincoln Life performs: American Funds Insurance Series, Fidelity Variable Insurance Products, and Lincoln Variable Insurance Products Trust. Payments made out of the assets of the fund will reduce the amount of assets that otherwise would be available for investment and will reduce the return on your investment. The dollar amount of future asset-based fees is not predictable because these fees are a percentage of the fund's average net assets, which can fluctuate over time. If, however, the value of the fund goes up, then so would the payment to us (or our affiliates). Conversely, if the value of the funds goes down, payments to us (or our affiliates) would decrease. 10 Distribution of the Policies and Compensation The policy is distributed by broker-dealer firms through their registered representatives who are appointed as life insurance agents for the Company. One of the broker-dealer firms is Lincoln Financial Advisors Corporation ("LFA"), which is an affiliate of the Company. Broker-dealer firms may receive commission and service fees up to 60% of first year premium, plus up to 5% of all other premiums paid. The amount of compensation may also be affected by choices the policy owner has made, including choices of riders, when the policy was applied for. In lieu of premium-based commission, equivalent amounts may be paid over time, based on accumulation value. Additionally, the broker-dealer may be paid additional compensation on first year premiums and all additional premiums and/or provided reimbursements for portions of policy sales expenses. In some situations, the broker-dealer may elect to share its commission or expense reimbursement allowance with its registered representatives. Registered representatives of broker-dealer firms may also be eligible for cash bonuses and "non cash compensation." The latter, as defined in FINRA Conduct Rule 2820, includes such things as office space, computers, club credit, prizes, awards, and training and education meetings. Broker-dealers or their affiliates may be paid additional amounts for: (1) "preferred product" treatment of the policies in their marketing programs, which may include marketing services and increased access to sales representatives; (2) sales promotions relating to the policies; (3) costs associated with sales conferences and educational seminars for their sales representatives; (4) other sales expenses incurred by them; and (5) inclusion in the financial products the broker-dealer offers. Loans may be provided to broker-dealers or their affiliates to help finance marketing and distribution of the policies, and those loans may be forgiven if aggregate sales goals are met. In addition, staffing or other administrative support and services may be provided to broker-dealers who distribute the policies. These additional types of compensation are not offered to all broker-dealers. The terms of any particular agreement governing compensation may vary among broker-dealers and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation may provide broker-dealers and/or their registered representatives with an incentive to favor sales of the policies over other variable life insurance policies (or other investments) with respect to which a broker-dealer does not receive additional compensation, or receives lower levels of additional compensation. You may ask your registered representative how he/she will personally be compensated for the transaction. You may wish to take such payments into account when considering and evaluating any recommendation relating to the policies. Depending on the particular selling arrangements, there may be others who are compensated for distribution activities. For example, certain "wholesalers," who control access to certain selling offices, may be compensated for access to those offices or for referrals, and that compensation may be separate from the compensation paid for sales of the policies. One of the wholesalers is Lincoln Financial Distributors, Inc. ("LFD"), a registered broker-dealer, also an affiliate of Lincoln Life. Marketing organizations, associations, brokers or consultants which provide marketing assistance and other services to broker-dealers who distribute the policies, and which may be affiliated with those broker-dealers, may also be compensated. Commissions and other incentives or payments described above are not charged directly to policy owners or the Separate Account. The potential of receiving, or the receipt of, such marketing assistance or other services and the payment to those who control access or for referrals, may provide broker-dealers and/or their registered representatives an incentive to favor sales of the policies over other variable life insurance policies (or other investments) with respect to which a broker-dealer does not receive similar assistance or disadvantage issuers of other variable life insurance policies (or other investments) which do not compensate for access or referrals. All compensation is paid from our resources, which include fees and charges imposed on your policy. We do not anticipate that the surrender charge, together with the portion of the premium load attributable to sales expense, will cover all sales and administrative expenses which we will incur in connection with your policy. Any such shortfall would be available for recovery from the Company's general account, which supports insurance and annuity obligations. 11 Sub-Accounts and Funds The variable investment options in the policy are Sub-Accounts of the Separate Account. All amounts allocated or transferred to a Sub-Account are used to purchase shares of the appropriate fund to which we refer as the underlying fund. You do not invest directly in these funds. The investment performance of each Sub-Account will reflect the investment performance of the underlying fund. We create Sub-Accounts and select the funds the shares of which are purchased by amounts allocated or transferred to the Sub-Accounts based on several factors, including, without limitation, asset class coverage, the strength of the manager's reputation and tenure, brand recognition, performance, and the capability and qualification of each sponsoring investment firm. Another factor we consider during the initial selection process is whether the fund or an affiliate of the fund will compensate us for providing administrative, marketing, and/or support services that would otherwise be provided by the fund, the fund's investment adviser, or its distributor. We review each fund periodically after it is selected. Upon review, we may either close a Sub-Account or restrict allocation of additional purchase payments to a Sub-Account if we determine the fund in which such Sub-Account invests no longer meets one or more of the factors and/or if the Sub-Account has not attracted significant policy owner assets. Alternatively, we may seek to substitute another fund which follows a similar investment objective as the fund in which a Sub-Account invests, subject to receipt of applicable regulatory approvals. Finally, when we develop a variable life insurance product in cooperation with a fund family or distributor (e.g., a "private label" product), we generally will include funds based on recommendations made by the fund family or distributor, whose selection criteria may differ from our selection criteria. A given underlying fund may have an investment objective and principal investment strategy similar to those for another fund managed by the same investment adviser or subadviser. However, because of timing of investments and other variables, there will be no correlation between the two investments. Even though the management strategy and the objectives of the funds are similar, the investment results may vary. Several of the underlying funds may invest in non-investment grade, high-yield, and high-risk debt securities (commonly referred to as "junk bonds"), as detailed in the individual fund prospectus. There is no assurance that the investment objective of any of the underlying funds will be met. You assume all of the investment performance risk for the Sub-Accounts you select. The amount of risk varies significantly among the Sub-Accounts. You should read each underlying fund's prospectus carefully before making investment choices. Additional Sub-Accounts and underlying funds may be made available in our discretion. The right to select among Sub-Accounts will be limited by the terms and conditions imposed by the Company. The underlying funds and their investment advisers/subadvisers and objectives are listed below. Comprehensive information on each fund, its objectives and past performance may be found in each fund prospectus. Prospectuses for each of the underlying funds listed below accompany this prospectus and are available by calling 1-800-444-2363. AllianceBernstein Variable Products Series Fund, Inc., advised by AllianceBernstein, L.P. o AllianceBernstein Global Technology Portfolio (Class A): Maximum capital appreciation. o AllianceBernstein Growth and Income Portfolio (Class A): Growth and income. o AllianceBernstein International Value Portfolio (Class A): Long-term growth. o AllianceBernstein Small/Mid Cap Value Portfolio (Class A): Long-term growth. American Century Investments Variable Portfolios, Inc., advised by American Century Investment Management, Inc. o Inflation Protection Fund (Class I): Long-term total return. 12 American Funds Insurance Series, advised by Capital Research and Management Company. o Global Growth Fund (Class 2): Long-term growth. o Global Small Capitalization Fund (Class 2): Long-term growth. o Growth Fund (Class 2): Long-term growth. o Growth-Income Fund (Class 2): Growth and income. o International Fund (Class 2): Long-term growth. Delaware VIP Trust, advised by Delaware Management Company. o Capital Reserves Series (Standard Class): Current income. o Diversified Income Series (Standard Class): Total return. o Emerging Markets Series (Standard Class): Capital appreciation. o High Yield Series (Standard Class): Total return. o Small Cap Value Series (Standard Class): Capital appreciation. o Trend Series (Standard Class): Capital appreciation. o U. S. Growth Series (Standard Class): Capital appreciation. o Value Series (Standard Class): Capital appreciation. Fidelity Variable Insurance Products, advised by Fidelity Management & Research Company. o Contrafund Portfolio (Service Class): Long-term capital appreciation. o Growth Portfolio (Service Class): Capital appreciation. o Mid Cap Portfolio (Service Class): Long-term growth. o Overseas Portfolio (Service Class): Long-term growth. Franklin Templeton Variable Insurance Products Trust, advised by Franklin Advisers, Inc. for the Franklin Income Securities Fund, the Franklin Small-Mid Cap Growth Securities Fund and the Templeton Global Income Securities Fund, and by Franklin Mutual Advisers, LLC for the Mutual Shares Securities Fund. o Franklin Income Securities Fund (Class 1): Current income. o Franklin Small-Mid Cap Growth Securities Fund (Class 1): Long-term capital growth. o Mutual Shares Securities Fund (Class 1): Capital appreciation. o Templeton Global Income Securities Fund (Class 1): High current income. Lincoln Variable Insurance Products Trust, advised by Lincoln Investment Advisors Corporation. o LVIP Baron Growth Opportunities Fund (Service Class): Long-term growth. (Subadvised by BAMCO, Inc.) (formerly Baron Capital Asset Fund) o LVIP Capital Growth Fund (Standard Class): Capital appreciation. (Subadvised by Wellington Management Company, LLP) o LVIP Cohen & Steers Global Real Estate Fund (Standard Class): Total return. (Subadvised by Cohen & Steers Capital Management) o LVIP Columbia Value Opportunities Fund (Standard Class): Long-term capital appreciation. (Subadvised by Dalton, Greinger, Hartman, Maher & Co.) (formerly LVIP Value Opportunities Fund) o LVIP Delaware Bond Fund (Standard Class): Current income. (Subadvised by Delaware Management Company) 13 o LVIP Delaware Growth and Income Fund (Standard Class): Capital appreciation. (Subadvised by Delaware Management Company) o LVIP Delaware Social Awareness Fund (Standard Class): Capital appreciation. (Subadvised by Delaware Management Company) o LVIP Delaware Special Opportunities Fund (Standard Class): Capital appreciation. (Subadvised by Delaware Management Company) o LVIP FI Equity-Income Fund (Standard Class): Income. (Subadvised by Pyramis Global Advisors LLC) o LVIP Janus Capital Appreciation Fund (Standard Class): Long-term growth. (Subadvised by Janus Capital Management LLC) o LVIP Marsico International Growth Fund (Standard Class): Long-term capital appreciation. (Subadvised by Marsico Capital Management, LLC) o LVIP MFS (Reg. TM) Value Fund (Standard Class): Capital appreciation. (Subadvised by Massachusetts Financial Services Company) o LVIP Mid-Cap Value Fund (Standard Class): Long-term capital appreciation. (Subadvised by Wellington Management Company, LLP) o LVIP Mondrian International Value Fund (Standard Class): Long-term capital appreciation. (Subadvised by Mondrian Investment Partners Limited) o LVIP Money Market Fund (Standard Class): Current income/Preservation of capital. (Subadvised by Delaware Management Company) o LVIP SSgA Bond Index Fund (Standard Class): Current income. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA Developed International 150 Fund (Standard Class): Long-term capital appreciation. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA Emerging Markets 100 Fund (Standard Class): Long-term capital appreciation. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA International Index Fund (Standard Class): Long-term capital appreciation. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA Large Cap 100 Fund (Standard Class): Long-term capital appreciation. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA S&P 500 Index Fund (Standard Class)(1): Capital appreciation. (Subadvised by SSgA Funds Management, Inc.) (formerly LVIP S&P 500 Index Fund) o LVIP SSgA Small/Mid Cap 200 Fund (Standard Class): Long-term capital appreciation. (Subadvised by SSgA Funds Management, Inc.) This fund will be available as of May 19, 2008. Consult your financial adviser. o LVIP SSgA Small-Cap Index Fund (Standard Class): Capital appreciation. (Subadvised by SSgA Funds Management, Inc.) (formerly LVIP Small-Cap Index Fund) o LVIP T. Rowe Price Growth Stock Fund (Standard Class): Long-term growth of capital. (Subadvised by T. Rowe Price Associates, Inc.) 14 o LVIP T. Rowe Price Structured Mid-Cap Growth Fund (Standard Class): Maximum capital appreciation. (Subadvised by T. Rowe Price Associates, Inc.) o LVIP Templeton Growth Fund (Standard Class): Long-term growth of capital. (Subadvised by Templeton Investment Counsel, LLC) o LVIP Turner Mid-Cap Growth Fund (Standard Class): Capital appreciation. (Subadvised by Turner Investment Partners) (formerly LVIP Mid-Cap Growth Fund) o LVIP UBS Global Asset Allocation Fund (Standard Class): Total return. (Subadvised by UBS Global Asset Management (Americas) Inc. (UBS Global AM)) o LVIP Wilshire 2010 Profile Fund (Standard Class)(2): Total return. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire 2020 Profile Fund (Standard Class)(2): Total return. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire 2030 Profile Fund (Standard Class)(2): Total return. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire 2040 Profile Fund (Standard Class)(2): Total return. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire Aggressive Profile Fund (Standard Class)(2): Capital appreciation. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire Conservative Profile Fund (Standard Class)(2): Current income. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire Moderate Profile Fund (Standard Class)(2): Total return. (Subadvised by Wilshire Associates Incorporated) o LVIP Wilshire Moderately Aggressive Profile Fund (Standard Class)(2): Growth and income. (Subadvised by Wilshire Associates Incorporated) MFS (Reg. TM) Variable Insurance Trust, advised by Massachusetts Financial Services Company o Growth Series (Initial Class): Capital appreciation. This fund will be available as of May 19, 2008. Consult your financial adviser. o Total Return Series (Initial Class): Total return. o Utilities Series (Initial Class): Total return. (1)"S&P 500" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use by Lincoln Variable Insurance Products Trust and its affiliates. The product is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of purchasing the product. (Please see Statement of Additional Information which sets forth additional disclaimers and limitations of liability on behalf of S&P.) (2)The Lincoln Variable Insurance Products Trust LVIP Wilshire 2010 Profile Fund, LVIP Wilshire 2020 Profile Fund, LVIP Wilshire 2030 Profile Fund, LVIP Wilshire 2040 Profile Fund, LVIP Wilshire Aggressive Profile Fund, LVIP Wilshire Conservative Profile Fund, LVIP Wilshire Moderate Profile Fund, and LVIP Wilshire Moderately Aggressive Profile Fund are "Fund of Funds" and as such purchase shares of other mutual funds rather than directly investing in debt and equity securities. As a result, Fund of Funds may have higher expenses than mutual funds which invest directly in debt and equity securities. 15 Sub-Account Availability and Substitution of Funds Lincoln Life may close Sub-Accounts and may seek to substitute shares of other funds as the fund in which a Sub-Account invests if: 1) the shares of any underlying fund should no longer be available for investment by the Separate Account; or 2) the Sub-Account has not attracted significant policyholder allocations; or 3) in our judgment, further investment in such shares ceases to be appropriate in view of the purpose of the Separate Account, legal, regulatory or federal income tax restrictions, or for any other reason. We will obtain any necessary regulatory or other approvals prior to such a change. We will endorse your policy as required to reflect any withdrawal or substitution of underlying funds. Substitute funds may have higher charges than the funds being replaced. Voting Rights The underlying funds do not hold regularly scheduled shareholder meetings. When a fund holds a special meeting for the purpose of approving changes in the ownership or operation of the fund, the Company is entitled to vote the shares held by our Sub-Account in that fund. Under our current interpretation of applicable law, you may instruct us how to vote those shares. We will notify you when your instructions are needed and will provide information from the fund about the matters requiring the special meeting. We will calculate the number of votes for which you may instruct us based on the amount you have allocated to that Sub-Account, and the value of a share of the corresponding fund, as of a date chosen by the fund (record date). If we receive instructions from you, we will follow those instructions in voting the shares attributable to your policy. If we do not receive instructions from you, we will vote the shares attributable to your policy in the same proportion as we vote other shares based on instructions received from other policy owners. Since underlying funds may also offer their shares to entities other than the Company, those other entities also may vote shares of the underlying funds, and those votes may affect the outcome. Each underlying fund is subject to the laws of the state in which it is organized concerning, among other things, the matters which are subject to a shareholder vote, the number of shareholders which must be present in person or by proxy at a meeting of shareholders (a "quorum"), and the percentage of such shareholders present in person or by proxy which must vote in favor of matters presented. Because shares of the underlying fund held in the Separate Account are owned by the Company, and because under the 1940 Act the Company will vote all such shares in the same proportion as the voting instruction which we receive, it is important that each policy owner provide their voting instructions to the Company. Even though policy owners may choose not to provide voting instruction, the shares of a fund to which such policy owners would have been entitled to provide voting instruction will, subject to fair representation requirements, be voted by the Company in the same proportion as the voting instruction which we actually receive. All shares voted by the Company will be counted when the underlying fund determines whether any requirement for a minimum number of shares be present at such a meeting to satisfy a quorum requirement has been met. POLICY CHARGES AND FEES Policy charges and fees compensate us for providing your insurance benefit, administering your policy, assuming risks associated with your policy, and incurring sales related expenses. We may profit from any of these charges, and we may use this profit for any purpose, including covering shortfalls from other charges. In addition to policy charges, the investment adviser for each of the underlying funds deducts a daily charge as a percent of the value in each fund as an asset management charge. The charge reflects asset management fees of the investment adviser. Other expenses are incurred by the funds (including 12b-1 fees for Class 2 shares and other expenses) and deducted from fund assets. Values in the Sub-Accounts are reduced by these charges. Future fund 16 expenses may vary. Detailed information about charges and expenses incurred by an underlying fund is contained in each fund's prospectus. The monthly deductions, including the cost of insurance charges, will be deducted proportionately from the net accumulation value of each Sub-Account and the Fixed Account subject to the charge. The monthly deductions are made on the "monthly anniversary day," which is the policy date and the same day of each month thereafter. If the day that would otherwise be a monthly anniversary day is non-existent for that month, or is not a valuation day, then the monthly anniversary day is the next valuation day. If the net accumulation value is insufficient to cover the current monthly deduction, you have a 61-day grace period to make a payment sufficient to cover that deduction. Premium Load; Net Premium Payment We make a deduction from each premium payment. This amount, referred to as "premium load," covers certain policy-related state and federal tax liabilities. It also covers a portion of the sales expenses incurred by the Company. We deduct 7.0% from each premium payment in policy years 1-20 and 4.0% in policy years 21 and beyond. The premium payment, net of the premium load, is called the "net premium payment." Surrender Charges A surrender charge may apply if the policy is totally surrendered or has a decrease in the specified amount of death benefit. The surrender charge is in part a deferred sales charge and in part a recovery of certain first year administrative costs. A schedule of surrender charges is included in each policy. The surrender charge varies by age of the insured, the number of years since the date of policy issue or the date of an increase in specified amount, and the specified amount. The surrender charge will never exceed $60.00 per $1,000 of specified amount. A personalized schedule of surrender charges is included in each policy. You may obtain more information about the surrender charges that would apply to your policy by requesting a personalized illustration from your insurance representative. The duration of the surrender charge is 15 years for full surrenders and 10 years for decreases in specified amount. Surrender charges are assessed by withdrawing value from the Sub-Accounts and the Fixed Account proportionately. The surrender charge will not exceed the policy value. All surrender charges decline to zero within 15 years following policy issue, or any increase in specified amount. Upon either a full surrender of the policy or a decrease in specified amount, the charge will be subject to the following conditions: A. For decreases in specified amount, excluding full surrender of the policy, no surrender charge will be applied where the decrease: 1) occurs after the tenth policy anniversary following policy issue or increase in specified amount; or 2) is caused by a partial surrender; or 3) when added to the sum of all prior decreases, does not exceed 25% of the initial specified amount. B. For all other decreases, the charge will be calculated as 1) minus 2), then divided by 3) and then multiplied by 4), where: 1) is the amount of this decrease plus any prior decreases; 2) is the greater of an amount equal to 25% of the initial specified amount or the sum of all prior decreases; 3) is the initial specified amount; and 4) is the then applicable surrender charge from the schedule in the policy. 17 We may refuse or limit requests for decreases in specified amount, to the extent there is insufficient value to cover the necessary surrender charges. If you increase the specified amount, a new surrender charge will be applicable to each increase. This charge is in addition to any surrender charge on the existing specified amount. Upon an increase in specified amount, we will send you a confirmation of the increase. Upon full surrender of your policy following a policy decrease, the surrender charge will be calculated as the entire amount shown in the policy specifications, multiplied by one minus the percentage of the initial specified amount for which a surrender charge was previously assessed. The charge assessed upon a full surrender will not exceed the policy's value. If your policy includes the Estate Tax Repeal Rider, and if you satisfy its special conditions, you will have a one-time right to cancel your policy without being subject to surrender charges. This is a limited benefit and is subject to our specific definition of Estate Tax Repeal. In addition, if your policy includes the Enhanced Surrender Value Rider, you may surrender your policy for an enhanced surrender value provided under the rider, without being subject to the policy surrender charges. Any surrender may have tax implications. Consult your tax or other financial adviser before initiating a surrender. Partial Surrender Fee No surrender charge or administrative fee is imposed on a partial surrender. Transfer Fee For each transfer request in excess of 24 made during any policy year, we reserve the right to charge you an administrative fee of $25. Mortality and Expense Risk Charge We assess a daily mortality and expense risk charge as a percentage of the value of the Sub-Accounts. The mortality risk assumed is that the insured may live for a shorter period than we originally estimated. The expense risk assumed is that our expenses incurred in issuing and administering the policies will be greater than we originally estimated. The charge is guaranteed not to exceed an effective annual rate of 0.60% in policy years 1-10 and 0.20% in policy years 11 and beyond. The current charge is at an effective annual rate of 0.60% in policy years 1-10, 0.20% in policy years 11-20, and 0.00% in policy years 21 and beyond. Fixed Account Asset Charge We assess a daily Fixed Account asset charge, which is calculated as a percentage of the value of the Fixed Account. The charge is guaranteed not to exceed an effective annual rate of 0.50% of the Fixed Account's value in all policy years. The current charge is 0.50% in policy years 1-10, 0.20% in policy years 11-20 and 0.00% in policy years 21 and beyond. Cost of Insurance Charge A significant cost of variable life insurance is the "cost of insurance" charge. This charge is the portion of the monthly deduction designed to compensate the Company for the anticipated cost of paying death benefits in excess of the policy value. It is determined based on our expectation of future mortality, investment earnings, persistency and expenses (including taxes). 18 The cost of insurance charge depends on the policy duration, the age, underwriting category and gender (in accordance with state law) of the insured, and the current net amount at risk. The net amount at risk is the death benefit minus the greater of zero or the policy value, and may vary with investment performance, premium payment patterns, and charges. The rate on which the monthly deduction for the cost of insurance is based will generally increase each policy year as the insured ages. Cost of insurance rates are generally lower for healthy individuals. The cost of insurance is determined monthly by dividing the death benefit at the beginning of the policy month by 1 plus .0032737 (the monthly equivalent of an effective annual rate of 4.0%), subtracting the value at the beginning of the policy month, and multiplying the result (the "net amount at risk") by the applicable cost of insurance rate as determined by the Company. The current cost of insurance charge may be less than the guaranteed maximum cost of insurance charge, but it will never exceed the guaranteed maximum cost of insurance charge. A schedule of guaranteed maximum cost of insurance rates is part of your policy. Administrative Fee There is a flat monthly deduction of $10 in all years. For the first ten policy years from issue date or increase in specified amount, there is an additional charge that varies with the insured's age, sex, premium class, and benefit selection option percentage, if any. This charge will never exceed $2.56 per $1,000 of initial specified amount or increase in specified amount. This fee compensates the Company for administrative expenses associated with policy issue and ongoing policy maintenance including premium billing and collection, policy value calculation, confirmations, periodic reports and other similar matters. Policy Loan Interest If you borrow against your policy, interest will be charged to the Loan Account value. The annual effective interest rate is 5.0% in years 1-10, 4.0% in years 11 and beyond. We will credit 4.0% interest on the Loan Account value in all years. Rider Charges Accelerated Benefits Riders. There is a flat charge of $250 (limited in certain states), which will be deducted from any benefit when paid. Enhanced Surrender Value Rider. There is a monthly charge during policy years 2-5 of $0.05 per $1,000 of initial specified amount. Waiver of Monthly Deduction Rider. The monthly charge for this benefit is equal to the sum of all other covered monthly charges for the policy and all riders, multiplied by a rate factor. The rate factor depends on the age, underwriting category and gender of the insured. The maximum rate factor is 12.0%. If you have elected this rider, a table of rate factors appears on the rider pages in your policy. Estate Tax Repeal Rider. There is a $250 one-time charge at issue for this rider. Overloan Protection Rider. There is a one-time charge for this rider if you choose to elect the benefit. This charge will not exceed 5.0% of the accumulation value at the time you elect the benefit. Premium Reserve Rider. We deduct 4.0% from each premium payment you direct to this rider. Transfers of premium reserve rider accumulation value from this rider to the policy may be subject to a charge of 3.0% of amount transferred during policy years 1-10. Rider accumulation value allocated to the premium reserve separate account is subject to the mortality and expense risk charge not to exceed 0.60% for policy years 1-10 and 0.20% for policy years 11 and later. The rider accumulation value allocated to the premium reserve rider fixed account is 19 subject to the fixed account asset charge not to exceed 0.50% for all policy years. In addition, if you request a loan from the accumulation value of this rider, interest is charged at the same rate as for policy loans. YOUR INSURANCE POLICY Your policy is a life insurance contract that provides for a death benefit payable on the death of the insured. The policy and the application constitute the entire contract between you and Lincoln Life. We may add, change or eliminate any underlying funds that the Separate Account or the Sub-Accounts invest in, subject to state and federal laws and regulations. We may substitute a new fund for one that is no longer available for investment, or is no longer suitable for the policy. We will obtain any required approvals from policy owners, the SEC, and state insurance regulators before substituting any funds. We may choose to add or remove Sub-Accounts as investment options under the policies, based on marketing needs or investment conditions. If we change any Sub-Accounts or substitute any funds, we will make appropriate endorsements to the policies. If we obtain appropriate approvals from policy owners and securities regulators, we may: o change the investment objective of the Separate Account; o operate the Separate Account as a management investment company, unit investment trust, or any other form permitted under applicable securities laws; o deregister the Separate Account; or o combine the Separate Account with another separate account. We will notify you of any change that is made. (See section headed "Transfer Fee" for explanation of an additional right to transfer accumulation values from a Sub-Account when its investment objective changes.) The policy includes policy specifications pages. These pages provide important information about your policy such as: the identity of the insured and owner; policy date; the initial specified amount; the death benefit option selected; issue age; planned premium payment; surrender charges; expense charges and fees; and guaranteed maximum cost of insurance rates. When your policy is delivered to you, you should review it promptly to confirm that it reflects the information you provided in your application. If not, please notify us immediately. The policy is nonparticipating. This means that no dividends are payable to you. In addition, your policy does not share in the profits or surplus earnings of the Company. Before purchasing the policy to replace, or to be funded with proceeds from an existing life insurance policy or annuity, make sure you understand the potential impact. The insured will need to prove current insurability and there may be a new contestable period for the new policy. The death benefit and policy values may be less for some period of time in the new policy. The policy date is the date on which we begin life insurance coverage. This is the date from which policy years, policy anniversary and age are determined. Once your policy is in force, the effective date of payments and requests you send us is usually determined by the day and time we receive them. We allow telephone or other electronic transactions when you complete our authorization form and return it to us. Contact our Administrative Office for information on permitted electronic transactions and authorization for electronic transactions. Any telephone or other electronic transmission, whether it is yours, your service provider's, your agent's, or ours, can experience outages or slowdowns for a variety of reasons. Although we have taken precautions to help our 20 systems handle heavy use, we cannot promise complete reliability under all circumstances. If you experience problems, you should send your request in writing to our Administrative Office. Application If you decide to purchase a policy, you must first complete an application. A completed application identifies the proposed insured and provides sufficient information to permit us to begin underwriting risks in the policy. We require a medical history and examination of the proposed insured. Based on our review of medical information about the proposed insured, we may decline to provide insurance, or we may place the proposed insured in a special underwriting category. The monthly cost of insurance charge deducted from the policy value after issue varies depending on the age, gender and underwriting category of the insured. A policy may only be issued upon receipt of satisfactory evidence of insurability, and generally when the insured is at least age 15 and at most age 85. Age will be determined by the nearest birthday of the insured. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who applies for a policy. When you apply for a policy, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We, or our agent, may also ask to see your driver's license, photo i.d. or other identifying documents. Owner The owner on the date of issue is designated in the policy specifications. You, as owner, will make the following choices: 1) initial death benefit amount and death benefit option; 2) optional riders; 3) the amount and frequency of premium payments; and 4) the amount of net premium payment to be allocated to the selected Sub-Accounts or the Fixed Account. You are entitled to exercise rights and privileges of your policy as long as the insured is living. These rights generally include the power to select the beneficiary, request policy loans, make partial surrenders, surrender the policy entirely, name a new owner, and assign the policy. You must inform us of any change in writing. We will record change of owner and beneficiary forms to be effective as of the date of the latest signature on the request. Right to Examine Period You may return your policy to us for cancellation within ten days after you receive it (or a greater number of days if required by your state). This is called the right to examine period. If the policy is returned for cancellation within the right to examine period, depending on the state of issue of your policy, we will refund to you either all premium payments or the policy value plus any charges and fees. If a premium payment was made by check, there may be a delay until the check clears. If your policy is issued in a state that requires return of premium payments, any net premium payments received by us within ten days of the date the policy was issued will be held in the Money Market Sub-Account. At the end of that period, it will be allocated to the Sub-Accounts and the Fixed Account, if applicable, which you designated. If the policy is returned for cancellation within the right to examine period, we will return the full amount of any premium payments made. If your policy is issued in a state that provides for return of value, any net premium payments received before the end of the right to examine period will be allocated directly to the Sub-Accounts and the Fixed Account, if applicable, which you designated. The owner bears the risk of a decline in Sub-Account values. If the policy is 21 returned for cancellation within the right to examine period, we will return the policy value, plus any charges and fees, as of the date the cancelled policy is received at our Administrative Office. Initial Specified Amount You will select the initial specified amount of death benefit on the application. This may not be less than $100,000. This amount, in combination with a death benefit option, will determine the initial death benefit. The initial specified amount is shown on the policy specifications page. Transfers You may make transfers among the Sub-Accounts and the Fixed Account, subject to certain provisions. You should carefully consider current market conditions and each fund's objective and investment policy before allocating money to the Sub-Accounts. During the first policy year, transfers from the Fixed Account to the Sub-Accounts may be made only as provided for in the dollar cost averaging or automatic rebalancing program described below. The amount of all transfers from the Fixed Account in any other policy year may not exceed the greater of: 1) 25% of the Fixed Account value as of the immediately preceding policy anniversary, or 2) the total dollar amount transferred from the Fixed Account in the immediately preceding policy year. Up to 24 transfer requests (a request may involve more than a single transfer) may be made in any policy year without charge. We may limit transfers from the Fixed Account at any time. Requests for transfers must be made in writing, or electronically, if you have previously authorized telephone or other electronic transfers in writing, subject to our consent. Any transfer among the Sub-Accounts or to the Fixed Account will result in the crediting and cancellation of accumulation units. This will be based on the accumulation unit values determined after our Administrative Office receives a request in writing or adequately authenticated electronic transfer request. Transfer and financial requests received in good order before 4:00 P.M. Eastern time on a business day will normally be effective that day. Market Timing Frequent, large, or short-term transfers among Sub-Accounts and the Fixed Account, such as those associated with "market timing" transactions, can affect the underlying funds and their investment returns. Such transfers may dilute the value of the fund shares, interfere with the efficient management of the fund's portfolio, and increase brokerage and administrative costs of the funds. As an effort to protect our policy owners and the funds from potentially harmful trading activity, we utilize certain market timing policies and procedures (the "Market Timing Procedures"). Our Market Timing Procedures are designed to detect and prevent such transfer activity among the Sub-Accounts and the Fixed Account that may affect other policy owners or fund shareholders. In addition, the underlying funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the funds describe any such policies and procedures, which may be more or less restrictive than the frequent trading policies and procedures of other funds and the Market Timing Procedures we have adopted to discourage frequent transfers among Sub-Accounts. While we reserve the right to enforce these policies and procedures, policy owners and other persons with interests under the policies should be aware that we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the funds. However, under the SEC rules, we are required to: (1) enter into written agreement with each underlying fund or its principal underwriter that obligates us to provide to the underlying fund promptly upon request certain information about trading activity of individual policy owners, and (2) execute instructions from the underlying fund to restrict 22 or prohibit further purchases or transfers by specific policy owners who violate excessive trading policies established by the underlying funds. You should be aware that the purchase and redemption orders received by underlying funds generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts to which premium payments and cash values of variable insurance policies are allocated. The omnibus orders reflect aggregation and netting of multiple orders from individual retirement plan participants and/or individual owners of variable insurance policies. The omnibus nature of these orders may limit the underlying funds' ability to apply their respective disruptive trading policies and procedures. We cannot guarantee that the underlying funds (and thus our policy owners) will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may purchase the underlying funds. In addition, if an underlying fund believes that an omnibus order we submit may reflect one or more transfer requests from policy owners engaged in disruptive trading activity, the underlying fund may reject the entire omnibus order. Our Market Timing Procedures detect potential "market timers" by examining the number of transfers made by policy owners within given periods of time. In addition, managers of the funds might contact us if they believe or suspect that there is market timing. If requested by a fund company, we may vary our Market Timing Procedures from Sub-Accounts to Sub-Accounts to comply with specific fund policies and procedures. We may increase our monitoring of policy owners who we have previously identified as market timers. When applying the parameters used to detect market timers, we will consider multiple contracts owned by the same policy owner if that policy owner has been identified as a market timer. For each policy owner, we will investigate the transfer patterns that meet the parameters being used to detect potential market timers. We will also investigate any patterns of trading behavior identified by the funds that may not have been captured by our Market Timing Procedures. Once a policy owner has been identified as a "market timer" under our Market Timing Procedures, we will notify the policy owner in writing that future transfers (among the Sub-Accounts and/or the Fixed Account) will be temporarily permitted to be made only by original signature sent to us by U.S. mail, standard delivery for the remainder of the policy year. Overnight delivery or electronic instructions (which may include telephone, facsimile, or Internet instructions) submitted during this period will not be accepted. If overnight delivery or electronic instructions are inadvertently accepted from a policy owner that has been identified as a market timer, upon discovery, we will reverse the transaction within 1 to 2 business days of our discovery. We will impose this "original signature" restriction on that policy owner even if we cannot identify, in the particular circumstances, any harmful effect from that policy owner's particular transfers. Policy owners seeking to engage in frequent, large, or short-term transfer activity may deploy a variety of strategies to avoid detection. Our ability to detect such transfer activity may be limited by operational systems and technological limitations. The identification of policy owners determined to be engaged in such transfer activity that may adversely affect other policy owners or fund shareholders involves judgments that are inherently subjective. We cannot guarantee that our Market Timing Procedures will detect every potential market timer. If we are unable to detect market timers, you may experience dilution in the value of your fund shares and increased brokerage and administrative costs in the funds. This may result in lower long-term returns for your investments. Our Market Timing Procedures are applied consistently to all policy owners. An exception for any policy owner will be made only in the event we are required to do so by a court of law. In addition, certain funds available as investment options in your policy may also be available as investment options for owners of other, older life insurance policies issued by us. Some of these older life insurance policies do not provide a contractual basis for us to restrict or refuse transfers which are suspected to be market timing activity. In addition, because other insurance companies and/or retirement plans may invest in the funds, we cannot guarantee that the funds will not suffer harm from frequent, large, or short-term transfer activity among Sub-Accounts and the Fixed Accounts of variable contracts issued by other insurance companies or among investment options available to retirement plan participants. 23 In our sole discretion, we may revise our Market Timing Procedures at any time without prior notice as necessary to better detect and deter frequent, large, or short-term transfer activity, to comply with state or federal regulatory requirements, and/or to impose additional or alternate restrictions on market timers (such as dollar or percentage limits on transfers). If we modify our Market Timing Procedures, they will be applied uniformly to all policy owners or as applicable to all policy owners with policy values allocated to Sub-Accounts investing in particular underlying funds. We also reserve the right to implement and administer redemption fees imposed by one or more of the funds in the future. Some of the underlying funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the underlying fund's investment adviser, the underlying fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. To the extent permitted by applicable law, we reserve the right to defer or reject a transfer request at any time that we are unable to purchase or redeem shares of any of the funds in which the Separate Account invests, including any refusal or restriction on purchases or redemptions of the Sub-Account units as a result of the funds' own policies and procedures on market timing activities. If a fund refuses to accept a transfer request we have already processed, we will reverse the transaction within 1-2 business days of the day on which we receive notice of the refusal. We will notify you in writing if we have reversed, restricted or refused any of your transfer requests. Some of the underlying funds may also impose redemption fees on short-term trading (i.e., redemptions of underlying fund shares within a certain number of business days after purchase). We reserve the right to administer and collect any such redemption fees on behalf of the underlying funds. You should read the prospectuses of the funds for more details on their ability to refuse or restrict purchases or redemptions of their shares. Optional Sub-Account Allocation Programs You may elect to participate in programs for dollar cost averaging or automatic rebalancing. There is currently no charge for these programs. You may participate in only one program at any time. Dollar Cost Averaging systematically transfers specified dollar amounts during the first policy year from the Money Market Sub-Account or the Fixed Account. Transfer allocations may be made to one or more of the Sub-Accounts (not the Fixed Account) on a monthly basis. These transfers do not count against the free transfers available. Transfers from the Fixed Account can only be elected at the time your policy is issued. Transfers from the Money Market Sub-Account may be elected at any time while your policy is in force. By making allocations on a regularly scheduled basis, instead of on a lump sum basis, you may reduce exposure to market volatility. Dollar cost averaging will not assure a profit or protect against a declining market. If the owner elects Dollar Cost Averaging from either the Money Market Sub-Account or the Fixed Account the value in that account must be at least $1,000 initially. The minimum amount that may be allocated is $50 monthly. If dollar cost averaging is desired, it must be elected at issue. Dollar cost averaging terminates automatically: 1) if the value in the Money Market Sub-Account or the Fixed Account is insufficient to complete the next transfer; 2) seven calendar days after our Administrative Office receives a request for termination in writing or by telephone, with adequate authentication; 3) on the first policy anniversary; or 4) if your policy is surrendered or otherwise terminates. Automatic Rebalancing periodically restores to a pre-determined level the percentage of policy value allocated to the Fixed Account and each Sub-Account. The pre-determined level is the allocation initially selected on the application, until changed by the owner. Your policy will be issued with automatic rebalancing. When automatic rebalancing is in effect, all net premium payments allocated to the Sub-Accounts and Fixed Account will be subject to automatic 24 rebalancing. Transfers among the Sub-Accounts and the Fixed Account as a result of automatic rebalancing do not count against the number of free transfers available. Automatic rebalancing is available only on a quarterly basis. Automatic rebalancing may be terminated, or the allocation may be changed at any time, by contacting our Administrative Office. Terminating automatic rebalancing may affect riders attached to your policy. Refer to the "Riders" section of this prospectus for more information. Riders We may offer you riders to your policy from time to time. Riders may alter the benefits or charges in your policy, rider availability and benefits may vary by state of issue, and their election may have tax consequences to you. Also, if you elect a particular rider, it may restrict the terms of your policy, or of other riders in force. Consult your financial and tax advisers before adding riders to, or deleting them from, your policy. Accelerated Benefits Riders. There are two Accelerated Benefits Riders. The availability of the riders is based upon the insured meeting our underwriting criteria (including the insured's age and the state of the insured's health at the time of application), which will determine which, if any, form of rider will be issued to you. There is a charge for these riders of $250 (limited in certain states), which will be deducted from any benefit when paid. Benefits payable under either form of rider will be considered as a lien against your policy for the amount of the accelerated benefit paid, and the lien will be considered as a policy loan and will be charged interest. (See section headed "Policy Loans".) As the benefit paid is a lien, you may, if you wish, repay any part (but not less than $25) or all of the amount paid. The amount of any lien outstanding at the time of the death of the insured will be deducted from the death benefit otherwise payable. One version of this rider pays a portion of the death benefit upon occurrence of terminal illness (defined by the rider as when the insured's life expectancy is reduced to less than 12 months) or nursing home confinement (defined by the rider as the insured being confined to a qualifying nursing home for the balance of life), subject to the terms of the rider. This version of the rider will pay 50% of the death benefit for terminal illness and 40% of the death benefit for nursing home confinement, subject to an overall maximum of $250,000 on all policies in force with us, in accordance with the terms of the rider. You may apply for this rider either at the time you apply for the policy is made or at any time thereafter. Our underwriting rules in effect at the time you apply will determine whether the rider will be issued. The second version of this rider, which must be applied for at the time you apply for your policy, in addition to paying the same portion of the death benefit upon occurrence of terminal illness or nursing home confinement (as discussed above), also may pay a portion of the death benefit upon critical illness or a condition specified in the rider. The illnesses which qualify are detailed in the rider and generally include, but are not limited to, heart attack (myocardial infarction) and life threatening cancer. In the instance of critical illness, the portion of the death benefit payable is 5% (not to exceed a total of $25,000) upon the occurrence of the first critical illness covered by the rider. To receive a benefit, you must contact us and let us know which benefit you are requesting and the benefit amount (subject to the maximum limits) you are requesting. We will let you know what physician's certification or other requirements you must submit. If you request less than the maximum benefit, you may later apply for the balance of the benefit. For example, if the insured is confined to a qualifying nursing home for life, and your only policy with us covering that insured has a $100,000 death benefit, you could request up to 40% or $40,000, and if the insured is later diagnosed with a medical condition resulting in a less than 12 months life expectancy, you may request an additional 10% (for a total benefit of 50%) or $10,000 (for a total benefit of $50,000). Because the benefit payable creates a lien on the policy, the maximum amount of your benefit may also be restricted (or no benefit may be available) if you have an outstanding policy loan or if the policy has been assigned to a third party. Benefits paid under the Rider may restrict your ability to request future policy loans. Waiver of Monthly Deduction Rider: If desired, you must select this rider when you initially apply for insurance. We will maintain the death benefit by waiving covered monthly deductions during periods of the insured's disability. Charges for this rider, if elected, are part of the monthly deductions. 25 Change of Insured Rider. With this rider, you may name a new insured in place of the current insured. Underwriting and policy value requirements must be met. The benefit expires on the anniversary nearest to the current insured's 65th birthday. There is no separate charge for this rider, however policy charges applicable to the new insured may differ from charges applicable to the current insured. Exercising the Change of Insured Rider is a fully taxable event. Enhanced Surrender Value Rider. If desired, you must select this rider when you initially apply for insurance. The rider provides an enhanced surrender value without imposition of a surrender charge if you fully surrender your policy during the first five policy years (the "Enhanced Surrender Value Period"). This rider does not provide for enhanced surrender value for partial surrenders, loans, or in connection with the exchange of this policy for any other policy. This rider will terminate at the earliest of the full surrender of the policy for the benefit provided by this rider; the end of the fifth policy year; lapse of the policy; or exchange, replacement, or any termination of the policy except for the benefits provided by the Change of Insured Rider. In policy years 2-5, there will be a monthly charge per $1,000 of initial specified amount for this rider. If the policy is fully surrendered at any time during the Enhanced Surrender Value Period, the surrender value payable on the date your policy is surrendered will equal: 1) the policy's accumulation value; minus 2) indebtedness. The following example demonstrates hypothetical accumulation values and Surrender Values with and without the Enhanced Surrender Value Rider during the first five policy years of the policy described below: Sample Policy o Insured: Male Standard Non-tobacco, age 55 o Specified amount: $1,000,000 o Benefit Selection Option: Not Elected o Planned annual premium payment: $60,000 o No Indebtedness
Accumulation Surrender Accumulation Surrender Value Without Value Without Value With Value With End of Year ESV Rider ESV Rider ESV Rider ESV Rider - ------------- --------------- --------------- -------------- ----------- 1 $ 50,329 $ 13,659 $ 50,329 $ 50,329 2 $104,322 $ 69,012 $103,696 $103,696 3 $162,331 $128,421 $161,029 $161,029 4 $224,665 $192,205 $222,631 $222,631 5 $291,734 $260,774 $288,910 $288,910
Estate Tax Repeal Rider: If desired, you must select this rider when you initially apply for insurance. In the event of federal estate tax repeal as set forth in the Economic Growth and Tax Relief Reconciliation Act of 2001 (H.R. 1836) being extended, this rider allows you to cancel your policy for an amount equal to the surrender value of the policy plus the applicable surrender charge. There is a one-time $250 charge at issue for this rider. For purposes of this rider, estate tax repeal will be deemed to have occurred if federal legislation is enacted into law that extends the estate tax repeal provisions set forth in the Economic Growth and Tax Reconciliation Act of 2001 (H.R. 1836) at least two years beyond January 1, 2011. This new legislation must be in effect on January 1, 2010. The start date for this rider (the date that begins the 12-month "window" for you to exercise the rider) is the later of January 1, 2010, or the date in 2010 upon which legislation is enacted that triggers estate tax repeal, but no later than December 31, 2010. 26 This rider terminates on the earliest of: 1) one year from the start date; 2) December 31, 2010, provided no estate tax repeal, as defined above, has been enacted; 3) the date you request termination of the rider; 4) termination of your policy; or 5) full surrender of your policy prior to the start date. If your policy lapses but is reinstated, the rider will likewise be reinstated, provided such reinstatement occurs before 1), 2), or 3) above. No-Lapse Enhancement Rider: We will automatically issue this rider with your policy. There is no charge for this rider. This rider provides you with a limited benefit in the event that your policy would otherwise lapse. It is a limited benefit in that it does not provide any additional death benefit amount or any increase in your cash value. Also, it does not provide any type of market performance guarantee. The duration of lapse protection provided by this rider will be determined monthly, and will vary based on net premium payments made, interest credited, the amount of any partial surrenders, and rates and fees for the rider. Payment of premiums higher than the planned premium and interest credited on net premiums will increase the duration of lapse protection. Partial surrenders and adjustments for rider reference rates and fees will reduce the duration of lapse protection. If the net accumulation value under the policy is insufficient to cover the monthly deductions, the policy will not lapse as long as three conditions are met: 1) you meet the requirements to prevent termination of this rider; 2) the duration of lapse protection has not ended; and 3) either the no-lapse value or the reset account value, less any indebtedness, is greater than zero. Refer to the subsection headed "Rider Termination" for more information. The rider consists of the no-lapse value provision and the reset account value provision. Under this rider, your policy will not lapse as long as either the no-lapse value or the reset account value, less any indebtedness, is greater than zero. If both the no-lapse value and the reset account value, less any indebtedness, are zero or less, this rider will not prevent your policy from lapsing. The no-lapse value and reset account value are reference values only. If the net accumulation value is insufficient to cover the monthly deductions, the no-lapse value and reset account value will be referenced to determine whether either provision of the rider will prevent your policy from lapsing. If either provision of this rider is actively preventing the policy from lapsing, that provision will trigger a death benefit which is different from the death benefit otherwise in effect under the policy. Each provision triggers a different death benefit, as described in more detail below. The change to a death benefit triggered by either provision under this rider is not permanent. If subsequent premium payments create accumulation value sufficient to cover the accumulated, if any, as well as current monthly deductions, the death benefit triggered by either rider provision will no longer apply, and the death benefit will be restored to the death benefit option in effect under the policy. There is no limit on the number of times we allow death benefits to be restored in this manner. Refer to the section headed "Death Benefits" for more information. We calculate the no-lapse value and reset account value based on a set of rates and fees which are reference rates and fees only, and which differ from the rates and fees we use to calculate the accumulation value of the policy. Each provision's value is based on a set of reference rates and fees unique to that provision. At the time we issue the policy, we fix the schedules of reference rates and fees for the life of the policy. Refer to the No-Lapse Enhancement Rider form issued with your policy for more information about the actual schedules of reference rates and fees applicable to your policy. 27 On each monthly anniversary day, the no-lapse value will be calculated as 1), plus 2), minus 3), plus 4), minus 5), minus 6) where: 1) is the no-lapse value on the preceding monthly anniversary day. 2) is all net premiums received since the preceding monthly anniversary day. 3) is the amount of any partial surrenders (i.e. withdrawals) under the policy since the preceding monthly anniversary day. 4) is accumulated interest. 5) is the no-lapse monthly deduction for the month following the monthly anniversary day. 6) is the surrender charge, if any, as determined from the table of surrender charges of the policy, for any decrease in specified amount on the monthly anniversary day. On any day other than the monthly anniversary day, the no-lapse value will be the no-lapse value as of the preceding monthly anniversary day, plus all net premiums received since the preceding monthly anniversary day, less partial surrenders, plus accumulated interest. The no-lapse value on the policy date will be the net initial premium received less the no-lapse monthly deduction for the first policy month. On each monthly anniversary day, the reset account value will be calculated as 1), plus 2), minus 3), plus 4), minus 5), minus 6) where: 1) is the reset account value on the preceding monthly anniversary day. 2) is all net premiums received since the preceding monthly anniversary day. 3) is the amount of any partial surrenders (i.e. withdrawals) under the policy since the preceding monthly anniversary day. 4) is accumulated interest. 5) is the reset account monthly deduction for the month following the monthly anniversary day. 6) is the surrender charge, if any, as determined from the table of surrender charges of the policy, for any decrease in specified amount on the monthly anniversary day. On any day other than the monthly anniversary day, the reset account value will be the reset account value as of the preceding monthly anniversary day, plus all net premiums received since the preceding monthly anniversary day, less partial surrenders, plus accumulated interest. The reset account value on the policy date will be the net initial premium received less the reset account monthly deduction for the first policy month. On each policy anniversary, the reset account value may increase to reflect positive investment performance. If the reset account value on any policy anniversary is less than the accumulation value on that same policy anniversary, the reset account value will be increased to equal the accumulation value. Refer to the No-Lapse Reset Account Provision of the No-Lapse Enhancement Rider attached to your policy. You will select a guaranteed minimum death benefit when you apply for your policy. This guaranteed minimum death benefit will be used in determining the actual death benefit proceeds provided by the no-lapse value provision. It will be shown on the policy specifications page. The initial guaranteed minimum death benefit you select must be between 70% and 100% of the initial specified amount for the policy. The higher the percentage you select, the higher the ongoing premium payments which will be required to maintain a no-lapse value and/or reset account value greater than zero. If the policy specified amount is later decreased below the guaranteed minimum death benefit, the guaranteed minimum death benefit will 28 automatically decrease to equal the specified amount as of the same effective date. If the policy specified amount is later increased, the guaranteed minimum death benefit will not automatically increase. If the accumulation value is sufficient to cover the accumulated, if any, and current monthly deductions, the death benefit payable will be determined by the death benefit option in effect. Refer to the section headed "Death Benefits" for more information. If the net accumulation value is insufficient to cover the accumulated, if any, and current monthly deductions, the no-lapse value and reset account value will be referenced to determine whether either provision of the rider will prevent your policy from lapsing. Each provision triggers a different death benefit. If the no-lapse value provision is actively keeping the policy from lapsing, the death benefit is the guaranteed minimum death benefit less any indebtedness and less any partial surrenders (i.e., withdrawals) after the date of death, which may be less than the specified amount of the policy. If the reset account value provision is actively keeping the policy from lapsing, the death benefit is the greater of: 1) the reset death benefit (which is the lesser of the current specified amount and initial specified amount) less indebtedness and less any partial surrenders (i.e., withdrawals) after the date of death; or 2) an amount equal to the reset account value multiplied by the applicable percentage shown in the corridor percentages table of the policy specifications, less any indebtedness and less any partial surrenders after the date of death. If the requirements of both of these provisions are met, the death benefit payable will be the greater death benefit amount triggered by either of the provisions. Refer to the section headed "Death Benefits" for more information. If this rider prevents the policy from lapsing, and subsequent premium payments are made such that the accumulation value is sufficient to cover the monthly deductions, the death benefit payable will be determined by the death benefit option in effect. During the period that the rider is preventing the policy from lapsing, the monthly deductions under your policy, which consist of the monthly cost of insurance, the monthly cost of any riders, and the monthly administrative fee, will continue and will be accumulated. A statement will be sent to you, at least annually, which reflects the accumulated amount of those deductions. If the rider terminates for any reason, the accumulated and current monthly deduction would have to be paid to prevent lapse, and we will send you a notice stating the amount of premiums you would be required to pay to keep your policy in force (see section headed "Lapse and Reinstatement"). You must maintain automatic rebalancing in order to keep this rider in effect. Automatic rebalancing will be in effect when the policy is issued. If you discontinue automatic rebalancing after the policy is issued, this rider will terminate. After this rider terminates, the policy will remain in force only if the accumulation value is sufficient to cover the monthly deductions. Refer to the section headed "Optional Sub-Account Allocation Programs" for more information about automatic rebalancing. We reserve the right to restrict your allocation to certain Sub-Accounts to a maximum of 40% of the policy accumulation value in order to keep this rider in effect. The decision to enforce this restriction will be based on an annual review of the Separate Account investments of all owners of this product. If we determine that the investments of all owners are highly concentrated in certain Sub-Accounts, then Sub-Accounts with higher concentrations than anticipated will be subject to the restriction. Any restriction will apply to all owners of this product. If such a restriction is put in place in the future, you will be notified in writing and advised if it is necessary to reallocate the policy accumulation value or subsequent premium payments among Sub-Accounts which are not subject to the restriction and advised of the steps you will need to take, if any, in order to keep the rider in effect. We will not reallocate the accumulation value to comply with any such restriction except pursuant to your instructions. You may provide instructions for reallocation in writing, or electronically, if you have previously provided authorization in writing for telephone or other electronic transfers. If you choose not to reallocate the 29 accumulation value of your policy to comply with a Sub-Account restriction, this rider will terminate. If this rider is actively preventing the policy from lapsing and this rider terminates as a result of the owner's failure to comply with a Sub-Account restriction, then the policy will lapse. The duration of the no-lapse coverage will be determined monthly by referencing the no-lapse account value and the reset account value. The duration is determined by projecting the first monthly anniversary day on which future deductions for the rider rates and fees would cause both the no-lapse value and reset account value to reach zero. Because the duration is recalculated on a monthly basis, higher premium payments and credited interest will increase the duration, while partial surrenders and adjustments for rider rates and fees will reduce the duration. In general, later premium payments are credited with less interest over time, and result in a lower no-lapse value and reset account value, with a shorter duration of no-lapse protection. The duration of the lapse protection provided by this rider may be reduced if: 1) premiums or other deposits are not received on or before their due date; or 2) you initiate any policy change that decreases the no-lapse value or reset account value under the policy. These changes include, but are not limited to, partial surrenders, loans, increases in specified amount, and changes in death benefit option. The Company will determine the duration of the lapse protection based on the situation in 1) and 2) above by recalculating the no-lapse value and the reset account value. In general, later premium payments are credited with less interest over time, resulting in a lower no-lapse value and reset account value. A lower no-lapse value or reset account value will reduce the duration of lapse protection. The following example shows the impact of delayed premium payments on the duration of lapse protection: Sample Policy o Insured: Male Standard Non-tobacco, age 55 o Specified amount: $1,000,000 o Benefit Selection Option: Not elected o Planned annual premium payment: $13,000 Duration of lapse protection: 1) if premiums are received on the planned payment date each year: 326 months; or 2) if premiums are received 30 days after the planned payment date each year: 322 months. The impact of late premium payments on the duration of the lapse protection varies by policy. If both the no-lapse value and the reset account value, less any indebtedness, are zero or less, this rider will not prevent your policy from lapsing. Payment of sufficient additional premiums while this rider remains in force will increase one or both of the values to an amount greater than zero, and the rider will provide lapse protection. You may obtain information about your policy's current duration of lapse protection and the impact that late premium payments may have on that duration by requesting a personalized policy illustration from your financial adviser. This rider and all rights provided under it will terminate automatically upon the earliest of the following: 1) the insured reaches age 121; or 2) surrender or other termination of the policy; or 3) automatic rebalancing is discontinued; or 4) an allocation restriction requirement is not met within 61 days of notification to you of such a requirement. If the policy terminates and is reinstated, this rider will likewise be reinstated unless the rider had terminated before the policy terminated. 30 Benefit Selection Option. When you apply for the policy, you may elect the Benefit Selection Option. With this option, you can select a balance between potentially greater accumulation value and the death benefit protection provided by the No-Lapse Enhancement Rider. When considering this option, you should consider the amount of market risk which is appropriate for you and your circumstances. This option is designed to reduce the charges for the per $1,000 of specified amount monthly administrative expense fee (the "Monthly Administrative Expense Fee") deducted from your policy and thereby reduce the cost of the death benefit provided by your policy. Since reducing the monthly charges will reduce the amounts deducted from your policy's accumulation value, you have the opportunity to have a larger accumulation value allocated to the Fixed Account and invested in the Sub-Accounts. When you elect this option, you choose to reduce the benefits provided by the No-Lapse Enhancement Rider in exchange for reduced Monthly Administrative Expense Fees. The reduced Policy Monthly Administrative Expense Fee will be displayed in your Policy Specifications. However, when the Benefit Selection Option is elected, your choice of a Benefit Selection Option percentage greater than zero will increase the no-lapse reference per $1,000 of specified amount monthly administrative fees, and, therefore, the premiums which you must pay in order to meet the requirements of the No-Lapse Enhancement Rider will increase. (Refer to the section headed "No-Lapse Enhancement Rider" for discussion of how Rider values are calculated.) The higher the percentage you select for the Benefit Selection Option, the larger the increase in the no-lapse reference per $1,000 of specified amount monthly administrative fees and the higher the premiums you must pay in order to meet the requirements of the Rider. The following example shows two policies on the same insured. In the first example, the Benefit Selection Option was not elected; and in the second example the Benefit Selection Option was elected:
Male, 55 Year Old, Standard Non-tobacco Monthly Administrative Benefit Selection Option Expense Fee Election: None $0.5133 per thousand of Specified Amount (higher) Election: 100% $0.0683 per thousand of Specified Amount (lower) Male, 55 Year Old, Standard Non-tobacco No-Lapse Monthly Administrative Expense Benefit Selection Option Reference Fee Result Election: None $0.1333 per thousand This option offers the best no-lapse of Specified Amount protection available. The price of the (lower) protection is reflected in the higher Monthly Administrative Expense Fee. Election: 100% $0.2333 per thousand This option offers the least amount of of Specified Amount no-lapse protection. The Monthly (higher) Administrative Expense Fee is reduced in exchange. Therefore, this option allows more money to be invested in the Sub-Accounts or allocated to the Fixed Account. However, the premiums which you must pay in order to satisfy the no- lapse requirements of the rider will increase.
You elect this option by selecting a percentage from 1 to 100%. This election must be made at Policy issue and is irrevocable. The impact of selecting a Benefit Selection Option percentage greater than zero on your policy is best shown in an illustration. Please ask your registered representative for illustrations which demonstrate the impact of electing various Benefit Selection Option percentages greater than zero. If elected, the percentage you select under this option will be shown in your policy specifications. Once your policy is issued with the Benefit Selection Option, you may not change the percentage you selected nor may you terminate your election. 31 Overloan Protection Rider. If this rider is issued with your policy, you meet the requirements as described in this rider and have elected this benefit, your policy will not lapse solely based on indebtedness exceeding the accumulation value less the surrender charges. It is a limited benefit, in that it does not provide any additional death benefit or any increase in accumulation value. Also, it does not provide any type of market performance guarantee. We will automatically issue this rider with your policy in states where it is available. There is no charge for adding this rider to your policy. However, if you choose to elect this benefit, there is a one-time charge which will not exceed 5.0% of the then current accumulation value. Once you elect the benefit, certain provisions of your policy will be impacted as described in the rider. Premium Reserve Rider: We will automatically issue this rider with your policy in states where it is available. The rider allows you to pay premiums in addition to those you plan to pay for your policy and to have such amounts accumulate in the same manner as if they had been allocated to your policy without, as detailed in the rider, being subject to all charges and expenses of your policy. For example, this rider can be used to fund future premium payments if needed while retaining the flexibility to withdraw such funds from the rider without reducing the policy's Specified Amount (or being subject to withdrawal fees or surrender charges) in the event the funds are not needed due to favorable investment performance. Premiums allocated to the Premium Reserve Rider do not increase the policy's Accumulation Value and, therefore, will not decrease the net amount at risk. Since the net amount at risk will not be reduced, current cost of insurance charges will not be reduced. However, the policy's death benefit will be increased by the Premium Reserve Rider Accumulation Value less indebtedness. The Premium Reserve Rider Accumulation Value is the sum of the (i) values of sub-accounts created for the rider which, but for having been created specifically for the rider, are in all other respects identical to the Sub-Accounts (the "Premium Reserve Rider Sub-Accounts"), and (ii) values held in the portion of the Fixed Account created specifically for the rider (the "Premium Reserve Rider Fixed Account"). A premium load of 4.0% (known as the Premium Reserve Rider Premium Load) will be deducted from each amount allocated to this rider. Net Premium Reserve Rider premiums will be allocated to the Premium Reserve Rider Sub-Accounts and/or the Premium Reserve Rider Fixed Account using the same premium allocation instruction that you have provided to us for allocating premiums which you direct to your policy. Calculations of the values of the Premium Reserve Rider Sub-Accounts and the Premium Reserve Rider Fixed Account apply the same daily mortality and expense risk charge and the fixed account asset charge as would have been deducted if the premiums had been allocated to your policy; however, the monthly deductions for your policy, which include charges for the cost of insurance and the administrative fee, and charges for riders to your policy other than this rider will not be reflected. You may request us to transfer all or part of the Premium Reserve Rider's accumulation value to your policy at any time. Transfers of the rider's accumulation value to your policy are subject to a deduction of 3.0% from each amount transferred (the 3.0% charge is called the Premium Reserve Rider transfer load) if such transfers are made (either automatically, as discussed below, or at your request) in the first ten policy years. No other policy charges or fees will be deducted from the amount allocated to the Premium Reserve Rider. In addition, after policy year 10, subject to certain limitations (which relate to meeting the requirement that sufficient value remains to maintain the duration of lapse protection provided under the No-Lapse Enhancement Rider until the insured reaches age 121 - see section headed "No-Lapse Enhancement Rider"), you may request transfers from the policy's net accumulation value to the Premium Reserve Rider for allocation to the Premium Reserve Rider's Sub-Accounts and Fixed Account. Transfers between the policy and the rider will not be counted against the number of free transfers permitted by the policy. The rider provides for the automatic transfer of the entire accumulation value of the rider to the policy in the event: 1) the net accumulation value under your policy is insufficient to maintain your policy in force and the No-Lapse Enhancement Rider described above is not at the time preventing your policy from lapsing; and 32 2) you do not pay at least the amount set forth in the lapse notice and your payment is not received by us before the end of the grace period. If the Premium Reserve Rider accumulation value (less the Premium Reserve Rider transfer load of 3.0% if the transfer is made during the first 10 policy years) on the day the grace period ends is insufficient to meet the amount then due, your policy will lapse without value. If this rider is in force at the time you request a loan on or partial surrender of your policy, any such loan or partial surrender will be made first from any Premium Reserve Rider accumulation value and when the Premium Reserve Rider accumulation value is reduced to zero, then from the accumulation value of your policy. Loan interest will be charged and credited to any Premium Reserve Rider loans on the same basis as the policy. Please refer to the section headed "Policy Loans" for a more detailed discussion of policy loans, including interest charged on policy loans. In the event of the death of the insured while the rider is in force, any Premium Reserve Rider accumulation value less indebtedness on the date of death will be added to the death benefit if Death Benefit Option 1 is in force and will be added to the policy's Accumulation Value less indebtedness on the date of death if Death Benefit Option 2 is in force. If the death benefit is paid pursuant to the No-Lapse Enhancement Rider, the Premium Reserve Rider accumulation value less indebtedness will be added to the death benefit payable under that rider. The Premium Reserve Rider will terminate at the earlier of the date your policy terminates; the date the entire Premium Reserve Rider accumulation value is automatically transferred to your policy to maintain your policy in force; or your written request to terminate the rider is received. Once terminated, the rider may not be reinstated, and no further premium payments may be allocated to it. Finally, the amount of premiums you may pay, whether you direct them to your policy or to your Premium Reserve Rider, are subject to limits which are discussed in the Tax Issues section of the prospectus. As with your policy, you bear the risk that the investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Adverse investment results will impact the accumulation value of the rider and, therefore, the amount of rider accumulation value which may be available to prevent your policy from lapsing or for providing policy benefits. The Premium Reserve Rider, as discussed above, can help provide additional protection against lapse of your policy. The Premium Reserve Rider Accumulation Value generated by the additional premiums you pay to the rider may be transferred to the policy either through (i) your voluntarily requesting us to transfer available Premium Reserve Rider Accumulation Value to the policy in the amount needed to prevent lapse (because, for example, you do not have the funds outside of the policy to make the premium payment required to keep the policy in force), or (ii) the rider's provision for automatically transferring all available Premium Reserve Rider Accumulation Value to the policy should those values be needed to prevent lapse of the policy (because, for example, the payment you do make either is less than the amount requested or is not received by the time set by the terms of the policy). However, as noted above, if such values are transferred pursuant to the Premium Reserve Rider's automatic transfer provision, the Premium Reserve Rider will terminate, and the policy owner will permanently lose the ability to allocate any future premium payments to the rider. As a hypothetical example of how the Premium Reserve Rider might help prevent lapse of your policy, assume that you have had your policy for 11 years and that you have allocated additional premiums to the rider so that your Premium Reserve Rider Accumulation Value at the end of policy year 11 is $25,000. Further assume that the No-Lapse Enhancement Rider is no longer preventing your policy from lapsing, that the premium required to maintain your policy in force that is due at the beginning of policy year 12 is $15,000, and that you have decided that you wish to minimize your current cash outlays. If you do not pay the $15,000 premium, you will receive a lapse notice which will tell you that you need to make a premium payment of $15,000 to your policy. If you wish, you could request (before the end of the grace period) that we transfer $15,000 of the Premium Reserve Rider Accumulation Value to the policy. If you do not so request, we will automatically transfer the entire Premium Reserve Rider 33 Accumulation Value of $25,000 to the policy (and your Premium Reserve Rider will terminate). In this example, the transfer of $15,000 from your Premium Reserve Rider Accumulation Value to your policy will avoid lapse of the policy. As a further hypothetical example, again assume that you have had your policy for 11 years but that you have allocated fewer additional premiums to the rider so that your Premium Reserve Rider Accumulation Value is $10,000. Continuing the assumption that the No-Lapse Enhancement Rider is no longer preventing your policy from lapsing, that the premium required to maintain your policy in force that is due at the beginning of policy year 12 is $15,000, and that you wish to minimize your current cash outlays, your Premium Reserve Rider Accumulation Value would provide (either by transfer at your specific request or through automatic transfer) $10,000 towards the premium due. But in this example, you would have to then pay the balance of the premium due, that is $5,000, to us from your savings or from another source outside of the policy to avoid lapse of your policy. You should discuss with your financial adviser the needs which purchasing the policy will meet, including the need to provide to beneficiaries a guaranteed death benefit which does not depend upon growth of the policy's accumulation value. Policy illustrations, which the financial adviser can prepare, will help determine the amount of premiums which should be allocated to paying the costs of the policy for the death benefit you need. Once that need for a guaranteed death benefit is met and premium requirements determined, the policy owner then could consider whether to allocate additional funds to the Rider. You should carefully weigh the balance between allocating premiums to the policy and premiums to the rider. Premiums allocated to the Premium Reserve Rider may be withdrawn without reducing the specified amount (which might be the case if those premiums had been allocated to the policy). In addition, premiums allocated to the rider initially are charged only with the 4.0% Premium Reserve Rider Premium Load and will only be charged the 3.0% Premium Reserve Rider Transfer Load if transfers are voluntarily made during the first 10 policy years (or are automatically transferred to help prevent policy lapse). And premiums allocated to the rider become part of the Premium Reserve Rider Accumulation Value and that value (less any Indebtedness) would be paid upon the death of the insured in addition to the death benefit paid However, premiums allocated to the rider do not increase the policy's Accumulation Value and, therefore, would not reduce the cost of insurance charges. An illustration can show the impact that paying a higher level of premiums would have on the policy's cost of insurance: that is as accumulation values in the policy increase (through positive investment results and/or allocating more premiums to the policy), the net amount at risk (that is, the difference between the death benefit and the accumulation value) will decrease, thereby decreasing the cost of insurance charges. Decreasing policy charges increases the amount of policy accumulation value available for allocation to the Sub-Accounts, and thereby increases the amount available for investment, subject to your tolerance for risk. Your financial adviser can prepare illustrations which would reflect the potential impact that different allocations of premium between the policy and the Premium Reserve Rider might have, as well as illustrate the impact rates of return selected by you might have on the policy's benefits and the Rider's Accumulation Value. Continuation of Coverage If the insured is still living at age 121, and the policy is still in force and has not been surrendered, the policy will remain in force until policy surrender or death of the insured. However, there are certain changes that will take place: 1) we will no longer accept premium payments; 2) we will make no further deductions; 3) policy values held in the Separate Account will be transferred to the Fixed Account; and 4) we will no longer transfer amounts to the Sub-Accounts. Loan interest will continue to accrue on any outstanding loans. Provisions may vary in certain states. 34 Termination of Coverage All policy coverage terminates on the earliest of: 1) surrender of the policy; 2) death of the insured; or 3) failure to pay the necessary amount of premium to keep your policy in force. State Regulation The state in which your policy is issued will govern whether or not certain features, riders, charges and fees will be allowed in your policy. You should refer to your policy for these state-specific features. PREMIUMS You may select and vary the frequency and the amount of premium payments and the allocation of net premium payments. After the initial premium payment is made there is no minimum premium required, except to keep the policy in force. Premiums may be paid any time before the insured attains age 121. The initial premium must be paid for policy coverage to be effective. Allocation of Net Premium Payments Your net premium payment is the portion of a premium payment remaining after deduction of the premium load. The net premium payment is available for allocation to the Sub-Accounts or the Fixed Account. You first designate the allocation of net premium payments among the Sub-Accounts and Fixed Account on a form provided by us for that purpose. Subsequent net premium payments will be allocated on the same basis unless we are instructed otherwise, in writing. You may change the allocation of net premium payments among the Sub-Accounts and Fixed Account at any time. The amount of net premium payments allocated to the Sub-Accounts and Fixed Account must be in whole percentages and must total 100%. We credit net premium payments to your policy as of the end of the valuation period in which it is received at our Administrative Office. The end of the valuation period is 4:00 P.M., Eastern Time, unless the New York Stock Exchange closes earlier. The valuation period is the time between valuation days. A valuation day is every day on which the New York Stock Exchange is open and trading is unrestricted. Your policy values are calculated on every valuation day. Planned Premiums; Additional Premiums Planned premiums are the amount of periodic premium (as shown in the policy specifications) you choose to pay the Company on a scheduled basis. This is the amount for which we send a premium reminder notice. Premium payments may be billed annually, semi-annually, or quarterly. You may arrange for monthly pre-authorized automatic premium payments at any time. In addition to any planned premium, you may make additional premium payments. These additional payments must be sent directly to our Administrative Office, and will be credited when received by us. Unless you specifically direct otherwise, any payment received (other than any premium payment necessary to prevent, or cure, policy lapse) will be applied as premium and will not repay any outstanding loans. There is no premium load on any payment which you specifically direct as repayment of an outstanding loan. You may increase planned premiums, or pay additional premiums, subject to the certain limitations. We reserve the right to limit the amount or frequency of additional premium payments. 35 We may require evidence of insurability if any payment of additional premium (including planned premium) would increase the difference between the specified amount and the accumulation value. If we are unwilling to accept the risk, your increase in premium will be refunded without interest. We may decline any additional premium (including planned premium) or a portion of a premium that would cause total premium payments to exceed the limit for life insurance under federal tax laws. Our test for whether or not your policy exceeds the limit is referred to as the guideline premium test. The excess amount of premium will be returned to you. We may accept alternate instructions from you to prevent your policy from becoming a MEC (Modified Endowment Contract). Refer to the section headed "Tax Issues" for more information. Policy Values Policy value in your variable life insurance policy is called the accumulation value. The accumulation value equals the sum of the Fixed Account value, the Separate Account value, and the Loan Account value. At any point in time, the accumulation value reflects: 1) net premium payments made; 2) the amount of any partial surrenders; 3) any increases or decreases as a result of market performance of the Sub-Accounts; 4) interest credited to the Fixed Account or the Loan Account; 5) persistency bonuses on net accumulation value in Fixed Account and the Sub-Accounts beginning in policy year 21; and 6) all charges and fees deducted. The Separate Account value, if any, is the portion of the accumulation value attributable to the Separate Account. The value is equal to the sum of the current values of all the Sub-Accounts in which you have invested. This is also referred to as the variable accumulation value. A unit of measure used in the calculation of the value of each Sub-Account is the variable accumulation unit. It may increase or decrease from one valuation period to the next. The variable accumulation unit value for a Sub-Account for a valuation period is determined as follows: 1) the total value of fund shares held in the Sub-Account is calculated by multiplying the number of fund shares owned by the Sub-Account at the beginning of the valuation period by the net asset value per share of the fund at the end of the valuation period, and adding any dividend or other distribution of the fund made during the valuation period; minus 2) the liabilities of the Sub-Account at the end of the valuation period. Such liabilities include daily charges imposed on the Sub-Account, and may include a charge or credit with respect to any taxes paid or reserved for by Lincoln Life that we determine result from the operations of the Separate Account; and 3) the result of (1) minus (2) is divided by the number of variable accumulation units for that Sub-Account outstanding at the beginning of the valuation period. In certain circumstances, and when permitted by law, we may use a different standard industry method for this calculation, called the Net Investment Factor method. We will achieve substantially the same result using either method. The daily charge imposed on a Sub-Account for any valuation period is equal to the daily mortality and expense risk charge multiplied by the number of calendar days in the valuation period. The Fixed Account value, if any, reflects amounts allocated or transferred to the Fixed Account, plus interest credited, and less any deductions or partial surrenders. We guarantee the Fixed Account value. Interest is credited 36 daily on the Fixed Account value at the greater of a rate of 0.01074598% (equivalent to a compounded annual rate of 4.0%) or a higher rate determined by the Company. The Fixed Account Asset Charge is deducted daily. The Loan Account value, if any, reflects any outstanding policy loans, including any interest charged on the loans. This amount is held in the Company's general account. We do not guarantee the Loan Account value. Interest is credited on the Loan Account at an effective annual rate of 4.0% in all years. The "net" accumulation value is the accumulation value less the Loan Account value. It represents the net value of your policy and is the basis for calculating the surrender value. We will tell you at least annually the accumulation value, the number of accumulation units credited to your policy, current accumulation unit values, Sub-Account values, the Fixed Account value and the Loan Account value. We strongly suggest that you review your statements to determine whether additional premium payments may be necessary to avoid lapse of your policy. Persistency Bonus On each monthly anniversary day beginning with the first monthly anniversary day in policy year 21, we will credit a persistency bonus to net accumulation values in each Sub-Account and the Fixed Account at an annual rate guaranteed to be not less than 0.15% of the values in each Sub-Account and the Fixed Account on the monthly anniversary day. In the event that you have allocated premiums payments to the Premium Reserve Rider, beginning with the first monthly anniversary day in policy year 21, a persistency bonus, calculated as described above, will be credited to the Premium Reserve Rider net accumulation value. The persistency bonus is based on reduced costs in later policy years that we can pass on to policies that are still in force. Our payment of the persistency bonus will not increase or otherwise affect the charges and expenses of your policy or any policy riders. DEATH BENEFITS The death benefit proceeds is the amount payable to the beneficiary upon the death of the insured, based upon the death benefit option in effect. Loans, loan interest, partial surrenders, and overdue charges, if any, are deducted from the death benefit proceeds prior to payment. Riders, including the No-Lapse Enhancement Rider and the Premium Reserve Rider, may impact the amount payable as death benefit proceeds in your policy. Refer to the "Riders" section of this prospectus for more information. Death Benefit Options Two different death benefit options are available. Regardless of which death benefit option you choose, the death benefit proceeds payable will be the greater of: 1) the amount determined by the death benefit option in effect on the date of the death of the insured, less any indebtedness; or 2) a percentage of the accumulation value equal to that required by the Internal Revenue Code to maintain the policy as a life insurance policy. These percentages are shown on your policy specifications pages. The following table provides more information about the death benefit options.
Option Death Benefit Proceeds Equal to the Variability 1 Specified amount (a minimum of $100,000) level death benefit. None
37
Option Death Benefit Proceeds Equal to the Variability 2 Sum of the specified amount plus the net accumulation value as of May increase or decrease over the date of the insured's death. time, depending on the amount of premium paid and the investment performance of the Sub-Accounts or the interest credited to the Fixed Account.
If for any reason the owner does not elect a particular death benefit option, Option 1 will apply. Changes to the Initial Specified Amount and Death Benefit Options Within certain limits, you may decrease or, with satisfactory evidence of insurability, increase the specified amount. The minimum specified amount is currently $100,000. The death benefit option may be changed by the owner, subject to our consent, as long as the policy is in force. You must submit all requests for changes among death benefit options and changes in the specified amount in writing to our Administrative Office. The minimum increase in specified amount currently permitted is $1,000. If you request a change, a supplemental application and evidence of insurability must also be submitted to us.
Option Change Impact 2 to 1 The specified amount will be increased by the accumulation value as of the effective date of change.
A surrender charge may apply to a decrease in specified amount. Please refer to the Surrender Charges section of this prospectus for more information on conditions that would cause a surrender charge to be applied. A table of surrender charges is included in each policy. Any reductions in specified amount will be made against the initial specified amount and any later increase in the specified amount on a last in, first out basis. Any increase in the specified amount will increase the amount of the surrender charge applicable to your policy. Changes in specified amount do not affect the premium load as a percentage of premium. We may decline any request for reduction of the specified amount if, after the change, the specified amount would be less than the minimum specified amount or would reduce the specified amount below the level required to maintain the policy as life insurance for purposes of federal income tax law according to the guideline premium test. The guideline premium test provides for a maximum amount of premium paid in relation to the death benefit and a minimum amount of death benefit in relation to policy value. As a result, we may increase the policy's death benefit above the specified amount in order to satisfy the guideline premium test. If the increase in the policy's death benefit causes an increase in the net amount at risk, charges for the cost of insurance will increase as well. Any change is effective on the first monthly anniversary day on, or after, the date of approval of the request by Lincoln Life. If the monthly deduction amount would increase as a result of the change, the changes will be effective on the first monthly anniversary day on which the accumulation value is equal to, or greater than, the monthly deduction amount. 38 Death Benefit Proceeds Proof of death should be furnished to us at our Administrative Office as soon as possible after the death of the insured. This notification must include a certified copy of an official death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death, or any other proof satisfactory to us. After receipt at our Administrative Office of proof of death of the insured, the death benefit proceeds will ordinarily be paid within seven days. The proceeds will be paid in a lump sum or in accordance with any settlement option selected by the owner or the beneficiary. Payment of the death benefit proceeds may be delayed if your policy is contested or if Separate Account values cannot be determined. If the recipient of the death benefit proceeds has elected a lump sum settlement and the death benefit proceeds are over $5,000, the proceeds will be placed into an interest-bearing account in the recipient's name. The SecureLine (Reg. TM) account allows the recipient additional time to decide how to manage the proceeds with the balance earning interest from the day the account is opened. The SecureLine (Reg. TM) account is a special service that we offer in which your death benefit or surrender proceeds are placed into an interest-bearing account. Instead of mailing you (or the recipient of the proceeds) a check, we will send a checkbook so that you (or the proceeds recipient) will have access to the account simply by writing a check for all or any part of the proceeds. You (or the recipient of the proceeds) may request that the proceeds be paid in the form of a check rather than receiving the SecureLine (Reg. TM) checkbook. The SecureLine (Reg. TM) account is part of our general account. It is not a bank account, and it is not insured by the FDIC or any other government agency. As part of our general account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in the SecureLine (Reg. TM) account. POLICY SURRENDERS You may surrender your policy at any time by sending us your policy along with a written request for surrender. If you surrender your policy, all policy coverage will automatically terminate and may not be reinstated. Consult your tax adviser to understand tax consequences of any surrender you are considering. The surrender value of your policy is the amount you can receive by surrendering the policy. The surrender value is the net accumulation value less any applicable surrender charge, less any accrued loan interest not yet charged. If you have elected the Enhanced Surrender Value Rider, your surrender value may be enhanced if you fully surrender your policy during the first five policy years. Any surrender results in a withdrawal of values from the Sub-Accounts and Fixed Account that have values allocated to them. Any surrender from a Sub-Account will result in the cancellation of variable accumulation units. The cancellation of such units will be based on the variable accumulation unit value determined at the close of the valuation period during which the surrender is effective. Surrender proceeds will generally be paid within seven days of our receipt of your request. If you request lump sum surrender and the policy's surrender value is over $5,000, your surrender proceeds will be placed into a SecureLine (Reg. TM) account in your name. Refer to the description of the SecureLine (Reg. TM) account under the section headed "Death Benefit Proceeds" for more information. Partial Surrender You may make a partial surrender, withdrawing a portion of your policy values. You may request a partial surrender in writing or electronically, if previously authorized and we consent. The total of all partial surrenders may not exceed 90% of the surrender value of your policy. We may limit partial surrenders to the extent necessary to meet the federal tax law requirements. Each partial surrender must be at least $500. Partial surrenders are subject to other limitations as described below. Partial surrenders may reduce the accumulation value and the specified amount. The amount of the partial surrender will be withdrawn from the Sub-Accounts and Fixed Account in proportion to their values. The effect of 39 partial surrenders on the death benefit proceeds depends on the death benefit option in effect at the time of the partial surrender.
Death Benefit Option in Effect Impact of Partial Surrender 1 Will reduce the accumulation value and may reduce the specified amount. 2 Will reduce the accumulation value, but not the specified amount.
Partial surrender proceeds will generally be paid within seven days of our receipt of your request. POLICY LOANS You may borrow against the surrender value of your policy and the Premium Reserve Rider, if you have allocated premiums to the Premium Reserve Rider. The loan may be for any amount up to 100% of the current surrender value. However, we reserve the right to limit the amount of your loan so that total indebtedness under the policy (including Premium Reserve Rider, if any, in policy years 1-10) will not exceed 90% of an amount equal to the accumulation value less surrender charge. A loan agreement must be executed and your policy assigned to us free of any other assignments. Outstanding policy loans and accrued interest reduce the policy's death benefit and accumulation value. The amount of your loan will be withdrawn first from accumulation values, if any, of the Premium Reserve Rider Sub-Accounts and Fixed Account and then from policy Sub-Accounts and Fixed Account in proportion to their values. The Loan Account is the account in which policy indebtedness (outstanding loans and interest) accrues once it is transferred out of the Sub-Accounts and Fixed Account. Amounts transferred to the Loan Account of both the policy and the Premium Reserve Rider do not participate in the performance of the Sub-Accounts or the Fixed Account. Loans, therefore, can affect the policy's death benefit and accumulation value whether or not they are repaid. Interest on policy loans (from both the Premium Reserve Rider and the policy) accrues at an effective annual rate of 5.0% in years 1-10 and 4.0% thereafter, and is payable once a year in arrears on each policy anniversary, or earlier upon full surrender or other payment of proceeds of your policy. The amount of your loan, plus any accrued but unpaid interest, is added to your outstanding policy loan balance. Unless paid in advance, loan interest due will be transferred proportionately from the Sub-Accounts and Fixed Account. This amount will be treated as an additional policy loan, and added to the loan account value. Lincoln Life credits interest to the loan account value (of both the Premium Reserve Rider and the Policy) at a rate of 4.0% in all years, so the net cost of your policy loan is 1.0% in years 1-10 and 0.0% thereafter. Your outstanding loan balance may be repaid at any time during the lifetime of the insured. The loan account will be reduced by the amount of any loan repayment. Any repayment, other than loan interest, will be allocated to the Sub-Accounts and Fixed Account in the same proportion in which net premium payments are currently allocated, unless you instruct otherwise. When making a payment to us, we will apply your payment as premiums and not loan repayments unless you specifically instruct us otherwise. If at any time the total indebtedness against your policy, including interest accrued but not due, equals or exceeds the then current accumulation value less surrender charges, the policy will terminate subject to the conditions in the grace period provision, unless the provisions of the No-Lapse Enhancement Rider are preventing policy termination. If your policy lapses while a loan is outstanding, there may be adverse tax consequences. The amount of a benefit paid (the "accelerated benefit") under the Accelerated Benefits Riders (see section headed "Riders - Accelerated Benefits Riders") is a lien against the policy and is considered as a policy loan. Therefore, an amount equal to the accelerated benefit paid will be withdrawn first from accumulation values, if any, of the Premium Reserve Rider sub-accounts and the Premium Reserve Rider fixed account and then from policy Sub-Accounts and Fixed Account in proportion to their values. That amount is transferred to the loan account. Interest will be credited by the Company as described above. To the extent that the accelerated benefit paid does not exceed the surrender value, interest will be charged in the same manner as described above. However, to the extent that the 40 accelerated benefit exceeds the surrender value at the time it is paid, interest charged during each policy year is determined annually at least 30 days in advance of the beginning of a policy year and will not exceed the higher of (i) the published monthly average of the Moody's Corporate Bond Yield Average - Monthly Average Corporates (as published by Moody's Investors Service, Inc. for the calendar month ending 2 months before the beginning of the policy year), and (ii) the rate used to compute the accumulation value of the Fixed Account plus 1.0%. Please ask your financial adviser for additional details. LAPSE AND REINSTATEMENT If at any time: 1) the net accumulation value of the policy is insufficient to pay the monthly deduction, and 2) the provisions of the No-Lapse Enhancement Rider are not preventing policy termination, then all policy coverage will terminate. This is referred to as policy lapse. The net accumulation value may be insufficient: 1) because it has been exhausted by earlier deductions; 2) as a result of poor investment performance; 3) due to partial surrenders; 4) due to indebtedness for policy loans; or 5) because of a combination of any of these factors. If we have not received your premium payment (or payment of indebtedness on policy loans) necessary so that the net accumulation value of your policy is sufficient to pay the monthly deduction amount on a monthly anniversary day, we will send a written notice to you, or any assignee of record. The notice will state the amount of the premium payment (or payment of indebtedness on policy loans) that must be paid to avoid termination of your policy. If the amount stated in the notice is not paid to us within the grace period and any Premium Reserve accumulation value (less any Premium Reserve Rider transfer load) automatically transferred at the end of the grace period is also insufficient to keep the policy in force, then the policy will terminate. The grace period is the later of (a) 31 days after the notice was mailed, and (b) 61 days after the monthly anniversary day on which the monthly deduction could not be paid. If the insured dies during the grace period, we will deduct any charges due to us from any death benefit that may be payable under the terms of the policy. No-Lapse Protection Your policy includes the No-Lapse Enhancement Rider. This rider provides you with additional protection to prevent a lapse in your policy. If you meet the requirements of this rider, your policy will not lapse, even if the net accumulation value under the policy is insufficient to cover the accumulated, if any, and current monthly deductions. It is a limited benefit in that it does not provide any additional death benefit amount or any increase in your cash value. Also, it does not provide any type of market performance guarantee. We will automatically issue this rider with your policy. There is no charge for this rider. The rider consists of the no-lapse value provision and the reset account value provision. Under this rider, your policy will not lapse as long as either the no-lapse value or the reset account value, less any indebtedness, is greater than zero. The no-lapse value and reset account value are reference values only. If the net accumulation value is insufficient to cover the accumulated, if any, and current monthly deductions, the no-lapse value and reset account value will be referenced to determine whether either provision of the rider will prevent your policy from lapsing. Refer to the "No-Lapse Enhancement Rider" section of this prospectus for more information. 41 Your policy may also include the Overloan Protection Rider. If this rider is issued with your policy, you meet the requirements as described in this rider and have elected this benefit, your policy will not lapse solely based on indebtedness exceeding the accumulation value less the surrender charges. It is a limited benefit, in that it does not provide any additional death benefit or any increase in accumulation value. Also, it does not provide any type of market performance guarantee. There is no charge for adding this rider to your policy. However, if you choose to elect the benefit provided by the rider, there is a one-time charge which will not exceed 5.0% of the then current accumulation value. Once you elect the benefit, certain provisions of your policy will be impacted as described in the rider. Finally, your policy includes the Premium Reserve Rider (in states where available). To the extent you have allocated premium payments to this rider, any rider accumulation value may prevent lapse of your policy. If your policy's net accumulation value is insufficient to cover the monthly deductions, and the provisions of the No-Lapse Enhancement Rider are not preventing policy termination, we will send a written notice to you which will state the amount of the premium payment (or payment of indebtedness on policy loans) that must be paid to avoid termination of your policy. If the amount in the notice is not paid to us within the grace period, we will automatically transfer to your policy any Premium Reserve Rider accumulation value (less any Premium Reserve Rider transfer load) on the day the grace period ends. If after such transfer, your policy's net accumulation value is sufficient to cover the monthly deductions then due, your policy will not lapse. As with your policy, you bear the risk that investment results of the Sub-Accounts you have chosen are adverse or are less favorable than anticipated. Adverse investment results will impact the accumulation value of the rider and, therefore, the amount of the rider accumulation value which may be available to prevent your policy from lapsing or for providing policy benefits. Reinstatement of a Lapsed Policy If your policy has lapsed and the insured has not died since lapse, you may reinstate your policy within five years of the policy lapse date, provided: 1) it has not been surrendered; 2) there is an application for reinstatement in writing; 3) satisfactory evidence of insurability is furnished to us and we agree to accept the risk; 4) we receive a payment sufficient to keep your policy in force for at least two months; and 5) any accrued loan interest is paid and any remaining indebtedness is either paid or reinstated. The reinstated policy will be effective as of the monthly anniversary day on or next following the date on which we approve your application for reinstatement. Surrender charges will be reinstated as of the policy year in which your policy lapsed. Your accumulation value at reinstatement will be the net premium payment then made less all monthly deductions due. TAX ISSUES The federal income tax treatment of your policy is complex and sometimes uncertain. The federal income tax rules may vary with your particular circumstances. This discussion does not include all the federal income tax rules that may affect you and your policy and is not intended as tax advice. This discussion also does not address other federal tax consequences, such as estate, gift and generation skipping transfer taxes, or any state and local income, estate and inheritance tax consequences, associated with the policy. You should always consult a tax adviser about the application of tax rules to your individual situation. Taxation of Life Insurance Contracts in General Tax Status of the Policy. Section 7702 of the Internal Revenue Code ("Code") establishes a statutory definition of life insurance for federal tax purposes. We believe that the policy will meet the statutory definition of life insurance 42 under the guideline premium test, which provides for a maximum amount of premium paid depending upon the insured's age, gender, and risk classification in relation to the death benefit and a minimum amount of death benefit in relation to policy value. As a result, the death benefit payable will generally be excludable from the beneficiary's gross income, and interest and other income credited will not be taxable unless certain withdrawals are made (or are deemed to be made) from the policy prior to the death of the insured, as discussed below. This tax treatment will only apply, however, if (1) the investments of the Separate Account are "adequately diversified" in accordance with Treasury Department regulations, and (2) we, rather than you, are considered the owner of the assets of the Separate Account for federal income tax purposes. The Code also recognizes a cash value accumulation test, which does not limit premiums paid, but requires the policy to provide a minimum death benefit in relation to the policy value, depending on the insured's age, gender, and risk classification. We do not apply this test to the policy. Investments in the Separate Account Must be Diversified. For a policy to be treated as a life insurance contract for federal income tax purposes, the investments of the Separate Account must be "adequately diversified." IRS regulations define standards for determining whether the investments of the Separate Account are adequately diversified. If the Separate Account fails to comply with these diversification standards, you could be required to pay tax currently on the excess of the policy value over the policy premium payments. Although we do not control the investments of the Sub-Accounts, we expect that the Sub-Accounts will comply with the IRS regulations so that the Separate Account will be considered "adequately diversified." Restriction on Investment Options. Federal income tax law limits your right to choose particular investments for the policy. Because the IRS has issued little guidance specifying those limits, the limits are uncertain and your right to allocate policy values among the Sub-Accounts may exceed those limits. If so, you would be treated as the owner of the assets of the Separate Account 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 policies. We reserve the right to modify the policy without your consent to try to prevent the tax law from considering you as the owner of the assets of the Separate Account. No Guarantees Regarding Tax Treatment. We make no guarantee regarding the tax treatment of any policy or of any transaction involving a policy. However, the remainder of this discussion assumes that your policy will be treated as a life insurance contract for federal income tax purposes and that the tax law will not impose tax on any increase in your policy value until there is a distribution from your policy. Tax Treatment of Life Insurance Death Benefit Proceeds. In general, the amount of the death benefit payable from a policy because of the death of the insured is excludable from gross income. Certain transfers of the policy for valuable consideration, however, may result in a portion of the death benefit being taxable. If the death benefit is not received in a lump sum and is, instead, applied to one of the settlement options, payments generally will be prorated between amounts attributable to the death benefit which will be excludable from the beneficiary's income and amounts attributable to interest (accruing after the insured's death) which will be includible in the beneficiary's income. Tax Deferral During Accumulation Period. Under existing provisions of the Code, except as described below, any increase in your policy value is generally not taxable to you unless amounts are received (or are deemed to be received) from the policy prior to the insured's death. If there is a total withdrawal from the policy, the surrender value will be includible in your income to the extent the amount received exceeds the "investment in the contract." (If there is any debt at the time of a total withdrawal, such debt will be treated as an amount received by the owner.) The "investment in the contract" generally is the aggregate amount of premium payments and other consideration paid for the policy, less the aggregate amount received previously to the extent such amounts received were excludable from gross income. Whether partial withdrawals (or other amounts deemed to be distributed) from the policy constitute income to you depends, in part, upon whether the policy is considered a "modified endowment contract" (a "MEC") for federal income tax purposes. 43 Policies That Are MECs Characterization of a Policy as a MEC. A modified endowment contract (MEC) is a life insurance policy that meets the requirements of Section 7702 and fails the "7-pay test" of 7702A of the Code. A policy will be classified as a MEC if premiums are paid more rapidly than allowed by the "7-pay test", a test that compares actual paid premium in the first seven years against a pre-determined premium amount as defined in 7702A of the Code. A policy may also be classified as a MEC if it is received in exchange for another policy that is a MEC. In addition, even if the policy initially is not a MEC, it may in certain circumstances become a MEC. These circumstances would include a material change of the policy (within the meaning of the tax law), and a withdrawal or reduction in the death benefit during the first seven policy years following the last material change. Tax Treatment of Withdrawals, Loans, Assignments and Pledges under MECs. If the policy is a MEC, withdrawals from your policy will be treated first as withdrawals of income and then as a recovery of premium payments. Thus, withdrawals will be includible in income to the extent the policy value exceeds the investment in the policy. The Code treats any amount received as a loan under a policy, and any assignment or pledge (or agreement to assign or pledge) any portion of your policy value, as a withdrawal of such amount or portion. Your investment in the policy is increased by the amount includible in income with respect to such assignment, pledge, or loan. Penalty Taxes Payable on Withdrawals. A 10% penalty tax may be imposed on any withdrawal (or any deemed distribution) from your MEC which you must include in your gross income. The 10% penalty tax does not apply if one of several exceptions exists. These exceptions include withdrawals or surrenders that: you receive on or after you reach age 59 1/2, you receive because you became disabled (as defined in the tax law), or you receive as a series of substantially equal periodic payments for your life (or life expectancy). None of the penalty tax exceptions apply to a taxpayer who is not an individual. Special Rules if You Own More than One MEC. In certain circumstances, you must combine some or all of the life insurance contracts which are MECs that you own in order to determine the amount of withdrawal (including a deemed withdrawal) that you must include in income. For example, if you purchase two or more MECs from the same life insurance company (or its affiliates) during any calendar year, the Code treats all such policies as one contract. Treating two or more policies as one contract could affect the amount of a withdrawal (or a deemed withdrawal) that you must include in income and the amount that might be subject to the 10% penalty tax described above. Policies That Are Not MECs Tax Treatment of Withdrawals. If the policy is not a MEC, the amount of a withdrawal from the policy will generally be treated first as a non-taxable recovery of premium payments and then as income from the policy. Thus, a withdrawal from a policy that is not a MEC will not be includible in income except to the extent it exceeds the investment in the policy immediately before the withdrawal. Certain Distributions Required by the Tax Law in the First 15 Policy Years. Section 7702 places limitations on the amount of premium payments that may be made and the policy values that can accumulate relative to the death benefit. Where cash distributions are required under Section 7702 in connection with a reduction in benefits during the first 15 years after the policy is issued (or if withdrawals are made in anticipation of a reduction in benefits, within the meaning of the tax law, during this period), some or all of such amounts may be includible in income. A reduction in benefits may occur when the face amount is decreased, withdrawals are made, and in certain other instances. Tax Treatment of Loans. If your policy is not a MEC, a loan you receive under the policy is generally treated as your indebtedness. As a result, no part of any loan under such a policy constitutes income to you so long as the policy remains in force. Nevertheless, in those situations where the interest rate credited to the Loan Account equals the interest rate charged to you for the loan, it is possible that some or all of the loan proceeds may be includible in your income. If a policy lapses (or if all policy value is withdrawn) when a loan is outstanding, the amount of the loan outstanding will be treated as withdrawal proceeds for purposes of determining whether any amounts are includible in your income. Before purchasing a policy that includes the Overloan Protection Rider, you should note 44 that if you elect to exercise the Overloan Protection Rider at any time during the policy's life, such exercise could be deemed to result in a taxable distribution of the outstanding loan balance. You should consult a tax advisor prior to exercising the Overloan Protection Rider to determine the tax consequences of such exercise. Other Considerations Insured Lives Past Age 121. If the insured survives beyond the end of the mortality table, which is used to measure charges for the policy and which ends at age 121, and death benefit option 1 is in effect, in some circumstances the policy value may equal or exceed the specified amount level death benefit. In such cases, we believe your policy will continue to qualify as life insurance for federal tax purposes. However, there is some uncertainty regarding this treatment, and it is possible that you would be viewed as constructively receiving the cash value in the year the insured attains age 121. Compliance with the Tax Law. We believe that the maximum amount of premium payments we have determined for the policies will comply with the federal tax definition of life insurance. We will monitor the amount of premium payments. If at any time you pay a premium that would exceed the amount allowable to permit the policy to continue to qualify as life insurance, we will either refund the excess premium to you within 60 days of the end of the policy year or, if the excess premium exceeds $250, offer you the alternative of instructing us to hold the excess premium in a premium deposit fund and apply it to the policy later in accordance with your instructions. We will credit interest at an annual rate that we may declare from time to time on advance premium deposit funds. The policy will be allowed to become a MEC under the Code only with your consent. If you pay a premium that would cause your policy to be deemed a MEC and you do not consent to MEC status for your policy, we will either refund the excess premium to you within 60 days of the end of the policy year, offer you the opportunity to apply for an increase in Death Benefit, or if the excess premium exceeds $250, offer you the alternative of instructing us to hold the excess in a premium deposit fund and apply it to the policy on the next, succeeding policy anniversary when the premium no longer causes your policy to be deemed a MEC in accordance with your premium allocation instructions on file at the time the premium is applied. Any interest and other earnings will be includible in income subject to tax as required by law. Disallowance of Interest Deductions. Interest on policy loan indebtedness is not deductible. If an entity (such as a corporation or a trust, not an individual) purchases a policy or is the beneficiary of a policy issued after June 8, 1997, a portion of the interest on indebtedness unrelated to the policy may not be deductible by the entity. However, this rule does not apply to a policy owned by an entity engaged in a trade or business which covers the life of an individual who is a 20% owner of the entity, or an officer, director, or employee of the trade or business, at the time first covered by the policy. This rule also does not apply to a policy owned by an entity engaged in a trade or business which covers the joint lives of the 20% owner of the entity and the owner's spouse at the time first covered by the policy. In the case of an "employer-owned life insurance contract" as defined in the tax law that is issued (or deemed to be issued) after August 17, 2006, the portion of the benefit excludable from gross income generally will be limited to the premiums paid for the contract. However, this limitation on the death benefit exclusion will not apply if certain notice and consent requirements are satisfied and one of several exceptions is satisfied. These exceptions include circumstances in which the death benefit is payable to certain heirs of the insured to acquire an ownership interest in a business, or where the contract covers the life of a director or an insured who is "highly compensated" within the meaning of the tax law. These rules, including the definition of an employer-owned life insurance contract, are complex, and you should consult with your advisers for guidance as to their application. Federal Income Tax Withholding. We will withhold and remit to the IRS a part of the taxable portion of each distribution made under a policy unless you notify us in writing at or before the time of the distribution that tax is not to be withheld. Regardless of whether you request that no taxes be withheld or whether the Company withholds a sufficient amount of taxes, you will be responsible for the payment of any taxes and early distribution penalties 45 that may be due on the amounts received. You may also be required to pay penalties under the estimated tax rules, if your withholding and estimated tax payments are insufficient to satisfy your total tax liability. Changes in the Policy or Changes in the Law. Changing the owner, exchanging the policy, and other changes under the policy may have tax consequences (in addition to those discussed herein) depending on the circumstances of such change. The above discussion is based on the Code, IRS regulations, and interpretations existing on the date of this prospectus. However, Congress, the IRS, and the courts may modify these authorities, sometimes retroactively. Fair Value of Your Policy It is sometimes necessary for tax and other reasons to determine the "value" of your policy. The value can be measured differently for different purposes. It is not necessarily the same as the accumulation value or the net accumulation value. You, as the owner, should consult with your advisers for guidance as to the appropriate methodology for determining the fair market value of the policy. Tax Status of Lincoln Life Under existing federal income tax laws, the Company does not pay tax on investment income and realized capital gains of the Separate Account. However, the Company does expect, to the extent permitted under Federal tax law, to claim the benefit of the foreign tax credit as the owner of the assets of the Separate Account. Lincoln Life does not expect that it will incur any federal income tax liability on the income and gains earned by the Separate Account. We, therefore, do not impose a charge for federal income taxes. If federal income tax law changes and we must pay tax on some or all of the income and gains earned by the Separate Account, we may impose a charge against the Separate Account to pay the taxes. RESTRICTIONS ON FINANCIAL TRANSACTIONS In accordance with money laundering laws and federal economic sanction policy, the Company may be required in a given instance to reject a premium payment and/or freeze a policy owner's account. This means we could refuse to honor requests for transfers, withdrawals, surrenders, loans, assignments, beneficiary changes or death benefit payments. Once frozen, monies would be moved from the Separate Account to a segregated interest-bearing account maintained for the policy owner, and held in that account until instructions are received from the appropriate regulator. We also may be required to provide additional information about a policy owner's account to government regulators. LEGAL PROCEEDINGS In the ordinary course of its business, the Company and its subsidiaries are involved in various pending or threatened legal proceedings, including purported class actions, arising from the conduct of business. In some instances, these proceedings include claims for unspecified or substantial 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 proceedings, after consideration of any reserves and rights to indemnification, ultimately will be resolved without materially affecting the consolidated financial position of the Company and its subsidiaries, or the financial position of the Separate Account or the Principal Underwriter. However, given the large and indeterminate amounts sought in certain of these proceedings and the inherent difficulty in predicting the outcome of such legal proceedings, it is possible that an adverse outcome in certain matters could be material to our operating results for any particular period. 46 FINANCIAL STATEMENTS The financial statements of the Separate Account and the consolidated financial statements of the Company are located in the SAI. 47 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Additional information about Lincoln Life, the Separate Account and your policy may be found in the Statement of Additional Information (SAI). Contents of the SAI GENERAL INFORMATION Lincoln Life Registration Statement Changes of Investment Policy Principal Underwriter Disaster Plan Advertising SERVICES Independent Registered Public Accounting Firm Accounting Services Checkbook Service for Disbursements
POLICY INFORMATION Case Exceptions Assignment Transfer of Ownership Beneficiary Right to Convert Contract Change of Plan Settlement Options Deferment of Payments Incontestability Misstatement of Age or Sex Suicide PERFORMANCE DATA FINANCIAL STATEMENTS Separate Account Company
The SAI may be obtained, at no cost to you, by contacting our Administrative Office at the address or telephone number listed on the first page of this prospectus. Your SAI will be sent to you via first class mail within three business days of your request. You may make inquiries about your policy to this same address and telephone number. You may request personalized illustrations of death benefits and policy values from your financial adviser without charge. You may review or copy this prospectus, the SAI, or obtain other information about the Separate Account at the Securities and Exchange Commission's Public Reference Room. You should contact the SEC at (202) 551-8090 to obtain information regarding days and hours the reference room is open. You may also view information at the SEC's Internet site, http://www.sec.gov. Copies of information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section, Securities and Exchange Commission, 100 F Street, NE, Washington, D.C. 20549-0102. This prospectus, the funds prospectus, and the SAI are also available on our internet site, www.LFG.com Lincoln Life Flexible Premium Variable Life Account M 1933 Act Registration No. 333-139960 1940 Act Registration No. 811-08557 End of Prospectus 48 STATEMENT OF ADDITIONAL INFORMATION (SAI) Dated May 1, 2008 Relating to Prospectus Dated May 1, 2008 for Lincoln VULONE2007 product Lincoln Life Flexible Premium Variable Life Account M, Registrant The Lincoln National Life Insurance Company, Depositor The SAI is not a prospectus. The SAI provides you with additional information about Lincoln Life, the Separate Account and your policy. It should be read in conjunction with the product prospectus. A copy of the product prospectus may be obtained without charge by writing to our Administrative Office: Customer Service Center One Granite Place Concord, NH 03301 or by telephoning (800) 444-2363, and requesting a copy of the Lincoln VULONE2007 product prospectus. TABLE OF CONTENTS OF THE SAI
Contents Page - ------------------------------------------------- ---------- GENERAL INFORMATION ............................. 2 Lincoln Life ................................ 2 Registration Statement ...................... 2 Changes of Investment Policy ................ 2 Principal Underwriter ....................... 2 Disaster Plan ............................... 3 Advertising ................................. 3 SERVICES ........................................ 4 Independent Registered Public Accounting Firm ...................................... 4 Accounting Services ......................... 4 Checkbook Service for Disbursements ......... 4
Contents Page - ------------------------------------------------- ---------- POLICY INFORMATION .............................. 5 Case Exceptions ............................. 5 Assignment .................................. 5 Transfer of Ownership ....................... 5 Beneficiary ................................. 5 Right to Convert Contract ................... 6 Change of Plan .............................. 6 Settlement Options .......................... 6 Deferment of Payments ....................... 6 Incontestability ............................ 6 Misstatement of Age or Sex .................. 6 Suicide ..................................... 7 PERFORMANCE DATA ................................ 7 FINANCIAL STATEMENTS ............................ 8 Separate Account ............................ M-1 Company ..................................... S-1
1 GENERAL INFORMATION Lincoln Life The Lincoln National Life Insurance Company ("Lincoln Life", "the Company", "we", "us", "our") (EIN 35-0472300), organized in 1905, is an Indiana-domiciled insurance company, engaged primarily in the direct issuance of life insurance contracts and annuities. Lincoln Life is wholly owned by Lincoln National Corporation (LNC), a publicly held insurance and financial services holding company incorporated in Indiana. Lincoln Life is obligated to pay all amounts promised to policy owners under the policies. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. Lincoln Financial Group sells a wide variety of financial products and solutions through financial advisors: mutual funds, managed accounts, retirement solutions, life insurance, 401(k) and 403(b) plans, savings plans, institutional investments and comprehensive financial planning and advisory services. Lincoln Life is subject to the laws of Indiana governing insurance companies and to regulation by the Indiana Department of Insurance ("Insurance Department"). An annual statement in a prescribed form is filed with the Insurance Department each year covering the operation of the Company for the preceding year along with the Company's financial condition as of the end of that year. Regulation by the Insurance Department includes periodic examination to determine our contract liabilities and reserves. Our books and accounts are subject to review by the Insurance Department at all times and a full examination of our operations is conducted periodically by the Insurance Department. Such regulation does not, however, involve any supervision of management practices or policies, or our investment practices or policies. A blanket bond with a per event limit of $50 million and an annual policy aggregate limit of $100 million covers all of the officers and employees of the Company. Registration Statement A Registration Statement has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the policies offered. The Registration Statement, its amendments and exhibits, contain information beyond that found in the prospectus and the SAI. Statements contained in the prospectus and the SAI as to the content of policies and other legal instruments are summaries. Changes of Investment Policy Lincoln Life may materially change the investment policy of the Separate Account. If this decision is made, we must inform the owners and obtain all necessary regulatory approvals. Any change must be submitted to the various state insurance departments. The state insurance departments would not approve the change in investment policy if found to be detrimental to the interests of the owners of the policies or the end result would render our operations hazardous to the public. If an owner objects, his or her policy may be converted to a substantially comparable fixed benefit life insurance policy offered by us on the life of the insured. The owner has the later of 60 days (6 months in Pennsylvania) from the date of the investment policy change or 60 days (6 months in Pennsylvania) from being informed of such change to make this conversion. We will not require evidence of insurability for this conversion. The new policy will not be affected by the investment experience of any separate account. The new policy will be for an amount of insurance equal to or lower than the amount of the death benefit of the current policy on the date of the conversion. Principal Underwriter Beginning on May 1, 2007, Lincoln Financial Distributors, Inc. ("LFD"), One Granite Place, Concord, NH 03301, became the principal underwriter for the policies, which are offered continuously. LFD is registered with the 2 Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). The principal underwriter has overall responsibility for establishing a selling plan for the policies. LFD received $31,900,362 in 2007 for the sale of policies offered through the Separate Account. LFD retains no underwriting commissions from the sale of the policies. Disaster Plan Lincoln's business continuity and disaster recovery strategy employs system and telecommunication accessibility, system back-up and recovery, and employee safety and communication. The plan includes documented and tested procedures that will assist in ensuring the availability of critical resources and in maintaining continuity of operations during an emergency situation. Advertising Lincoln Life is ranked and rated by independent financial rating services, including Moody's, Standard & Poor's, Duff & Phelps and A.M. Best Company. The purpose of these ratings is to reflect the financial strength or claims-paying ability of Lincoln Life. The ratings are not intended to reflect the investment experience or financial strength of the Separate Account. We may advertise these ratings from time to time. In addition, we may include in certain advertisements, endorsements in the form of a list of organizations, individuals or other parties which recommend Lincoln Life or the policies. Furthermore, we may occasionally include in advertisements comparisons of currently taxable and tax deferred investment programs, based on selected tax brackets, or discussions of alternative investment vehicles and general economic conditions. More About the S&P 500 Index. Investors look to indexes as a standard of market performance. Indexes are model portfolios, that is, groups of stocks or bonds selected to represent an entire market. The S&P 500 Index is a widely used measure of large US company stock performance. It consists of the common stocks of 500 major corporations selected according to size, frequency and ease by which their stocks trade, and range and diversity of the American economy. The fund seeks to approximate as closely as possible, before fees and expenses, the total return of the S&P 500 Index. To accomplish this objective the fund's sub-adviser, Mellon Capital Management Corporation (Mellon Capital), attempts to buy and sell all of the index's securities in the same proportion as they are reflected in the S&P 500 Index, although the fund reserves the right not to invest in every security in the S&P 500 Index if it is not practical to do so under the circumstances. Mellon Capital does not seek to beat the S&P 500 Index and does not seek temporary defensive positions when markets appear to be overvalued. Mellon Capital makes no attempt to apply economic, financial or market analysis when managing the fund. Including a security among the fund's holdings implies no opinion as to its attractiveness as an investment. The fund may invest in stock index futures and options on stock index futures as a substitute for a comparable market position in the underlying securities. A stock index future obligates one party to deliver (and the other party to take), effectively, an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying stocks in the index is made. Instead, the buyer and seller settle the difference in cash between the contract price and the market price on the agreed upon date. The buyer pays the difference if the actual price is lower than the contract price and the seller pays the difference if the actual price is higher. There can be no assurance that a liquid market will exist at the time when the fund seeks to close out a futures contract or a futures option position. Lack of a liquid market may prevent liquidation of an unfavorable position. The Product is not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship 3 to the Licensee is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to the Licensee or the Product. S&P has no obligation to take the needs of the Licensee or the owners of the Product into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Product or the timing of the issuance or sale of the Product or in the determination or calculation of the equation by which the Product is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Product. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. SERVICES Independent Registered Public Accounting Firm The financial statements of the Separate Account and the consolidated financial statements of the Company appearing in this SAI and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, 2300 National City Center, 110 West Berry Street, Fort Wayne, Indiana 46802, as set forth in their reports, also appearing in this SAI and in the Registration Statement. The financial statements audited by Ernst & Young LLP have been included herein in reliance on their reports given on their authority as experts in accounting and auditing. Accounting Services We have entered into an agreement with the Delaware Service Company, Inc., 2005 Market Street, Philadelphia, PA, 19203, to provide accounting services to the Separate Account. Lincoln Life makes no separate charge against the assets of the Separate Account for this service. Checkbook Service for Disbursements We offer a checkbook service in which the death benefit proceeds are transferred into an interest-bearing account, in the beneficiary's name as owner of the account. Your beneficiary has quick access to the proceeds and is the only one authorized to transfer proceeds from the account. This service allows the beneficiary additional time to decide how to manage death benefit proceeds with the balance earning interest from the day the account is opened. We also offer this same checkbook service for surrenders of your policy of $5,000 or more. Once your request is processed, proceeds are placed in an interest-bearing account in your name. You have complete access to your proceeds through check writing privileges. You have the choice of leaving proceeds in this account or you may write checks immediately - even a check for the entire amount. 4 POLICY INFORMATION Case Exceptions This policy is available for purchase by corporations and other groups or sponsoring organizations on a multiple-life case basis. We reserve the right to reduce premium loads or any other charges on certain cases, where it is expected that the amount or nature of such cases will result in savings of sales, underwriting, administrative or other costs. Eligibility for these reductions and the amount of reductions will be determined by a number of factors, including but not limited to, the number of lives to be insured, the total premiums expected to be paid, total assets under management for the policy owner, the nature of the relationship among the insured individuals, the purpose for which the policies are being purchased, the expected persistency of the individual policies and any other circumstances which we believe to be relevant to the expected reduction of its expenses. Some of these reductions may be guaranteed and others may be subject to withdrawal or modification by us on a uniform case basis. Reductions in these charges will not be unfairly discriminatory against any person, including the affected policy owners invested in the Separate Account. Assignment While the insured is living, you may assign your rights in the policy, including the right to change the beneficiary designation. The assignment must be in writing, signed by you and received at our Administrative Office. We will not be responsible for any assignment that is not received by us, nor will we be responsible for the sufficiency or validity of any assignment. Any assignment is subject to any indebtedness owed to Lincoln Life at the time the assignment is received and any interest accrued on such indebtedness after we have received any assignment. Once received, the assignment remains effective until released by the assignee in writing. As long as an assignment remains effective, you will not be permitted to take any action with respect to the policy without the consent of the assignee in writing. Transfer of Ownership As long as the insured is living, you may transfer all of your rights in the policy by submitting a Written Request to our Administrative Office. You may revoke any transfer of ownership prior to its effective date. The transfer of ownership, or revocation of transfer, will not take effect until recorded by us. Once we have recorded the transfer or revocation of transfer, it will take effect as of the date of the latest signature on the Written Request. On the effective date of transfer, the transferee will become the Owner and will have all the rights of the Owner under the policy. Unless you direct us otherwise, with the consent of any assignee recorded with us, a transfer will not affect the interest of any beneficiary designated prior to the effective date of transfer. Beneficiary The beneficiary is initially designated on a form provided by us for that purpose and is the person who will receive the death benefit proceeds payable. Multiple beneficiaries will be paid in equal shares, unless otherwise specified to the Company. You may change the beneficiary at any time while the insured is living, except when we have received an assignment of your policy or an agreement not to change the beneficiary. Any request for a change in the beneficiary must be in writing, signed by you, and recorded at our Administrative Office. If the owner has specifically requested not to reserve the right to change the beneficiary, such a request requires the consent of the beneficiary. The change will not be effective until recorded by us. Once we have recorded the change of beneficiary, the change will take effect as of the date of latest signature on the Written Request or, if there is no such date, the date recorded. 5 If any beneficiary dies before the insured, the beneficiary's potential interest shall pass to any surviving beneficiaries in the appropriate beneficiary class, unless otherwise specified to the Company. If no named beneficiary survives the insured, any death benefit proceeds will be paid to you, as the owner, or to your executor, administrator or assignee. Right to Convert Contract You may at any time transfer 100% of the Policy's Accumulation Value to the General Account and choose to have all future premium payments allocated to the General Account. After you do this, the minimum period the Policy will be in force will be fixed and guaranteed. The minimum period will depend on the amount of Accumulation Value, the Specified Amount, the sex, Attained Age and rating class of the Insured at the time of transfer. The minimum period will decrease if you choose to surrender the Policy or make a withdrawal. The minimum period will increase if you choose to decrease the Specified Amount, make additional premium payments, or we credit a higher interest rate or charge a lower cost of insurance rate than those guaranteed for the General Account. Change of Plan Your policy may be exchanged for another policy issued by the Company only if the Company consents to the exchange and all requirements for the exchange, as determined by the Company, are met. Your request for exchange must be in writing. The Company may not make an offer to you to exchange your policy without obtaining required regulatory approvals. Settlement Options Proceeds will be paid in a lump sum unless you choose a settlement option we make available. Deferment of Payments Amounts payable as a result of loans, surrenders or partial surrenders will be paid within seven calendar days of our receipt of such a request in a form acceptable to us. We may defer payment or transfer from the Fixed Account up to six months at our option. If we exercise our right to defer any payment from the Fixed Account, interest will accrue and be paid (as required by law) from the date you would otherwise have been entitled to receive the payment. We will not defer any payment used to pay premiums on policies with us. Incontestability The Company will not contest your policy or payment of the death benefit proceeds based on the initial specified amount, or an increase in the specified amount requiring evidence of insurability, after your policy or increase has been in force for two years from date of issue or increase (in accordance with state law). Misstatement of Age or Sex If the age or sex of the insured has been misstated, benefits will be those which would have been purchased at the correct age and sex. If the policy is issued on a unisex basis, and the age of the insured has been misstated, benefits will be those which would have been purchased at the correct age. 6 Suicide If the insured dies by suicide, while sane or insane, within two years from the date of issue, the Company will pay no more than the sum of the premiums paid, less any indebtedness and the amount of any partial surrenders. If the insured dies by suicide, while sane or insane, within two years from the date any increase in the specified amount, the Company will pay no more than a refund of the monthly charges for the cost of the increased amount. This time period could be less depending on the state of issue. PERFORMANCE DATA Performance data may appear in sales literature or reports to owners or prospective buyers. Past performance cannot guarantee comparable future results. Performance data reflects the time period shown on a rolling monthly basis and is based on Sub-Account level values adjusted for your policy's expenses. Data reflects: o an annual reduction for fund management fees and expenses, and o a policy level mortality and expense charge applied on a daily equivalent basis, but o no deductions for additional policy expenses (i.e., premium loads, administrative fees, and cost of insurance charges), which, if included, would have resulted in lower performance. These charges and deductions can have a significant effect on policy values and benefits. Ask your financial representative for a personalized illustration reflecting these costs. Sub-Account performance figures are historical and include change in share price, reinvestment of dividends and capital gains and are net of the asset management expenses that can be levied against the Sub-Account. The Average Annual Returns in the table below are calculated in two ways, one for Money Market Sub-Account, one for all other Sub-Accounts. Both are according to methods prescribed by the SEC. Money Market Sub-Account: The Average Annual Return is the income generated by an investment in the Money Market Sub-Account over a seven-day period, annualized. The process of annualizing results when the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The Money Market Sub-Account's return is determined by: a) calculating the change in unit value for the base period (the 7-day period ended December 31, of the previous year); then b) dividing this figure by the account value at the beginning of the period; then c) annualizing this result by the factor of 365/7. Other Sub-Accounts: The 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
7 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, 3-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 policy owner's accounts; and (2) there will be a complete redemption upon the anniversary of the 1-year, 3-year, 5-year, or 10-year period in question. In accordance with SEC guidelines, we report Sub-Account performance back to the first date that the fund became available, which could pre-date its inclusion in this product. Where the length of the performance reporting period exceeds the period for which the fund was available, Sub-Account performance will show an "N/A". FINANCIAL STATEMENTS The financial statements of the Separate Account and the consolidated financial statements of the Company follow. 8 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY S-1 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2007, 2006 AND 2005 S-2 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE DATA)
AS OF DECEMBER 31, ------------------- 2007 2006 -------- --------- ASSETS Investments: Available-for-sale securities, at fair value: Fixed maturity (amortized cost: 2007 -- $53,250; 2006 -- $53,846) $ 53,405 $ 54,697 Equity (cost: 2007 -- $132; 2006 -- $205) 134 218 Trading securities 2,533 2,820 Mortgage loans on real estate 7,117 7,344 Real estate 258 409 Policy loans 2,798 2,755 Derivative investments 172 245 Other investments 986 783 -------- -------- Total investments 67,403 69,271 Cash and invested cash 1,395 1,762 Deferred acquisition costs and value of business acquired 8,574 7,609 Premiums and fees receivable 382 331 Accrued investment income 801 838 Reinsurance recoverables 7,939 7,949 Goodwill 3,539 3,514 Other assets 2,030 1,765 Separate account assets 82,263 71,777 -------- -------- Total assets $174,326 $164,816 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Future contract benefits $ 13,619 $ 13,645 Other contract holder funds 58,168 58,718 Short-term debt 173 21 Long-term debt 1,675 1,439 Reinsurance related derivative liability 211 218 Funds withheld reinsurance liabilities 1,862 1,816 Deferred gain on indemnity reinsurance 696 760 Payables for collateral under securities loaned 1,135 1,504 Other liabilities 2,083 2,073 Separate account liabilities 82,263 71,777 -------- -------- Total liabilities 161,885 151,971 -------- -------- CONTINGENCIES AND COMMITMENTS (SEE NOTE 13) STOCKHOLDER'S EQUITY Common stock-- 10,000,000 shares, authorized, issued and outstanding 9,105 9,088 Retained earnings 3,283 3,341 Accumulated other comprehensive income 53 416 -------- -------- Total stockholder's equity 12,441 12,845 -------- -------- Total liabilities and stockholder's equity $174,326 $164,816 ======== ========
See accompanying notes to the Consolidated Financial Statements S-3 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31, --------------------------- 2007 2006 2005 ------- ------- ------- REVENUES Insurance premiums $ 1,560 $ 1,118 $ 67 Insurance fees 2,994 2,439 1,575 Net investment income 4,188 3,869 2,592 Realized loss (112) (2) (16) Amortization of deferred gain on indemnity reinsurance 83 76 77 Other revenues and fees 325 289 316 ------- ------- ------- Total revenues 9,038 7,789 4,611 ------- ------- ------- BENEFITS AND EXPENSES Interest credited 2,398 2,241 1,506 Benefits 2,329 1,757 616 Underwriting, acquisition, insurance and other expenses 2,472 2,086 1,544 Interest and debt expenses 96 84 78 ------- ------- ------- Total benefits and expenses 7,295 6,168 3,744 ------- ------- ------- Income before taxes 1,743 1,621 867 Federal income taxes 504 460 223 ------- ------- ------- Net income $ 1,239 $ 1,161 $ 644 ======= ======= =======
See accompanying notes to the Consolidated Financial Statements S-4 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (IN MILLIONS)
FOR THE YEARS ENDED DECEMBER 31, ----------------------------- 2007 2006 2005 -------- -------- ------- COMMON STOCK Balance at beginning-of-year $ 9,088 $ 2,125 $ 2,106 Lincoln National Corporation purchase price (9) 6,932 -- Stock compensation/issued for benefit plans 26 31 19 -------- -------- ------- Balance at end-of-year 9,105 9,088 2,125 -------- -------- ------- RETAINED EARNINGS Balance at beginning-of-year 3,341 2,748 2,304 Cumulative effect of adoption of SOP 05-1 (41) -- -- Cumulative effect of adoption of FIN 48 (14) -- -- Comprehensive income 876 1,124 315 Less other comprehensive loss, net of tax (363) (37) (329) -------- -------- ------- Net income 1,239 1,161 644 Dividends declared (1,242) (568) (200) -------- -------- ------- Balance at end-of-year 3,283 3,341 2,748 -------- -------- ------- NET UNREALIZED GAIN ON AVAILABLE-FOR-SALE SECURITIES Balance at beginning-of-year 421 452 781 Change during the year (345) (31) (329) -------- -------- ------- Balance at end-of-year 76 421 452 -------- -------- ------- NET UNREALIZED GAIN ON DERIVATIVE INSTRUMENTS Balance at beginning-of-year (9) 7 14 Change during the year (10) (16) (7) -------- -------- ------- Balance at end-of-year (19) (9) 7 -------- -------- ------- MINIMUM PENSION LIABILITY ADJUSTMENT Balance at beginning-of-year -- (6) (13) Change during the year -- 6 7 -------- -------- ------- Balance at end-of-year -- -- (6) -------- -------- ------- FUNDED STATUS OF EMPLOYEE BENEFIT PLANS Balance at beginning-of-year 4 -- -- Change during the year (8) 4 -- -------- -------- ------- Balance at end-of-year (4) 4 -- -------- -------- ------- Total stockholder's equity at end-of-year $ 12,441 $ 12,845 $ 5,326 ======== ======== =======
See accompanying notes to the Consolidated Financial Statements S-5 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)
For the Years Ended December 31, --------------------------- 2007 2006 2005 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,239 $ 1,161 $ 644 Adjustments to reconcile net income to net cash provided by operating activities: Deferred acquisition costs and value of business acquired deferrals and interest, net of amortization (1,101) (722) (430) Change in premiums and fees receivable (53) 16 54 Change in accrued investment income 13 21 (4) Change in contract accruals 574 170 (1,082) Net trading securities purchases, sales and maturities 316 165 (72) Gain on reinsurance embedded derivative/trading securities (2) (4) (5) Change in contract holder funds 453 741 1,893 Change in net periodic benefit accruals (5) (3) (11) Change in amounts recoverable from reinsurers (539) 199 101 Change in federal income tax accruals 310 150 148 Stock-based compensation expense 26 31 19 Depreciation, amortization and accretion, net 64 54 64 Increase in funds withheld liability 46 105 131 Realized loss on investments and derivative instruments 114 6 21 Amortization of deferred gain on indemnity reinsurance (83) (76) (77) Other (71) (706) (601) ------- ------- ------- Net adjustments 62 147 149 ------- ------- ------- Net cash provided by operating activities 1,301 1,308 793 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Available-for-sale securities: Purchases (8,606) (9,323) (5,725) Sales 3,453 5,328 3,767 Maturities 4,087 3,326 2,392 Purchases of other investments (2,018) (696) (1,008) Sales or maturities of other investments 1,880 585 1,151 Increase (decrease) in cash collateral on loaned securities (369) 538 45 Cash acquired from Jefferson-Pilot merger -- 154 -- Other (84) 58 9 ------- ------- ------- Net cash provided by (used in) investing activities (1,657) (30) 631 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Payment of long-term debt -- -- (47) Issuance of long-term debt 375 140 -- Net increase (decrease) in short-term debt 13 (13) 2 Universal life and investment contract deposits 9,481 7,444 4,783 Universal life and investment contract withdrawals (6,645) (6,660) (3,755) Investment contract transfers (2,448) (1,821) (1,483) Dividends paid (787) (568) (200) ------- ------- ------- Net cash used in financing activities (11) (1,478) (700) ------- ------- ------- Net increase (decrease) in cash and invested cash (367) (200) 724 ------- ------- ------- Cash and invested cash at beginning-of-year 1,762 1,962 1,238 ------- ------- ------- Cash and invested cash at end-of-period $ 1,395 $ 1,762 $ 1,962 ======= ======= =======
See accompanying notes to the Consolidated Financial Statements S-6 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Lincoln National Life Insurance Company ("LNL" or the "Company," which also may be referred to as "we," "our" or "us"), a wholly-owned subsidiary of Lincoln National Corporation ("LNC" or the "Parent Company"), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of one insurance company subsidiary, Lincoln Life & Annuity Company of New York ("LLANY"). We also own several non-insurance companies, including Lincoln Financial Distributors ("LFD") and Lincoln Financial Advisors ("LFA"), LNC's wholesaling and retailing business units, respectively. LNL's principal businesses consist of underwriting annuities, deposit-type contracts and life insurance through multiple distribution channels. LNL is licensed and sells its products throughout the United States and several U.S. territories (see Note 20). BASIS OF PRESENTATION The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). On April 3, 2006, LNC completed its merger with Jefferson-Pilot Corporation ("Jefferson-Pilot"). On February 15, 2007, the North Carolina Department of Insurance approved the merger of Jefferson-Pilot Life Insurance Company ("JPL") into LNL with LNL being the survivor and Jefferson Pilot LifeAmerica Insurance Company ("JPLA") into LLANY, with JPLA being the survivor. JPLA then changed its name to LLANY. The effective date of these transactions was April 2, 2007. On May 3, 2007, LNL made a dividend to LNC that transferred ownership of our formerly wholly-owned subsidiary, First Penn-Pacific Life Insurance Company ("FPP"), to LNC. On July 2, 2007, the Nebraska Insurance Department approved the merger of Jefferson Pilot Financial Insurance Company ("JPFIC"), formerly a wholly-owned subsidiary of Jefferson-Pilot, into LNL. Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" ("SFAS 141"), excludes transfers of net assets or exchanges of shares between entities under common control, and notes that certain provisions under Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations," provide a source of guidance for such transactions. In accordance with APB Opinion No. 16, the consolidated financial statements are presented as if on April 3, 2006, LNL completed the merger with JPL, JPLA and JPFIC, and has included the results of operations and financial condition of JPL, JPLA and JPFIC in our consolidated financial statements beginning on April 3, 2006 and all comparative financial statements are restated and presented as if the entities had been previously combined, in a manner similar to a pooling-of-interests. The consolidated financial statements for the period from January 1, 2006 through April 2, 2006 and for the year ended December 31, 2005 exclude the results of operations and financial condition of JPL, JPLA and JPFIC. The consolidated financial statements include the results of operations and financial condition of FPP from January 1, 2007 through May 3, 2007 and for the years ended December 31, 2006 and 2005. FPP's results subsequent to May 3, 2007 are excluded from these consolidated financial statements. The insurance subsidiaries also submit financial statements to insurance industry regulatory authorities. Those financial statements are prepared on the basis of statutory accounting practices ("SAP") and are significantly different from financial statements prepared in accordance with GAAP. See Note 18 for additional discussion on SAP. Certain amounts reported in prior years' consolidated financial statements have been reclassified to conform to the presentation adopted in the current year including a $2.1 billion increase to common stock offset by a decrease to retained earnings for each of the years ended December 31, 2006, 2005, and 2004 to properly classify historical capital contributions received and stock compensation expense incurred. These reclassifications have no effect on net income or stockholder's equity of the prior years. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of LNL and all other entities in which we have a controlling financial interest. All material intercompany accounts and transactions have been eliminated in consolidation. ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are: fair value of certain invested assets and derivatives, asset valuation allowances, deferred policy acquisition costs ("DAC"), goodwill, value of business acquired ("VOBA"), future contract benefits and other contract holder funds, deferred front-end loads ("DFEL"), pension plans, income taxes and the potential effects of resolving litigated matters. BUSINESS COMBINATIONS For all business combination transactions excluding mergers of entities under common control as discussed above initiated after June 30, 2001, the purchase method of accounting has been used, and accordingly, the assets and liabilities of the acquired company have been recorded at their estimated fair values as of the merger date. The fair values are subject to adjustment of the initial allocation for a one-year period as more information relative to the fair values as of the acquisition date becomes available. The consolidated financial statements include the results of operations of any acquired company since the acquisition date. AVAILABLE-FOR-SALE SECURITIES Securities classified as available-for-sale consist of fixed maturity and equity securities and are stated at fair value with unrealized gains and losses included as a separate component of S-7 accumulated other comprehensive income ("OCI"), net of associated DAC, VOBA, other contract holder funds and deferred income taxes. The fair value of actively traded securities is based on quoted market prices from observable market data or estimates from independent pricing services. In cases where this information is not available, such as for privately placed securities, fair value is estimated using an internal pricing matrix. This matrix relies on management's judgment concerning: 1) the discount rate used in calculating expected future cash flows; 2) credit quality; 3) industry sector performance; and 4) expected maturity. Dividends and interest income, recorded in net investment income, are recognized when earned. Amortization of premiums and accretion of discounts on investments in debt securities are reflected in net investment income over the contractual terms of the investments in a manner that produces a constant effective yield. Realized gains and losses on the sale of investments are determined using the specific identification method. LNC regularly reviews available-for-sale securities for impairments in value deemed to be other-than-temporary. The cost basis of securities that are determined to be other-than-temporarily impaired is written down to current fair value with a corresponding charge to realized loss in net income. A write-down for impairment can be recognized for both credit-related events and for change in fair value due to changes in interest rates. Once a security is written down to fair value through net income, any subsequent recovery in value cannot be recognized in net income until the security is sold. However, in the event that the security is written down due to an interest-rate related impairment, the write-down is accreted through investment income over the life of the security. In evaluating whether a decline in value is other-than-temporary, LNC considers several factors including, but not limited to: 1) the severity (generally if greater than 20%) and duration (generally if greater than six months) of the decline; 2) our ability and intent to hold the security for a sufficient period of time to allow for a recovery in value; 3) the cause of the decline; and 4) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer. TRADING SECURITIES Trading securities consist of fixed maturity and equity securities in designated portfolios, which support modified coinsurance ("Modco") and coinsurance with funds withheld ("CFW") reinsurance arrangements. Investment results for these portfolios, including gains and losses from sales, are passed directly to the reinsurers pursuant to contractual terms of the reinsurance arrangements. Trading securities are carried at fair value and changes in fair value, offset by corresponding changes in the fair value of embedded derivative liabilities associated with the underlying reinsurance arrangements, are recorded in net investment income as they occur. For asset-backed and mortgage-backed securities, included in the trading and available-for-sale fixed maturity securities portfolios, we recognize income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When actual prepayments differ significantly from originally anticipated prepayments, the effective yield is recalculated prospectively to reflect actual payments to date plus anticipated future payments. Any adjustments resulting from changes in effective yield are reflected in net investment income. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate are carried at unpaid principal balances adjusted for amortization of premiums and accretion of discounts and are net of valuation allowances. Interest income is accrued on the principal balance of the loan based on the loan's contractual interest rate. Premiums and discounts are amortized using the effective yield method over the life of the loan. Interest income and amortization of premiums and discounts are reported in net investment income along with mortgage loan fees, which are recorded as they are incurred. Loans are considered impaired when it is probable that, based upon current information and events, we will be unable to collect all amounts due under the contractual terms of the loan agreement. When we determine that a loan is impaired, a valuation allowance is established for the excess carrying value of the loan over its estimated value. The loan's estimated value is based on: 1) the present value of expected future cash flows discounted at the loan's effective interest rate; 2) the loan's observable market price; or 3) the fair value of the loan's collateral. Valuation allowances are maintained at a level we believe is adequate to absorb estimated probable credit losses. Our periodic evaluation of the adequacy of the allowance for losses is based on our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. We do not accrue interest on impaired loans and loans 90 days past due and any interest received on these loans is either applied to the principal or recorded in net investment income when received, depending on the assessment of the collectability of the loan. Mortgage loans deemed to be uncollectible are charged against the allowance for losses and subsequent recoveries, if any, are credited to the allowance for losses. All mortgage loans that are impaired have an established allowance for credit losses. Changes in valuation allowances are reported in realized loss on our Consolidated Statements of Income. REAL ESTATE Real estate includes both real estate held for the production of income and real estate held-for-sale. Real estate held for the production of income is carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. We periodically review properties held for the production of income for impairment and properties whose carrying values are greater than their projected undiscounted cash flows are written down to estimated fair value, with impairment losses reported in realized loss on our Consolidated Statements of Income. The estimated fair value of real estate is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. S-8 Real estate classified as held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs at the time classified as held-for-sale. Real estate is not depreciated while it is classified as held-for-sale. Also, valuation allowances for losses are established, as appropriate, for real estate held-for-sale and any changes to the valuation allowances are reported in realized loss on our Consolidated Statements of Income. Real estate acquired through foreclosure proceedings is recorded at fair value at the settlement date. POLICY LOANS Policy loans are carried at unpaid principal balances. SECURITIES LENDING 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. This liability is included within payables for collateral under securities loaned on our Consolidated Balance Sheets. Our pledged securities are included in fixed maturities on our Consolidated Balance Sheets. We generally obtain collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. We value collateral daily and obtain additional collateral when deemed appropriate. The cash received in our securities lending program is typically invested in cash equivalents, short-term investments or fixed maturity securities. Income and expenses associated with these transactions are recorded as investment income and investment expenses within net investment income on our Consolidated Statements of Income. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements are treated as collateralized financing transactions and a liability is recorded equal to the cash collateral received. This liability is included within payables for collateral under securities loaned on our Consolidated Balance Sheets. Our pledged securities are included in fixed maturities on our Consolidated Balance Sheets. We obtain collateral in an amount equal to 95% of the fair value of the securities, and our agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The cash received in our reverse repurchase program is typically invested in fixed maturity securities. Income and expenses associated with these transactions are recorded as investment income and investment expenses within net investment income on our Consolidated Statements of Income. REALIZED LOSS Realized loss includes realized gains and losses from the sale of investments, derivative gains and losses, gains and losses on the sale of subsidiaries and businesses and net gains and losses on reinsurance embedded derivative and trading securities on Modco and CFW reinsurance arrangements. Realized loss is recognized in net income, net of associated amortization of DAC, VOBA, deferred sales inducements ("DSI") and DFEL and changes in other contract holder funds. Realized loss is also net of allocations of investment gains and losses to certain contract holders and certain reinsurance arrangements for which we have a contractual obligation. DERIVATIVE INSTRUMENTS We hedge certain portions of our exposure to interest rate risk, foreign currency exchange risk, equity market risk and credit risk by entering into derivative transactions. All of our derivative instruments are recognized as either assets or liabilities on our Consolidated Balance Sheets at estimated fair value. The accounting for changes in the estimated fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we must designate the hedging instrument based upon the exposure being hedged: as a cash flow hedge, a fair value hedge or a hedge of a net investment in a foreign operation. As of December 31, 2007 and 2006, we had derivative instruments that were designated and qualified as cash flow hedges and fair value hedges. In addition, we had derivative instruments that were economic hedges but were not designated as hedging instruments under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of OCI and reclassified into net income in the same period or periods during which the hedged transaction affects net income. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of designated future cash flows of the hedged item (hedge ineffectiveness), if any, is recognized in net income during the period of change. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in net income during the period of change in estimated fair values. For derivative instruments not designated as hedging instruments but are economic hedges, the gain or loss is recognized in net income during the period of change in the corresponding income statement line as the transaction being hedged. See Note 5 for additional discussion of our derivative instruments. CASH AND CASH EQUIVALENTS Cash and invested cash are carried at cost and include all highly liquid debt instruments purchased with a maturity of three months or less. DAC, VOBA, DSI AND DFEL Commissions and other costs of acquiring universal life insurance, variable universal life insurance, traditional life insurance, annuities and other investment contracts, which vary with and are primarily related to the production of new business, have been deferred (i.e., DAC) to the extent recoverable. The methodology for determining the amortization of DAC varies by product type based on two different accounting pronouncements: SFAS No. 97, "Accounting and Reporting by Insurance S-9 Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments" ("SFAS 97") and SFAS No. 60, "Accounting and Reporting by Insurance Enterprises" ("SFAS 60"). Under SFAS 97, acquisition costs for universal life and variable universal life insurance and investment-type products, which include fixed and variable deferred annuities, are generally amortized over the lives of the policies in relation to the incidence of estimated gross profits ("EGPs") from surrender charges, investment, mortality net of reinsurance ceded and expense margins and actual realized gain or loss on investments. Contract lives for universal and variable universal life policies are estimated to be 30 years, based on the expected lives of the policies. Contract lives for fixed and variable deferred annuities are 14 to 20 years for the traditional, long surrender charge period products and 8 to 10 years for the more recent short-term or no surrender charge variable products. The front-end load annuity product has an assumed life of 25 years. Longer lives are assigned to those blocks that have demonstrated favorable lapse experience. Under SFAS 60, acquisition costs for traditional life insurance products, which include individual whole life, group business and term life insurance contracts, are amortized over periods of 10 to 30 years on either a straight-line basis or as a level percent of premium of the related policies depending on the block of business. There is currently no DAC balance or related amortization under SFAS 60 for fixed and variable payout annuities. For all SFAS 97 and SFAS 60 contracts, amortization is based on assumptions consistent with those used in the development of the underlying contract form adjusted for emerging experience and expected trends. VOBA is an intangible asset that reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the business in-force at the acquisition date. VOBA is amortized over the expected lives of the block of insurance business in relation to the incidence of estimated profits expected to be generated on universal life, variable universal life and investment-type products, (i.e., variable deferred annuities) and over the premium paying period for insurance products, (i.e., traditional life insurance products). Amortization is based upon assumptions used in pricing the acquisition of the block of business and is adjusted for emerging experience. Accordingly, amortization periods and methods of amortization for VOBA vary depending upon the particular characteristics of the underlying blocks of acquired insurance business. VOBA is amortized in a manner consistent with DAC. Both DAC and VOBA amortization is reported within underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income. The carrying amounts of DAC and VOBA are adjusted for the effect of realized gains and losses and the effects of unrealized gains and losses on debt securities classified as available-for-sale. Amortization expense of DAC and VOBA reflects an assumption for an expected level of credit-related investment losses. When actual credit-related investment losses are realized, we recognize a true-up to our DAC and VOBA amortization within realized gains and losses reflecting the incremental impact of actual versus expected credit-related investment losses. These actual to expected amortization adjustments can create volatility period-to-period in net realized gains and losses. Bonus credits and excess interest for dollar cost averaging contracts are considered DSI, and the unamortized balance is reported in other assets on our Consolidated Balance Sheets. DSI is amortized over the expected life of the contract as an expense in interest credited on our Consolidated Statements of Income. Amortization is computed using the same methodology and assumptions used in amortizing DAC. Contract sales charges that are collected in the early years of an insurance contract are deferred (referred to as "DFEL"), and are amortized into income over the life of the contract in a manner consistent with that used for DAC. The deferral and amortization of DFEL is reported within insurance fees on our Consolidated Statements of Income. See Note 2 for discussion of the adoption and impact of Statement of Position ("SOP") 05-1, "Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts" ("SOP 05-1"). On a quarterly basis, LNC may record an adjustment to the amounts included on our Consolidated Balance Sheets for DAC, VOBA, DSI and DFEL with an offsetting benefit or charge to revenues or expenses for the impact of the difference between the estimates of future gross profits used in the prior quarter and the emergence of actual and updated estimates of future gross profits in the current quarter ("retrospective unlocking"). In addition, in the third quarter of each year, LNC conducts an annual comprehensive review of the assumptions and the projection models used for our estimates of future gross profits underlying the amortization of DAC, VOBA, DSI and DFEL and the calculations of the embedded derivatives and reserves for annuity and life insurance products with certain guarantees. These assumptions include investment margins, mortality, retention and rider utilization. Based on LNC's review, the cumulative balances of DAC, VOBA, DSI and DFEL are adjusted with an offsetting benefit or charge to revenues or amortization expense to reflect such change ("prospective unlocking"). The distinction between these two types of unlocking is that retrospective unlocking is driven by the emerging experience period-over-period, while prospective unlocking is driven by changes in assumptions or projection models related to estimated future gross profits. DAC, VOBA, DSI and DFEL are reviewed periodically to ensure that the unamortized portion does not exceed the expected recoverable amounts. No significant impairments occurred during the three years ended December 31, 2007. S-10 REINSURANCE Our insurance companies enter into reinsurance agreements with other companies in the normal course of business. Assets and liabilities and premiums and benefits from certain reinsurance contracts that grant statutory surplus relief to other insurance companies are netted on our Consolidated Balance Sheets and Consolidated Statements of Income, respectively, because there is a right of offset. All other reinsurance agreements are reported on a gross basis on our Consolidated Balance Sheets as an asset for amounts recoverable from reinsurers or as a component of other liabilities for amounts, such as premiums, owed to the reinsurers, with the exception of Modco agreements for which the right of offset also exists. Premiums, benefits and DAC are reported net of insurance ceded. GOODWILL We recognize the excess of the purchase price over the fair value of net assets acquired as goodwill. Goodwill is not amortized, but is reviewed at least annually for indications of value impairment, with consideration given to financial performance and other relevant factors. In addition, certain events, including a significant adverse change in legal factors or the business climate, an adverse action or assessment by a regulator or unanticipated competition, would cause us to review the carrying amounts of goodwill for impairment. When an impairment occurs, the carrying amounts are written down and a charge is recorded against net income using a combination of fair value and discounted cash flows. No impairments occurred during the three years ended December 31, 2007. SPECIFICALLY IDENTIFIABLE INTANGIBLE ASSETS Specifically identifiable intangible assets, net of accumulated amortization are reported in other assets. The carrying values of specifically identifiable intangible assets are reviewed periodically for indicators of impairment in value that are other-than-temporary, including unexpected or adverse changes in the following: 1) the economic or competitive environments in which the company operates; 2) profitability analyses; 3) cash flow analyses; and 4) the fair value of the relevant business operation. If there was an indication of impairment, then the cash flow method would be used to measure the impairment, and the carrying value would be adjusted as necessary. Sales force intangibles are attributable to the value of the distribution system acquired in the Individual Markets - Life Insurance segment. These assets are amortized on a straight-line basis over their useful life of 25 years. PROPERTY AND EQUIPMENT Property and equipment owned for company use is included in other assets on our Consolidated Balance Sheets and is carried at cost less allowances for depreciation. Provisions for depreciation of investment real estate and property and equipment owned for company use are computed principally on the straight-line method over the estimated useful lives of the assets, which include buildings, computer hardware and software and other property and equipment. IMPAIRMENT OF LONG-LIVED ASSETS We periodically review the carrying value of our long-lived assets, including property and equipment, for impairment whenever events or circumstances indicate that the carrying amount of such assets may not be fully recoverable. For long-lived assets to be held and used, impairments are recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. Long-lived assets to be disposed of by abandonment or in an exchange for a similar productive long-lived asset are classified as held-for-use until disposed of. Long-lived assets to be sold are classified as held-for-sale and are no longer depreciated. Certain criteria have to be met in order for the long-lived asset to be classified as held-for-sale, including that a sale is probable and expected to occur within one year. Long-lived assets classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. SEPARATE ACCOUNT ASSETS AND LIABILITIES Separate account assets and liabilities represent segregated funds administered and invested by our insurance subsidiaries for the exclusive benefit of pension and variable life and annuity contract holders. Separate account assets are carried at fair value and the related liabilities are measured at an equivalent amount to the separate account assets. Investment risks associated with market value changes are borne by the contract holders, except to the extent of minimum guarantees made by us with respect to certain accounts. See Note 10 for additional information regarding arrangements with contractual guarantees. The revenues earned by our insurance subsidiaries for administrative and contract holder maintenance services performed for these separate accounts are included in insurance fees on our Consolidated Statements of Income. FUTURE CONTRACT BENEFITS AND OTHER CONTRACT HOLDER FUNDS The liabilities for future contract benefits and claim reserves for universal and variable universal life insurance policies consist of contract account balances that accrue to the benefit of the contract holders, excluding surrender charges. The liabilities for future insurance contract benefits and claim reserves for traditional life policies are computed using assumptions for investment yields, mortality and withdrawals based principally on generally accepted actuarial methods and assumptions at the time of contract issue. Investment yield assumptions for traditional direct individual life reserves for all contracts range from 2.25% to 7.00% depending on the time of contract issue. The investment yield assumptions for immediate and deferred paid-up annuities range from 0.75% to 13.50%. These investment yield assumptions are intended to represent an estimation of the interest rate experience for the period that these contract benefits are payable. S-11 The liabilities for future claim reserves for variable annuity products containing guaranteed minimum death benefit ("GMDB") features are calculated by multiplying the benefit ratio (present value of total expected GMDB payments over the life of the contract divided by the present value of total expected assessments over the life of the contract) by the cumulative assessments recorded from the contract inception through the balance sheet date less the cumulative GMDB payments plus interest. The change in the reserve for a period is the benefit ratio multiplied by the assessments recorded for the period less GMDB claims paid in the period plus interest. If experience or assumption changes result in a new benefit ratio, the reserves are adjusted to reflect the changes in a manner similar to the unlocking of DAC, VOBA, DFEL and DSI. With respect to our future contract benefits and other contract holder funds, we continually review: 1) overall reserve position; 2) reserving techniques; and 3) reinsurance arrangements. As experience develops and new information becomes known, liabilities are adjusted as deemed necessary. The effects of changes in estimates are included in the operating results for the period in which such changes occur. The business written or assumed by us includes participating life insurance contracts, under which the contract holder is entitled to share in the earnings of such contracts via receipt of dividends. The dividend scale for participating policies is reviewed annually and may be adjusted to reflect recent experience and future expectations. As of December 31, 2007 and 2006, participating policies comprised approximately 1.5% and 1.3%, respectively, of the face amount of insurance in force, and dividend expenses were $85 million for the years ended December 31, 2007 and 2006, and $78 million for the year ended December 31, 2005. Universal life and variable universal life products with secondary guarantees represented approximately 32% and 34% of permanent life insurance in force as of December 31, 2007 and 2006, respectively, and approximately 73% and 77% of sales for these products for the years ended December 31, 2007 and 2006, respectively. Liabilities for the secondary guarantees on universal life-type products are calculated by multiplying the benefit ratio (present value of total expected secondary guarantee benefits over the life of the contract divided by the present value of total expected assessments over the life of the contract) by the cumulative assessments recorded from contract inception through the balance sheet date less the cumulative secondary guarantee benefit payments plus interest. If experience or assumption changes result in a new benefit ratio, the reserves are adjusted to reflect the changes in a manner similar to the unlocking of DAC, VOBA, DFEL and DSI. The accounting for secondary guarantee benefits impacts, and is impacted by, EGPs used to calculate amortization of DAC, VOBA, DFEL and DSI. BORROWED FUNDS LNL's short-term borrowings are defined as borrowings with contractual or expected maturities of one year or less. Long-term borrowings have contractual or expected maturities greater than one year. Any premium or discount on borrowed funds is amortized over the term of the borrowings. COMMITMENTS AND CONTINGENCIES Contingencies arising from environmental remediation costs, regulatory judgments, claims, assessments, guarantees, litigation, recourse reserves, fines, penalties and other sources are recorded when deemed probable and reasonably estimable. PREMIUMS AND FEES ON INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS Investment products consist primarily of individual and group variable and fixed deferred annuities. Interest-sensitive life insurance products include universal life insurance, variable universal life insurance and other interest-sensitive life insurance policies. These products include life insurance sold to individuals, corporate-owned life insurance and bank-owned life insurance. Revenues for investment products and universal life insurance products consist of net investment income, asset-based fees, cost of insurance charges, percent of premium charges, contract administration charges and surrender charges that have been assessed and earned against contract account balances and premiums received during the period. The timing of revenue recognition as it relates to fees assessed on investment contracts is determined based on the nature of such fees. Asset based fees cost of insurance and contract administration charges are assessed on a daily or monthly basis and recognized as revenue when assessed and earned. Percent of premium charges are assessed at the time of premium payment and recognized as revenue when assessed and earned. Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are recognized upon surrender of a contract by the contract holder in accordance with contractual terms. PREMIUMS ON TRADITIONAL LIFE INSURANCE PRODUCTS Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies. Premiums for traditional life insurance products are recognized as revenue when due from the contract holder. OTHER REVENUES AND FEES Other revenues and fees primarily consist of amounts earned by our retail distributor, LFA, from sales of third party insurance and investment products. Such revenue is recorded as earned at the time of sale. BENEFITS Benefits for universal life and other interest-sensitive life insurance products include benefit claims incurred during the period in excess of contract account balances. Benefits also includes the change in reserves for life insurance products with secondary guarantee benefits and annuity products with guaranteed benefits, such as GMDB, and the change in fair values of guarantees for annuity products with guaranteed minimum S-12 withdrawal benefits ("GMWB") and guaranteed income benefits ("GIB"). For traditional life, group health and disability income products, benefits and expenses, other than DAC and VOBA, are recognized when incurred in a manner consistent with the related premium recognition policies. INTEREST CREDITED Interest credited includes interest credited to contract holder account balances. Interest crediting rates associated with funds invested in our general account during 2005 through 2007 ranged from 3.00% to 9.00%. INTEREST AND DEBT EXPENSES Interest and debt expenses includes interest on short-term commercial paper, long-term senior debt that we issue and junior subordinated debentures issued to affiliated trusts. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Pursuant to the accounting rules for LNC's obligations to employees under LNC's various pension and other postretirement benefit plans, LNC is required to make a number of assumptions to estimate related liabilities and expenses. LNC uses assumptions for the weighted-average discount rate and expected return on plan assets. The discount rate assumptions are determined using an analysis of current market information and the projected benefit flows associated with these plans. The expected long-term rate of return on plan assets is initially established at the beginning of the plan year based on historical and projected future rates of return and is the average rate of earnings expected on the funds invested or to be invested in the plan. The calculation of our accumulated postretirement benefit obligation also uses an assumption of weighted-average annual rate of increase in the per capita cost of covered benefits, which reflects a health care cost trend rate. See Note 16 for more information on our accounting for employee benefit plans. STOCK-BASED COMPENSATION LNC expenses the fair value of stock awards included in LNC's incentive compensation plans. As of the date LNC's Board of Directors approves stock awards, the fair value of stock options is determined using a Black-Scholes options valuation methodology. The fair value of other stock awards is based upon the market value of the stock. The fair value of the awards is expensed over the service period, which generally corresponds to the vesting period, and is recognized as an increase to common stock in stockholder's equity. Stock-based compensation expense is reflected in underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income. For additional information on stock-based incentive compensation see Note 17. INCOME TAXES We and our 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, we provide for income taxes on a separate return filing basis. The tax sharing agreement also provides that we 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. Deferred income taxes are recognized, based on enacted rates, when assets and liabilities have different values for financial statement and tax reporting purposes. A valuation allowance is recorded to the extent required to reduce the deferred tax asset to an amount that we expect, more likely than not, will be realized. See Note 6 for additional information. - -------------------------------------------------------------------------------- 2. NEW ACCOUNTING STANDARDS ADOPTION OF NEW ACCOUNTING STANDARDS SOP 05-1 -- ACCOUNTING BY INSURANCE ENTERPRISES FOR DEFERRED ACQUISITION COSTS IN CONNECTION WITH MODIFICATIONS OR EXCHANGES OF INSURANCE CONTRACTS In September 2005, the American Institute of Certified Public Accountants issued SOP 05-1, which provides guidance on accounting for DAC on internal replacements of insurance and investment contracts other than those specifically described in SFAS 97. An internal replacement, defined by SOP 05-1, is a modification in product benefits, features, rights or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement or rider to a contract, or by the election of a feature or coverage within a contract. Contract modifications that result in a substantially unchanged contract will be accounted for as a continuation of the replaced contract. Contract modifications that result in a substantially changed contract should be accounted for as an extinguishment of the replaced contract. Unamortized DAC, VOBA, DFEL and DSI from the replaced contract must be written-off. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. We adopted SOP 05-1 effective January 1, 2007 by recording decreases to the following categories (in millions) on our Consolidated Balance Sheets: ASSETS DAC $31 VOBA 35 Other assets -- DSI 3 --- Total assets $69 === LIABILITIES AND STOCKHOLDER'S EQUITY Future contract benefits -- GMDB annuity reserves $ 4 Other contract holder funds -- DFEL 2 Other liabilities -- income tax liabilities 22 --- Total liabilities 28 --- Retained earnings 41 --- Total liabilities and stockholder's equity $69 ===
The adoption of this new guidance primarily impacted our Individual Markets -- Annuities and Employer Markets -- Group Protection businesses and our accounting policies regarding the assumptions for lapsation used in the amortization of DAC S-13 and VOBA. In addition, the adoption of SOP 05-1 resulted in an approximately $17 million increase to underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income for the year ended December 31, 2007, which was attributable to changes in DAC and VOBA deferrals and amortization. FASB INTERPRETATION NO. 48 -- ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES -- AN INTERPRETATION OF FASB STATEMENT NO. 109 In June 2006, the FASB issued FASB Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. FIN 48 requires companies to determine whether it is "more likely than not" that an individual tax position will be sustained upon examination by the appropriate taxing authority prior to any part of the benefit being recognized in the financial statements. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that is greater than fifty percent likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. In addition, FIN 48 expands disclosure requirements to include additional information related to unrecognized tax benefits, including accrued interest and penalties, and uncertain tax positions where the estimate of the tax benefit may change significantly in the next twelve months. FIN 48 is effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 effective January 1, 2007 by recording an increase in the liability for unrecognized tax benefits of $14 million on our Consolidated Balance Sheets, offset by a reduction to the beginning balance of retained earnings. See Note 6 for more information regarding our adoption of FIN 48. SFAS NO. 155 -- ACCOUNTING FOR CERTAIN HYBRID FINANCIAL INSTRUMENTS -- AN AMENDMENT OF FASB STATEMENTS NO. 133 AND 140 In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140" ("SFAS 155"), which permits fair value remeasurement for a hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. Under SFAS 155, an entity may make an irrevocable election to measure a hybrid financial instrument at fair value, in its entirety, with changes in fair value recognized in earnings. SFAS 155 also: (a) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (b) eliminates the interim guidance in SFAS 133 Implementation Issue No. D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets," and establishes a requirement to evaluate beneficial interests in securitized financial assets to identify interests that are either freestanding derivatives or hybrid financial instruments that contain an embedded derivative requiring bifurcation; (c) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (d) eliminates restrictions on a qualifying special-purpose entity's ability to hold passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial instrument. In December 2006, the FASB issued Derivative Implementation Group ("DIG") Statement 133 Implementation Issue No. B40, "Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets" ("DIG B40"). Since SFAS 155 eliminated the interim guidance related to securitized financial assets, DIG B40 provides a narrow scope exception for securitized interests that contain only an embedded derivative related to prepayment risk. Under DIG B40, a securitized interest in prepayable financial assets would not be subject to bifurcation if: (a) the right to accelerate the settlement of the securitized interest cannot be controlled by the investor and (b) the securitized interest itself does not contain an embedded derivative for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. Any other terms in the securitized financial asset that may affect cash flow in a manner similar to a derivative instrument would be subject to the requirements of paragraph 13(b) of SFAS 133. The guidance in DIG B40 is to be applied upon the adoption of SFAS 155. We adopted the provisions of SFAS 155 and DIG B40 on January 1, 2007. Prior period restatement was not permitted. The adoption of SFAS 155 did not have a material impact on our financial condition or results of operations. SFAS NO. 158 -- EMPLOYERS' ACCOUNTING FOR DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS -- AN AMENDMENT OF FASB STATEMENTS NO. 87, 88, 106 AND 132(R) In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS 158"). The guidance requires us to recognize on the balance sheets the funded status of our defined benefit postretirement plans as either an asset or liability, depending on the plans' funded status, with changes in the funded status recognized through OCI. The funded status is measured as the difference between the fair value of the plan assets and the projected benefit obligation, for pension plans, or the accumulated postretirement benefit obligation for postretirement benefit plans. Prior service costs or credits and net gains or losses which are not recognized in current net periodic benefit cost, pursuant to SFAS No. 87, "Employers' Accounting for Pensions" or SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," must be recognized in OCI, net of tax, in the period in which they occur. As these items are recognized in net periodic benefit cost, the amounts accumulated in OCI are adjusted. Under SFAS 158, disclosure requirements have also been expanded to separately provide information on the prior service costs or credits and net gains and losses recognized in OCI and their effects on net periodic benefit costs. Retroactive application of SFAS 158 was not permitted. We applied the recognition provisions of SFAS 158 as of December 31, 2006 by recording an increase in the asset of $38 million and an increase in the S-14 liability of $34 million, offset by an increase in accumulated OCI of $4 million. STAFF ACCOUNTING BULLETIN NO. 108 -- CONSIDERING THE EFFECTS OF PRIOR YEAR MISSTATEMENTS WHEN QUANTIFYING MISSTATEMENTS IN CURRENT YEAR FINANCIAL STATEMENTS In September 2006, the U.S. Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"). SAB 108 provides guidance for evaluating the effects of prior year uncorrected errors when quantifying misstatements in the current year financial statements. Under SAB 108, the impact of correcting misstatements occurring in the current period and those that have accumulated over prior periods must both be considered when quantifying the impact of misstatements in current period financial statements. SAB 108 is effective for fiscal years ending after November 15, 2006, and may be adopted by either restating prior financial statements or recording the cumulative effect of initially applying the approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006, with an offsetting adjustment to retained earnings. We adopted the provisions of SAB 108 as of December 31, 2006. The adoption of SAB 108 did not have a material effect on our financial statements. SFAS NO. 123(R) -- SHARE-BASED PAYMENT In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"), which is a revision of SFAS No. 123, "Accounting for Stock-based Compensation" ("SFAS 123"). SFAS 123(R) requires us to recognize at fair value all costs resulting from share-based payments to employees, except for equity instruments held by employee share ownership plans. Similar to SFAS 123, under SFAS 123(R), the fair value of share-based payments is recognized as a reduction to earnings over the period an employee is required to provide service in exchange for the award. We had previously adopted the retroactive restatement method under SFAS No. 148, "Accounting for Stock-based Compensation - -Transition and Disclosure," and restated all periods presented to reflect stock-based employee compensation cost under the fair value accounting method for all employee awards granted, modified or settled in fiscal years beginning after December 15, 1994. Effective January 1, 2006, we adopted SFAS 123(R), using the modified prospective transition method. Under that transition method, compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments granted prior to but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). Results from prior periods have not been restated. The adoption of SFAS 123(R) did not have a material effect on our income before federal income taxes and net income. SFAS 123(R) eliminates the alternative under SFAS 123 permitting the recognition of forfeitures as they occur. Expected forfeitures, resulting from the failure to satisfy service or performance conditions, must be estimated at the grant date, thereby recognizing compensation expense only for those awards expected to vest. In accordance with SFAS 123(R), we have included estimated forfeitures in the determination of compensation costs for all share-based payments. Estimates of expected forfeitures must be reevaluated at each balance sheet date, and any change in the estimates will be recognized retrospectively in net income in the period of the revised estimates. Prior to the adoption of SFAS 123(R), we presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows on our Statements of Cash Flows. SFAS 123(R) requires the cash flows from tax benefits resulting from tax deductions in excess of the compensation costs recognized to be classified as financing cash flows. Our excess tax benefits are classified as financing cash flows, prospectively, on our Statements of Cash Flows for the years ended December 31, 2007 and 2006. We issue share-based compensation awards under an authorized plan, subject to specific vesting conditions. Generally, compensation expense is recognized ratably over a three-year vesting period, but recognition may be accelerated upon the occurrence of certain events. For awards that specify an employee will vest upon retirement and an employee is eligible to retire before the end of the normal vesting period, we record compensation expense over the period from the grant date to the date of retirement eligibility. As a result of adopting SFAS 123(R), we have revised the prior method of recording unrecognized compensation expense upon retirement and use the non-substantive vesting period approach for all new share-based awards granted after January 1, 2006. Under the non-substantive vesting period approach, we recognize compensation cost immediately for awards granted to retirement-eligible employees, or ratably over a period from the grant date to the date retirement eligibility is achieved. If we would have applied the non-substantive vesting period approach to all share based compensation awards granted prior to January 1, 2006, it would not have a material effect on our results of operations or financial position. See Note 17 for more information regarding our stock-based compensation plans. FASB STAFF POSITION SFAS 115-1 AND SFAS 124-1 -- THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS In November 2005, the FASB issued FASB Staff Position ("FSP") Nos. SFAS 115-1 and SFAS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" ("FSP 115-1"). The guidance in FSP 115-1 nullifies the accounting and measurement provisions of Emerging Issues Task Force ("EITF") No. 03-1 - "The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments" and supersedes EITF Topic No. D-44 "Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value." S-15 FSP 115-1 was effective for reporting periods beginning after December 15, 2005, on a prospective basis. Our existing policy for recognizing other-than-temporary impairments is consistent with the guidance in FSP 115-1, and includes the recognition of other-than-temporary impairments of securities resulting from credit related issues as well as declines in fair value related to rising interest rates, where we do not have the intent to hold the securities until either maturity or recovery. We adopted FSP 115-1 effective January 1, 2006. The adoption of FSP 115-1 did not have a material effect on our financial condition or results of operations. FUTURE ADOPTION OF NEW ACCOUNTING STANDARDS SFAS NO. 157 -- FAIR VALUE MEASUREMENTS In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"), which defines fair value, establishes a framework for measuring fair value under current accounting pronouncements that require or permit fair value measurement and enhances disclosures about fair value instruments. SFAS 157 retains the exchange price notion, but clarifies that exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (exit price) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability, as opposed to the price that would be paid to acquire the asset or receive a liability (entry price). Fair value measurement is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset, or nonperformance risk which would include the reporting entity's own credit risk. SFAS 157 establishes a three-level fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. The highest priority, Level 1, is given to quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability. Level 3 inputs, the lowest priority, include unobservable inputs in situations where there is little or no market activity for the asset or liability and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability, including assumptions regarding risk. We have certain guaranteed benefit features that, prior to January 1, 2008, were recorded using fair value pricing. These benefits will continue to be measured on a fair value basis with the adoption of SFAS 157, utilizing a number for Level 3, with some Level 2 inputs, which are reflective of the hypothetical market participant perspective for fair value measurement. In addition, SFAS 157 expands the disclosure requirements for annual and interim reporting to focus on the inputs used to measure fair value, including those measurements using significant unobservable inputs, and the effects of the measurements on earnings. We adopted SFAS 157 for all of our financial instruments effective January 1, 2008 and expect to record a charge of between $25 million and $75 million to net income attributable to changes in the fair value of guaranteed benefit reserves and indexed annuities reported in our Individual Markets - Annuities segment. SFAS NO. 159 -- THE FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which allows an entity to make an irrevocable election, on specific election dates, to measure eligible items at fair value. The election to measure an item at fair value may be determined on an instrument by instrument basis, with certain exceptions. If the fair value option is elected, unrealized gains and losses will be recognized in earnings at each subsequent reporting date, and any upfront costs and fees related to the item will be recognized in earnings as incurred. In addition, the presentation and disclosure requirements of SFAS 159 are designed to assist in the comparison between entities that select different measurement attributes for similar types of assets and liabilities. SFAS 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS 157. At the effective date, the fair value option may be elected for eligible items that exist on that date. Effective January 1, 2008, we elected not to adopt the fair value option for any financial assets or liabilities that existed as of January 1, 2008. SFAS NO. 141(R) -- BUSINESS COMBINATIONS In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations" ("SFAS 141(R)") - a revision to SFAS 141, which aims to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS 141(R) retains the fundamental requirements of SFAS 141, broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things, that assets acquired and liabilities assumed be measured at fair value as of the acquisition date, liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period, acquisition-related costs be expensed as incurred and that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred. SFAS 141(R) applies to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period on or after December 15, 2008. SFAS NO. 160 -- NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS -- AN AMENDMENT OF ACCOUNTING RESEARCH BULLETIN NO. 51 In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of Accounting Research Bulletin No. 51A" ("SFAS 160"), which aims to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards surrounding noncontrolling interests, or minority interests, which are the portions of equity in a subsidiary not attributable, directly or indirectly, to a parent. The ownership interests in S-16 subsidiaries held by parties other than the parent shall be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent's equity. The amount of consolidated net income attributable to the parent and to the noncontrolling interest must be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary must be accounted for consistently as equity transactions. A parent's ownership interest in a subsidiary changes if the parent purchases additional ownership interests in its subsidiary or sells some of its ownership interests in its subsidiary and if the subsidiary reacquires some of its ownership interests or issues additional ownership interests. When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary must be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than the carrying amount of that retained investment. Entities must provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We expect to adopt SFAS 160 effective January 1, 2009, and are currently evaluating the effects of SFAS 160 on our consolidated financial condition and results of operations. DERIVATIVE IMPLEMENTATION GROUP STATEMENT 133 IMPLEMENTATION ISSUE NO. E23 -- ISSUES INVOLVING THE APPLICATION OF THE SHORTCUT METHOD UNDER PARAGRAPH 68 In December 2007, the FASB issued DIG Statement 133 Implementation Issue No. E23, "Issues Involving the Application of the Shortcut Method under Paragraph 68" ("DIG E23"), which gives clarification to the application of the shortcut method of accounting for qualifying fair value hedging relationship involving an interest-bearing financial instrument and/or an interest rate swap, originally outlined in paragraph 68 in SFAS 133. DIG E23 clarifies that the shortcut method may be applied to a qualifying fair value hedge when the relationship is designated on the trade date of both the swap and the hedged item (for example, debt), even though the hedged item is not recognized for accounting purposes until the transaction settles (that is, until its settlement date), provided that the period of time between the trade date and the settlement date of the hedged item is within established conventions for that marketplace. DIG E23 also clarifies that Paragraph 68(b) is met for an interest rate swap that has a non-zero fair value at the inception of the hedging relationship provided that the swap was entered into at the hedge's inception for a transaction price of zero and the non-zero fair value is due solely to the existence of a bid-ask spread in the entity's principal market (or most advantageous market, as applicable) under SFAS 157. The interest rate swap would be reported at its fair value as determined under SFAS 157. DIG E23 is effective for hedging relationships designated on or after January 1, 2008. The adoption of DIG E23 is not expected to have a material impact on our consolidated financial condition or results of operations. FSP FAS140-3 -- ACCOUNTING FOR TRANSFERS OF FINANCIAL ASSETS AND REPURCHASE FINANCING TRANSACTIONS In February 2008, the FASB issued FSP No. FAS 140-3, "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions" ("FSP 140-3"). The guidance in FSP 140-3 provides accounting and reporting standards for transfers of financial assets. This FSP applies to a repurchase financing, which is a repurchase agreement that relates to a previously transferred financial asset between the same counterparties (or consolidated affiliates of either counterparty), that is entered into contemporaneously with, or in contemplation of, the initial transfer. FSP 140-3 shall be effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years and shall be applied prospectively to initial transfers and repurchase financings for which the initial transfer is executed on or after the beginning of the fiscal year in which FSP 140-3 is initially applied. We are evaluating the expected effect on our consolidated financial condition and results of operations. - -------------------------------------------------------------------------------- 3. ACQUISITION AND DIVIDEND OF FPP JEFFERSON-PILOT MERGER On April 3, 2006, LNC completed its merger with Jefferson-Pilot by acquiring 100% of the outstanding shares of Jefferson-Pilot in a transaction accounted for under the purchase method of accounting prescribed by SFAS 141. At that time, JPL, JPLA and JPFIC became wholly-owned by LNC. SFAS 141 requires that the total purchase price be allocated to the assets acquired and liabilities assumed based on their fair values at the merger date. The associated fair values of JPL, JPLA and JPFIC at April 3, 2006 were "pushed down" to LNL's consolidated financial statements in accordance with push down accounting rules. The fair value of the specifically identifiable net assets acquired in the merger was $4.3 billion. Goodwill of $2.6 billion resulted from the excess of purchase price over the fair value of the net assets. The amount of goodwill that was expected to be deductible for tax purposes was approximately $23 million. LNC paid a premium over the fair value of the net assets for a number of potential strategic and financial benefits that are expected to be realized as a result of the merger including, but not limited to, the following: - - Greater size and scale with improved earnings diversification and strong financial flexibility; - - Broader, more balanced product portfolio; - - Larger distribution organization; and - - Value creation opportunities through expense savings and revenue enhancements across business units. S-17 The following table summarizes the fair values of the net assets acquired (in millions) as of the acquisition date:
FAIR VALUE ---------- Investments $ 27,384 Reinsurance recoverables 1,193 Value of business acquired 2,489 Goodwill 2,622 Other assets 1,135 Separate account assets 2,574 Future contract benefits and other contract holder funds (26,677) Income tax liabilities (382) Accounts payable, accruals and other liabilities (841) Separate accounts liabilities (2,574) ---------- Total purchase price $ 6,923 ==========
The goodwill (in millions) resulting from the merger was allocated to the following segments:
GOODWILL -------- Individual Markets: Life Insurance $ 1,346 Annuities 1,002 -------- Total Individual Markets 2,348 Employer Markets: Group Protection 274 -------- Total goodwill $ 2,622 ========
DIVIDEND OF FPP On May 3, 2007, LNL made a dividend to LNC that transferred ownership of our formerly wholly-owned subsidiary, FPP, to LNC. The following table summarizes the dividend of FPP to LNC (in millions):
DIVIDENDED VALUE ---------- Investments $ 1,809 Cash and invested cash 20 Deferred acquisition costs and value of business acquired 246 Premiums and fees receivable 2 Accrued investment income 24 Reinsurance recoverables 669 Goodwill 2 Future contract benefits (705) Other contract holder funds (1,509) Other liabilities (66) ---------- Total dividend of FPP $ 492 ==========
The caption dividends declared, in the accompanying Consolidated Statements of Stockholder's Equity, includes the $492 million dividend of FPP presented above. 4. INVESTMENTS AVAILABLE-FOR-SALE SECURITIES The amortized cost, gross unrealized gains and losses and fair value of available-for-sale securities (in millions) were as follows:
AS OF DECEMBER 31, 2007 ---------------------------------------- GROSS UNREALIZED AMORTIZED ---------------- FAIR COST GAINS LOSSES VALUE --------- ----- ------ ------- Corporate bonds $ 42,041 $1,049 $ 904 $42,186 U.S. Government bonds 153 14 -- 167 Foreign government bonds 586 39 4 621 Asset and mortgage-backed securities 10,224 146 195 10,175 State and municipal bonds 143 2 -- 145 Redeemable preferred stocks 103 9 1 111 --------- ----- ------ ------- Total fixed maturity securities 53,250 1,259 1,104 53,405 Equity securities 132 9 7 134 --------- ----- ------ ------- Total available-for-sale securities $ 53,382 $1,268 $1,111 $53,539 ========= ====== ====== =======
S-18
AS OF DECEMBER 31, 2006 ---------------------------------------- GROSS UNREALIZED AMORTIZED ---------------- FAIR COST GAINS LOSSES VALUE --------- ------ ------ ------- Corporate bonds $ 44,049 $1,043 $ 283 $44,809 U.S. Government bonds 218 7 -- 225 Foreign government bonds 689 58 2 745 Asset and mortgage-backed securities 8,607 88 69 8,626 State and municipal bonds 194 2 2 194 Redeemable preferred stocks 89 9 -- 98 --------- ------ ------ ------- Total fixed maturity securities 53,846 1,207 356 54,697 Equity securities 205 15 2 218 --------- ------ ------ ------- Total available-for-sale securities $ 54,051 $1,222 $ 358 $54,915 ========= ====== ====== =======
The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities (in millions) were as follows:
AS OF DECEMBER 31, 2007 ------------------------ AMORTIZED FAIR COST VALUE --------- ------- Due in one year or less $ 2,261 $ 2,267 Due after one year through five years 11,217 11,489 Due after five years through ten years 15,437 15,315 Due after ten years 14,111 14,159 --------- ------- Subtotal 43,026 43,230 Asset and mortgage-backed securities 10,224 10,175 --------- ------- Total available-for-sale fixed maturity securities $ 53,250 $53,405 ========= =======
Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations. The fair value and gross unrealized losses of available-for-sale securities (in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
AS OF DECEMBER 31, 2007 ----------------------------------------------------------- LESS THAN OR EQUAL TO GREATER THAN TWELVE MONTHS TWELVE MONTHS TOTAL ------------------- ------------------ ------------------- GROSS GROSS GROSS FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES ------- ---------- ------ ---------- ------- ---------- Corporate bonds $11,038 $ 657 $4,142 $ 247 $15,180 $ 904 U.S. Government bonds -- -- 3 -- 3 -- Foreign government bonds 81 4 -- -- 81 4 Asset and mortgage-backed securities 2,194 142 1,793 53 3,987 195 State and municipal bonds 29 -- 15 -- 44 -- Redeemable preferred stocks 13 1 -- -- 13 1 ------- ---------- ------ ---------- ------- ---------- Total fixed maturity securities 13,355 804 5,953 300 19,308 1,104 Equity securities 61 7 -- -- 61 7 ------- ---------- ------ ---------- ------- ---------- Total available-for-sale securities $13,416 $ 811 $5,953 $ 300 $19,369 $ 1,111 ======= ========== ====== ========== ======= ========== Total number of securities in an unrealized loss position 2,263 ==========
S-19
AS OF DECEMBER 31, 2006 ------------------------------------------------------------ LESS THAN OR EQUAL TO GREATER THAN TWELVE MONTHS TWELVE MONTHS TOTAL ------------------- ------------------ ------------------- GROSS GROSS GROSS FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES ------- ---------- ------ ---------- ------- ---------- Corporate bonds $ 8,643 $ 115 $4,892 $ 168 $13,535 $ 283 U.S. Government bonds 43 -- -- -- 43 -- Foreign government bonds 56 1 62 1 118 2 Asset and mortgage-backed securities 1,911 13 2,227 56 4,138 69 State and municipal bonds 20 1 44 1 64 2 Redeemable preferred stocks -- -- 1 -- 1 -- ------- ---------- ------ ---------- ------- ---------- Total fixed maturity securities 10,673 130 7,226 226 17,899 356 Equity securities 50 2 -- -- 50 2 ------- ---------- ------ ---------- ------- ---------- Total available-for-sale securities $10,723 $ 132 $7,226 $ 226 $17,949 $ 358 ======= ========== ====== ========== ======= ========== Total number of securities in an unrealized loss position 1,451 ==========
The fair value, gross unrealized losses (in millions) and number of available-for-sale securities, where the fair value had declined below amortized cost by greater than 20%, were as follows:
AS OF DECEMBER 31, 2007 ------------------------------ GROSS NUMBER FAIR UNREALIZED OF VALUE LOSSES SECURITIES ------ ---------- ---------- Less than six months $ 133 $ 48 22 Six months or greater, but less than nine months 425 137 30 Nine months or greater, but less than twelve months 363 109 17 Twelve months or greater 182 79 57 ------ ---------- ---------- Total available-for-sale securities $1,103 $ 373 126 ====== ========== ==========
AS OF DECEMBER 31, 2006 ------------------------------ GROSS NUMBER FAIR UNREALIZED OF VALUE LOSSES SECURITIES ------ ---------- ---------- Less than six months $ -- $ -- $ 5 Six months or greater, but less than nine months -- -- 2 Nine months or greater, but less than twelve months -- -- 1 Twelve months or greater 9 3 12 ----- ---------- ---------- Total available-for-sale securities $ 9 $ 3 20 ===== ========== ==========
As described more fully in Note 1, LNC regularly reviews our investment holdings for other-than-temporary impairments. Based upon this review, the cause of the decline being principally attributable to changes in interest rates and credit spreads during the holding period and our current ability and intent to hold securities in an unrealized loss position for a period of time sufficient for recovery, LNC believes that these securities were not other-than-temporarily impaired as of December 31, 2007 and 2006. TRADING SECURITIES Trading securities at fair value retained in connection with Modco and CFW reinsurance arrangements (in millions) consisted of the following:
AS OF DECEMBER 31, -------------------- 2007 2006 ------ ------ Corporate bonds $1,817 $2,140 U.S. Government bonds 366 331 Foreign government bonds 45 45 Asset and mortgage-backed securities: Mortgage pass-through securities 21 24 Collateralized mortgage obligations 153 111 Commercial mortgage-backed securities 104 133 Other asset-backed securities -- 8 State and municipal bonds 17 18 Redeemable preferred stocks 8 8 ------ ------ Total fixed maturity securities 2,531 2,818 Equity securities 2 2 ------ ------ Total trading securities $2,533 $2,820 ====== ======
The portion of market adjustment for trading securities still held at December 31, 2007, 2006 and 2005 was a loss of $8 million, $48 million and $70 million, respectively. MORTGAGE LOANS ON REAL ESTATE Mortgage loans on real estate principally involve commercial real estate. The commercial loans are geographically diversified throughout the United States, with the largest concentrations in California and Texas, which accounted for approximately 29% of mortgage loans as of December 31, 2007. S-20 NET INVESTMENT INCOME The major categories of net investment income (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, ---------------------- 2007 2006 2005 ------ ------ ------ Available-for-sale fixed maturity securities $3,264 $2,979 $1,959 Available-for-sale equity securities 19 11 7 Trading securities 163 181 176 Mortgage loans on real estate 491 466 288 Real estate 53 37 48 Policy loans 172 158 118 Invested cash 49 53 46 Other investments 155 147 61 ------ ------ ------ Investment income 4,366 4,032 2,703 Less investment expense 178 163 111 ------ ------ ------ Net investment income $4,188 $3,869 $2,592 ====== ====== ======
REALIZED LOSS The detail of the realized loss (in millions) was as follows:
FOR THE YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- Available-for-sale fixed maturity securities: Gross gains $ 120 $ 119 $ 111 Gross losses (176) (97) (89) Available-for-sale equity securities: Gross gains 3 2 10 Gross losses (111) -- -- Gain on other investments 22 5 1 Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds 29 (37) (53) ----- ----- ----- Total realized loss on investments, excluding trading securities (113) (8) (20) Loss on derivative instruments, excluding reinsurance embedded derivatives (2) 2 (2) Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds 1 -- 1 ----- ----- ----- Total realized loss on investments and derivative instruments (114) (6) (21) Gain on reinsurance embedded derivative/trading securities 2 4 5 ----- ----- ----- Total realized loss $(112) $ (2) $ (16) ===== ===== ===== Write-downs for other-than-temporary impairments included in realized loss on investments above $(257) $ (62) $ (18) ===== ===== =====
SECURITIES LENDING The carrying values of the securities pledged under securities lending agreements were $655 million and $1.0 billion as of December 31, 2007 and 2006. The fair values of these securities were $634 million and $989 million as of December 31, 2007 and 2006, respectively. REVERSE REPURCHASE AGREEMENTS The carrying values of securities pledged under reverse repurchase agreements were $480 million as of December 31, 2007 and 2006. The fair values of these securities were $502 million and $500 million as of December 31, 2007 and 2006, respectively. INVESTMENT COMMITMENTS As of December 31, 2007, our investment commitments for fixed maturity securities, limited partnerships, real estate and mortgage loans on real estate were $1.2 billion, which includes $281 million of standby commitments to purchase real estate upon completion and leasing. CONCENTRATIONS OF FINANCIAL INSTRUMENTS As of December 31, 2007 and 2006, we did not have a significant concentration of financial instruments in a single investee, industry or geographic region of the U.S. CREDIT-LINKED NOTES As of December 31, 2007 and 2006, other contract holder funds on our Consolidated Balance Sheets included $1.2 billion and $700 million, respectively, outstanding in funding agreements. We invested the proceeds of $850 million received for issuing three funding agreements in 2006 and 2007 into three separate credit-linked notes originated by third party companies and $300 million of such agreements were assumed as a result of the merger of Jefferson-Pilot into LNL. The $850 million of credit-linked notes are classified as asset-backed securities and are included in our fixed maturity securities on our Consolidated Balance Sheets. The $300 million of investments which were assumed as a result of the merger were classified as corporate bonds and are included in our fixed maturity securities on our Consolidated Balance Sheets. We earn a spread between the coupon received on the credit-linked note and the interest credited on the funding agreement. Our credit linked notes were created using a trust that combines highly rated assets with credit default swaps to produce a multi-class structured security. The asset backing two of these credit-linked notes is a mid-AA rated asset-backed security secured by a pool of credit card receivables. The third credit-linked note is backed by a pool of assets which are guaranteed by MBIA, Inc, a financial guarantor and are mid-AA rated. Our affiliate, Delaware Investments, actively manages the credit default swaps in the underlying portfolio. Consistent with other debt market instruments, we are exposed to credit losses within the structure of the credit-linked notes, which could result in principal losses to our investments if the issuers of the debt market instruments default on their obligations. However, we have attempted to protect our investments from credit losses through the multi-tiered class structure of the credit-linked note, which requires the S-21 subordinated classes of the investment pool to absorb all of the initial credit losses. We own the mezzanine tranche of these investments, which currently carries a mid-AA rating. To date, there have been no defaults in any of the underlying collateral pools. Similar to other debt market instruments our maximum principal loss is limited to our original investment of $850 million as of December 31, 2007. The fair market value of these investments has declined, causing unrealized losses. As of December 31, 2007, we had unrealized losses of $190 million on the $850 million in credit linked notes. As described more fully in Note 1, we regularly review our investment holdings for other-than-temporary impairments. Based upon this review, we believe that these securities were not other-than-temporarily impaired as of December 31, 2007 and 2006. The following summarizes information regarding our investments in these securities (dollars in millions):
AMOUNT AND DATE OF ISSUANCE --------------------------------- $400 $200 $250 DECEMBER APRIL APRIL 2006 2007 2007 -------- ------- ------- Amount of subordination(1) $ 2,184 $ 410 $ 1,167 Maturity 12/20/16 3/20/17 6/20/17 Current rating of tranche(1) AA Aa2 AA Number of entities(1) 125 100 102 Number of countries(1) 20 21 14
- ---------- (1) As of December 31, 2007. - -------------------------------------------------------------------------------- 5. DERIVATIVE INSTRUMENTS TYPES OF DERIVATIVE INSTRUMENTS AND DERIVATIVE STRATEGIES We maintain an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate risk, foreign currency exchange risk, equity market risk and credit risk. We assess these risks by continually identifying and monitoring changes in interest rate exposure, foreign currency exposure, equity market exposure and credit exposure that may adversely impact expected future cash flows and by evaluating hedging opportunities. Derivative instruments that are currently used as part of our interest rate risk management strategy include interest rate swaps and interest rate caps. Derivative instruments that are used as part of our foreign currency risk management strategy include foreign currency swaps. Call options on LNC stock and call options on the S&P 500 Index(R) are used as part of our equity market risk management strategy. We also use credit default swaps as part of our credit risk management strategy. As of December 31, 2007 and 2006, we had derivative instruments that were designated and qualified as cash flow hedges. We also had derivative instruments that were economic hedges, but were not designated as hedging instruments under SFAS 133. See Note 1 for a detailed discussion of the accounting treatment for derivative instruments. Our derivative instruments are monitored by LNC's risk management committee as part of that committee's oversight of our derivative activities. LNC's risk management committee is responsible for implementing various hedging strategies that are developed through its analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies. Our hedging strategy is designed to mitigate the risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with the LINCOLN SMARTSECURITY(R) Advantage GMWB feature, the 4LATER(R) Advantage GIB feature and the i4LIFE(R) Advantage GIB feature that is available in our variable annuity products. This GMWB feature offers the contract holder a guarantee equal to the initial deposit adjusted for any subsequent purchase payments or withdrawals. There are one-year and five-year step-up options, which allow the contract holder to step up the guarantee. GMWB features are considered to be derivatives under SFAS 133, resulting in the guarantees being recognized at estimated fair value, with changes in estimated fair value being reported in net income. The hedging strategy is designed such that changes in the value of the hedge contracts move in the opposite direction of changes in the value of the embedded derivative of the GMWB and GIB. As part of our current hedging program, contract holder behavior, available equity, interest rate and volatility in market conditions are monitored on a daily basis. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, our hedge positions may not be totally effective to offset changes in assets and liabilities caused by movements in these factors due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments, or our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. We have certain Modco and CFW reinsurance arrangements with embedded derivatives related to the withheld assets of the related funds. These derivatives are considered total return swaps with contractual returns that are attributable to various assets and liabilities associated with these reinsurance arrangements. Changes in the estimated fair value of these derivatives are recorded in net income as they occur. Offsetting these amounts S-22 are corresponding changes in the estimated fair value of trading securities in portfolios that support these arrangements. We also distribute indexed annuity contracts. These contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500 Index(R). Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. At each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, subject to minimum guarantees. We purchase S&P 500 Index(R) call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. The mark-to-market of the options held impacts net investment income and generally offsets the change in value of the embedded derivative within the indexed annuity, which is recorded as a component of interest credited to contract holders. SFAS 133 requires that we calculate fair values of index options we may purchase in the future to hedge contract holder index allocations in future reset periods. These fair values represent an estimate of the cost of the options we will purchase in the future, discounted back to the date of the Consolidated Balance Sheets, using current market indicators of volatility and interest rates. Changes in the fair values of these liabilities are included in interest credited. The notional amounts of contract holder fund balances allocated to the equity-index options were $2.9 billion and $2.4 billion as of December 31, 2007 and 2006, respectively. We have derivative instruments with off-balance-sheet risks whose notional or contract amounts exceed the credit exposure. Outstanding derivative instruments with off-balance-sheet risks, shown in notional amounts along with their carrying values and estimated fair values (in millions), were as follows:
AS OF DECEMBER 31, ---------------------------------------------- ASSETS (LIABILITIES) ---------------------- NOTIONAL AMOUNTS CARRYING OR FAIR VALUE ------------------ ---------------------- 2007 2006 2007 2006 ------ ------ ----- ----- Cash flow hedges Interest rate swap agreements $1,372 $1,188 $ (5) $ 8 Foreign currency swaps 366 86 (17) (7) Call options (based on LNC stock) -- -- 1 4 ------ ------ ----- ----- Total cash flow hedges 1,738 1,274 (21) 5 ------ ------ ----- ----- All other derivative instruments Interest rate cap agreements 4,100 5,950 2 3 Credit default swaps 60 20 -- -- Call options (based on LNC stock) 1 1 13 18 Call options (based on S&P 500 Index(R)) 2,858 2,357 149 185 ------ ------ ----- ----- Total other derivative instruments 7,019 8,328 164 206 Embedded derivatives per SFAS 133 -- -- (412) (132) ------ ------ ----- ----- Total derivative instruments(1) $8,757 $9,602 $(269) $ 79 ====== ====== ===== =====
- ---------- (1) Total derivative instruments as of December 31, 2007 were composed of an asset of $172 million recorded in derivative investments, a $230 million liability recorded in other contract holder funds and a liability of $211 million recorded in reinsurance related derivative liability on our Consolidated Balance Sheets. Total derivative instruments as of December 31, 2006 were composed of an asset of $245 million recorded in derivative investments, a $52 million contra-liability recorded in future contract benefits and a liability of $218 million recorded in reinsurance related derivative liability on our Consolidated Balance Sheets. DERIVATIVE INSTRUMENTS DESIGNATED AS CASH FLOW HEDGES We designate and account for the following as cash flow hedges, when they have met the requirements of SFAS 133: 1) interest rate swap agreements; 2) foreign currency swaps; and 3) call options on LNC stock. We recognized a gain (loss) of $1 million and $(1) for the years ended December 31, 2007 and 2006, in net income as a component of realized investment gains and losses, related to the ineffective portion of cash flow hedges. We recognized a loss of $2 million for the year ended December 31, 2007, a gain of $2 million for the year ended December 31, 2006 and a loss of $2 million for the year ended December 31, 2005 in OCI related to the change in market value on derivative instruments that were designated and qualify as cash flow hedges. Gains and losses on derivative contracts that qualify as cash-flow hedges are reclassified from accumulated OCI to current period earnings. As of December 31, 2007, $4 million of the deferred net gains on derivative instruments in accumulated OCI were expected to be reclassified to earnings during 2008. This reclassification is primarily due to the receipt of interest payments associated with variable rate securities and forecasted purchases, S-23 payment of interest on our senior debt, the receipt of interest payments associated with foreign currency securities and the periodic vesting of stock appreciation rights ("SARs"). For the years ended December 31, 2007, 2006 and 2005, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period. INTEREST RATE SWAP AGREEMENTS We use a portion of our interest rate swap agreements to hedge our 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. We are required to pay the counterparty the stream of variable interest payments based on the coupon payments from the hedged bonds, and in turn, receive a fixed payment from the counterparty, at a predetermined interest rate. The net receipts/payments from these interest rate swaps are recorded in net investment income. Gains or losses on interest rate swaps hedging our interest rate exposure on floating rate bond coupon payments are reclassified from accumulated OCI to net income as the related bond interest is accrued. The open interest rate swap positions as of December 31, 2007 expire in 2008 through 2026. FOREIGN CURRENCY SWAPS We use 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. A foreign currency swap is a contractual agreement to exchange the currencies of two different countries at a specified rate of exchange in the future. Gains or losses on foreign currency swaps hedging foreign exchange risk exposure on foreign currency bond coupon payments are reclassified from accumulated OCI to net income as the related bond interest is accrued. The open foreign currency swap positions as of December 31, 2007 expire in 2014 through 2022. CALL OPTIONS (BASED ON LNC STOCK) We use call options on LNC stock to hedge the expected increase in liabilities arising from SARs granted on LNC stock. Upon option expiration, the payment, if any, is the increase in LNC stock price over the strike price of the option applied to the number of contracts. Call options hedging vested SARs are not eligible for hedge accounting and are marked-to-market through net income. Call options hedging non-vested SARs are eligible for hedge accounting and are accounted for as cash flow hedges of the forecasted vesting of the SAR liabilities. To the extent that the cash flow hedges are effective, changes in the fair value of the call options are recorded in accumulated OCI. Amounts recorded in OCI are reclassified to net income upon vesting of the related SARs. Our call option positions will be maintained until such time the related SARs are either exercised or expire and our SARs liabilities are extinguished. The SARs expire five years from the date of grant. ALL OTHER DERIVATIVE INSTRUMENTS We use various other derivative instruments for risk management and income generation purposes that either do not qualify for hedge accounting treatment or have not currently been designated by us for hedge accounting treatment. INTEREST RATE CAP AGREEMENTS The interest rate cap agreements entitle us to receive quarterly payments from the counterparties on specified future reset dates, contingent on future interest rates. For each cap, the amount of such quarterly 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 our interest rate cap agreement program is to provide a level of protection from the effect of rising interest rates for our annuity business, within both our Individual Markets and Employer Markets businesses. The interest rate cap agreements provide an economic hedge of the annuity line of business. However, the interest rate cap agreements do not qualify for hedge accounting under SFAS 133. The open interest rate cap agreements as of December 31, 2007 expire in 2008 through 2011. CREDIT DEFAULT SWAPS We buy credit default swaps to hedge against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows us to put the bond back to the counterparty at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. Our credit default swaps are not currently qualified for hedge accounting under SFAS 133, as amounts are insignificant. As of December 31, 2007, we had no outstanding purchased credit default swaps. We also sell credit default swaps to offer credit protection to investors. The credit default swaps hedge the investor against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows the investor to put the bond back to us at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. The open credit default swaps as of December 31, 2007 expire in 2010 through 2012. CALL OPTIONS (BASED ON LNC STOCK) We use call options on our stock to hedge the expected increase in liabilities arising from SARs granted on our stock. Call options hedging vested SARs are not eligible for hedge accounting treatment under SFAS 133. Mark-to-market changes are recorded in net income in underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income. CALL OPTIONS (BASED ON S&P 500 INDEX(R)) We use indexed annuity contracts to permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500 Index(R). Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. At each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, subject to minimum guarantees. We purchase call options that are highly correlated to the portfolio allocation S-24 decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. The mark-to-market of the options held impacts net investment income and generally offsets the change in value of the embedded derivative within the indexed annuity, which is recorded as a component of interest credited on our Consolidated Statements of Income. The open positions as of December 31, 2007 expire in 2008 through 2009. We also calculate fair values of index options we may purchase in the future to hedge contract holder index allocations in future reset periods. These fair values represent an estimate of the cost of the options we will purchase in the future, discounted back to the date of the Consolidated Balance Sheets, using current market indicators of volatility and interest rates. Changes in the fair values of these liabilities are included as a component of interest credited on our Consolidated Statements of Income. EMBEDDED DERIVATIVES DEFERRED COMPENSATION PLANS We have certain deferred compensation plans that have embedded derivative instruments. The liability related to these plans varies based on the investment options selected by the participants. The liability related to certain investment options selected by the participants is marked-to-market through net income in underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income. MODCO AND CFW ARRANGEMENTS We are involved in various Modco and CFW reinsurance arrangements that have embedded derivatives. The change in fair value of the embedded derivatives, as well as the gains or losses on trading securities supporting these arrangements, are recorded in net income as realized gains or losses on our Consolidated Statements of Income. VARIABLE ANNUITY PRODUCTS We have certain variable annuity products with GMWB and GIB features that are embedded derivatives. The change in fair value of the embedded derivatives flows through net income as benefits on our Consolidated Statements of Income. As of December 31, 2007 and 2006, we had approximately $18.9 billion and $13.8 billion, respectively, of separate account values that were attributable to variable annuities with a GMWB feature. As of December 31, 2007 and 2006, we had approximately $4.9 billion and $2.7 billion, respectively, of separate account values that were attributable to variable annuities with a GIB feature. All of the outstanding contracts with a GIB feature are still in the accumulation phase. We implemented a hedging strategy designed to mitigate the income statement volatility caused by changes in the equity markets, interest rates, and volatility associated with GMWB and GIB features. The hedging strategy is designed such that changes in the value of the hedge contracts move in the opposite direction of changes in the value of the embedded derivatives of the GMWB and GIB contracts subject to the hedging strategy. While we actively manage our hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments and our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. AVAILABLE-FOR-SALE SECURITIES We own various debt securities that either: 1) contain call options to exchange the debt security for other specified securities of the borrower, usually common stock; or 2) contain call options to receive the return on equity-like indexes. These embedded derivatives have not been qualified for hedge accounting treatment under SFAS 133; therefore, the change in fair value of the embedded derivatives flows through net investment income. ADDITIONAL DERIVATIVE INFORMATION Income other than realized gains and losses for the agreements and contracts described above amounted to $7 million, $78 million and $14 million during the years ended December 31, 2007, 2006 and 2005, respectively. We have used certain other derivative instruments in the past for hedging purposes. Although other derivative instruments may have been used in the past, derivative types that were not outstanding from January 1, 2005 through December 31, 2007 are not discussed in this disclosure. CREDIT RISK We are exposed to credit loss in the event of nonperformance by our counterparties on various derivative contracts. However, we do 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. Additionally, we maintain a policy of requiring all derivative contracts to be governed by an International Swaps and Derivatives Association ("ISDA") Master Agreement. We and LNC are required to maintain minimum ratings as a matter of routine practice in negotiating ISDA agreements. Under some ISDA agreements we have agreed to maintain certain financial strength or claims-paying ratings. A downgrade below these levels could result in termination of the derivatives contract at which time any amounts payable by us would be dependent on the market value of the underlying derivative contract. In certain transactions, we and the counterparty have entered into a collateral support agreement requiring us to post collateral upon significant downgrade. We do not believe the inclusion of termination or collateralization events pose any material threat to our liquidity position. 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 our favor. As of December 31, 2007 and 2006, the exposure was $164 million and $176 million, respectively. S-25 - -------------------------------------------------------------------------------- 6. FEDERAL INCOME TAXES The federal income tax expense (in millions) was as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------ 2007 2006 2005 ---- ---- ---- Current $372 $244 $111 Deferred 132 216 112 ---- ---- ---- Total federal income tax expense $504 $460 $223 ==== ==== ====
The effective tax rate on pre-tax income was lower than the prevailing corporate federal income tax rate. Included in tax-preferred investment income was a separate account dividend received deduction benefit of $88 million, $80 million and $55 million for the years ended December 31, 2007, 2006 and 2005, respectively, exclusive of any prior years' tax return resolution. A reconciliation of the effective tax rate differences (dollars in millions) was as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------------ 2007 2006 2005 ----- ----- ----- Tax rate of 35% times pre-tax income $ 610 $ 568 $ 303 Effect of: Tax-preferred investment income (88) (80) (63) Tax credits (22) (21) (14) Other 4 (7) (3) ----- ----- ----- Provision for income taxes $ 504 $ 460 $ 223 ===== ===== ===== Effective tax rate 29% 28% 26% ===== ===== =====
The federal income tax liability (in millions), which is included in other liabilities on our Consolidated Balance Sheets, was as follows:
AS OF DECEMBER 31, 2007 2006 ---- ---- Current $390 $ 13 Deferred 239 615 ---- ---- Total federal income tax liability $629 $628 ==== ====
Significant components of our deferred tax assets and liabilities (in millions) were as follows:
AS OF DECEMBER 31, -------------------- 2007 2006 ------ ------ DEFERRED TAX ASSETS Future contract benefits and other contract holder funds $1,904 $1,473 Reinsurance deferred gain 244 265 Net operating and capital loss carryforwards -- 23 Modco embedded derivative 74 76 Postretirement benefits other than pensions 8 7 Compensation and benefit plans 175 149 Ceding commission asset 7 9 Other 139 147 ------ ------ Total deferred tax assets 2,551 2,149 ------ ------ DEFERRED TAX LIABILITIES DAC 1,962 1,555 Net unrealized gain on available-for-sale securities 47 306 Net unrealized gain on trading securities 71 74 Present value of business in-force 589 619 Other 121 210 ------ ------ Total deferred tax liabilities 2,790 2,764 ------ ------ Net deferred tax liability $ 239 $ 615 ====== ======
LNL and its affiliates, with the exception of JPL, JPFIC and JPLA as noted below, are part of a consolidated federal income tax filing with LNC. JPL filed a separate federal income tax return until its merger with LNL on April 2, 2007. JPFIC filed a separate federal income tax return until its merger into LNL on July 2, 2007. JPLA was part of a consolidated federal income tax filing with JPFIC until its merger into LNL on April 2, 2007. We are required to establish a valuation allowance for any gross deferred tax assets that are unlikely to reduce taxes payable in future years' tax returns. As of December 31, 2007 and 2006, we concluded that it was more likely than not that all gross deferred tax assets will reduce taxes payable in future years. Accordingly, no valuation allowance was necessary as of December 31, 2007 and 2006. Under prior federal 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." On October 22, 2004, President Bush signed into law the "American Jobs Creation Act of 2004." In 2005 and 2006, the additional tax imposed on distributions from the special tax account, "Policyholders Surplus," was suspended. In addition, the statute provided that distributions made during the two-year suspension period would first reduce the Policyholders Surplus account balance. Our 2005 and 2006 dividend activity S-26 along with that of our insurance subsidiaries eliminated the account balance during the suspension period. As discussed in Note 2, we adopted FIN 48 on January 1, 2007 and had unrecognized tax benefits of $272 million, of which $134 million, if recognized, would impact our income tax expense and our effective tax rate. We anticipate a change to our unrecognized tax benefits within the next 12 months in the range of $0 to $12 million. A reconciliation of the unrecognized tax benefits (in millions) was as follows:
FOR THE YEAR ENDED DECEMBER 31, 2007 ------------ Balance at beginning-of-year $ 272 Increases for prior year tax positions 5 Decreases for prior year tax positions (1) Increases for current year tax positions 21 Decreases for current year tax positions (7) ------------ Balance at end-of-year $ 290 ============
We recognize interest and penalties accrued, if any, related to unrecognized tax benefits as a component of tax expense. During the years ended December 31, 2007, 2006 and 2005, we recognized interest and penalty expense related to uncertain tax positions of $19 million, $13 million and $3 million, respectively. We had accrued interest and penalty expense related to the unrecognized tax benefits of $64 million and $45 million as of December 31, 2007 and 2006, respectively. The LNC consolidated group is subject to annual tax examinations from the Internal Revenue Service ("IRS"). During the first quarter of 2006, the IRS completed its examination for the tax years 1999 through 2002 with assessments resulting in a payment that was not material to the results of operations. In addition to taxes assessed and interest, the payment included a deposit relating to a portion of the assessment, which LNC continues to challenge. LNC believes this portion of the assessment is inconsistent with existing law and is protesting it through the established IRS appeals process. We do not anticipate that any adjustments that might result from such audits would be material to our results of operations or financial condition. The LNC consolidated group is currently under audit by the IRS for years 2003 and 2004. The former Jefferson-Pilot Corporation and its subsidiaries are currently under examination by the IRS for the years 2004 and 2005. - -------------------------------------------------------------------------------- 7. DAC, VOBA and DSI Changes in DAC (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, --------------------------- 2007 2006 2005 ------- ------- ------- Balance at beginning-of-year $ 4,577 $ 3,676 $ 2,904 Cumulative effect of adoption of SOP 05-1 (31) -- -- Dividend of FPP (246) -- -- Deferrals 2,002 1,479 934 Amortization, net of interest: Unlocking 29 25 111 Other amortization (710) (651) (538) Adjustment related to realized (gains) losses on available-for-sale securities and derivatives 48 (38) (48) Adjustment related to unrealized losses on available-for-sale securities and derivatives 96 86 313 ------- ------- ------- Balance at end-of-year $ 5,765 $ 4,577 $ 3,676 ======= ======= =======
For the year ended December 31, 2007, the unlocking total includes $26 million in prospective unlocking from updates to assumptions for experience, $(50) million in model refinements and $53 million in retrospective unlocking. For the year ended December 31, 2006, the unlocking total includes $(9) million in prospective unlocking from updates to assumptions for experience, $(2) million in model refinements and $36 million in retrospective unlocking. For the year ended December 31, 2005, the unlocking total includes $90 million in prospective unlocking from updates to assumptions for experience and $21 million in retrospective unlocking. Changes in VOBA (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------------- 2007 2006 2005 ------- ------- ----- Balance at beginning-of-year $ 3,032 $ 742 $ 819 Cumulative effect of adoption of SOP 05-1 (35) -- -- Business acquired 14 2,478 -- Deferrals 46 96 -- Amortization: Unlocking 25 9 (11) Other amortization (416) (347) (111) Accretion of interest 125 111 45 Adjustment related to realized gains on available-for-sale securities and derivatives (6) (9) -- Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives 24 (48) -- ------- ------- ----- Balance at end-of-year $ 2,809 $ 3,032 $ 742 ======= ======= =====
For the year ended December 31, 2007, the unlocking total includes $14 million in prospective unlocking from updates to assumptions for experience, $(2) million in model refinements and $13 million in retrospective unlocking. For the year ended December 31, 2006, the unlocking total includes $5 million in S-27 prospective unlocking from updates to assumptions for experience and $4 million in retrospective unlocking. For the year ended December 31, 2005, the unlocking total includes $(9) million in prospective unlocking from updates to assumptions for experience and $(2) million in retrospective unlocking. Estimated future amortization of VOBA (in millions), net of interest, as of December 31, 2007 was as follows: 2008 $ 276 2009 252 2010 238 2011 208 2012 191 Thereafter 1,668 ----- Total $2,833 ======
Changes in DSI (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- Balance at beginning-of-year $ 194 $ 129 $ 85 Cumulative effect of adoption of SOP 05-1 (3) -- -- Deferrals 117 86 60 Amortization, net of interest: Unlocking 2 4 3 Other amortization (31) (25) (19) ----- ----- ----- Balance at end-of-year $ 279 $ 194 $ 129 ===== ===== =====
For the year ended December 31, 2007, the unlocking total includes $2 million in prospective unlocking from updates to assumptions for experience, $(1) million in model refinements and $1 million in retrospective unlocking. For the year ended December 31, 2006, the unlocking total includes $1 million in prospective unlocking from updates to assumptions for experience and $3 million in retrospective unlocking. For the year ended December 31, 2005, the unlocking total includes $2 million in prospective unlocking from updates to assumptions for experience and $1 million in retrospective unlocking. - -------------------------------------------------------------------------------- 8. REINSURANCE Reinsurance transactions included in insurance premiums (in millions), excluding amounts attributable to the indemnity reinsurance transaction with Swiss Re Life & Health America, Inc. ("Swiss Re"), were as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------------- 2007 2006 2005 ------- ------- ----- Reinsurance assumed $ 12 $ 8 $ 1 Reinsurance ceded (1,063) (1,021) (767) ------- ------- ----- Net reinsurance premiums and fees $(1,051) $(1,013) $(766) ======= ======= ===== Reinsurance recoveries netted against benefits $ 1,249 $ 904 $ 722 ======= ======= =====
We cede insurance to other companies. The portion of risks exceeding our retention limits is reinsured with other insurers. We seek reinsurance coverage within the businesses that sell life insurance in order to limit our exposure to mortality losses and enhance our capital management. Under our reinsurance program, we reinsure approximately 45% to 50% of the mortality risk on newly issued non-term life insurance contracts and approximately 40% to 45% of total mortality risk including term insurance contracts. Our policy for this program is to retain no more than $10 million on a single insured life issued on fixed and variable universal life insurance contracts. Additionally, the retention per single insured life for term life insurance and for corporate owned life insurance is $2 million for each type of insurance. Portions of our deferred annuity business have been reinsured on a Modco basis with other companies to limit our exposure to interest rate risks. As of December 31, 2007, the reserves associated with these reinsurance arrangements totaled $1.3 billion. To cover products other than life insurance, we acquire other insurance coverages with retentions and limits. We obtain reinsurance from a diverse group of reinsurers, and we monitor concentration as well as financial strength ratings of our principal reinsurers. Our reinsurance operations were acquired by Swiss Re in December 2001, through a series of indemnity reinsurance transactions. Swiss Re represents our largest reinsurance exposure. Under the indemnity reinsurance agreements, Swiss Re reinsured certain of our liabilities and obligations. As we are not relieved of our legal liability to the ceding companies, the liabilities and obligations associated with the reinsured contracts remain on our Consolidated Balance Sheets with a corresponding reinsurance receivable from Swiss Re, which totaled $4.0 billion at December 31, 2007. Swiss Re has funded a trust, with a balance of $1.8 billion as of December 31, 2007, to support this business. In addition to various remedies that we would have in the event of a default by Swiss Re, we continue to hold assets in support of certain of the transferred reserves. These assets consist of those reported as trading securities and certain mortgage loans. Our liabilities for funds withheld and embedded derivatives as of December 31, 2007, included $1.9 billion and $200 million, respectively, related to the business reinsured by Swiss Re. We recorded the gain related to the indemnity reinsurance transactions on the business sold to Swiss Re as a deferred gain S-28 in the liability section of our Consolidated Balance Sheets in accordance with the requirements of SFAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" ("SFAS 113"). The deferred gain is being amortized into income at the rate that earnings on the reinsured business are expected to emerge, over a period of 15 years. During 2007, 2006 and 2005 we amortized $55 million, $49 million and $49 million, after-tax, respectively, of deferred gain on the sale of the reinsurance operation. Because of ongoing uncertainty related to personal accident business, the reserves related to these exited business lines carried on our Consolidated Balance Sheets as of December 31, 2007, may ultimately prove to be either excessive or deficient. For instance, in the event that future developments indicate that these reserves should be increased, under SFAS 113 we would record a current period non-cash charge to record the increase in reserves. Because Swiss Re is responsible for paying the underlying claims to the ceding companies, we would record a corresponding increase in reinsurance recoveries from Swiss Re. However, SFAS 113 does not permit us to take the full benefit in earnings for the recording of the increase in the reinsurance recoveries in the period of the change. Rather, we would increase the deferred gain recognized upon the closing of the indemnity reinsurance transaction with Swiss Re and would report a cumulative amortization "catch-up" adjustment to the deferred gain balance as increased earnings recognized in the period of change. Any amount of additional increase to the deferred gain above the cumulative amortization "catch-up" adjustment must continue to be deferred and will be amortized into income in future periods over the remaining period of expected run-off of the underlying business. We would not transfer any cash to Swiss Re as a result of these developments. In the second quarter of 2007, we recognized increased reserves on the business sold and recognized a deferred gain that is being amortized into income at the rate that earnings are expected to emerge within a 15 year period. This adjustment resulted in a non-cash charge of $13 million, after-tax, to increase reserves, which was partially offset by a cumulative "catch-up" adjustment to the deferred gain amortization of $5 million, after-tax, for a total decrease to net income of $8 million. The impact of the accounting for reserve adjustments related to this reinsurance treaty is excluded from our definition of income from operations. - -------------------------------------------------------------------------------- 9. GOODWILL AND SPECIFICALLY IDENTIFIABLE INTANGIBLE ASSETS The changes in the carrying amount of goodwill (in millions) by reportable segment were as follows:
FOR THE YEAR ENDED DECEMBER 31, 2007 -------------------------------------------- BALANCE AT PURCHASE DIVIDEND BALANCE BEGINNING- ACCOUNTING OF AT END- OF-YEAR ADJUSTMENTS FPP OF-YEAR ---------- ----------- -------- ------- Individual Markets: Life Insurance $ 2,181 $ 20 $ (2) $ 2,199 Annuities 1,032 14 -- 1,046 Employer Markets: Retirement Products 20 -- -- 20 Group Protection 281 (7) -- 274 ---------- ----------- -------- ------- Total goodwill $ 3,514 $ 27 $ (2) $ 3,539 ========== =========== ======== =======
FOR THE YEAR ENDED DECEMBER 31, 2006 -------------------------------------------- BALANCE AT PURCHASE DIVIDEND BALANCE BEGINNING- ACCOUNTING OF AT END- OF-YEAR ADJUSTMENTS FPP OF-YEAR ---------- ----------- -------- ------- Individual Markets: Life Insurance $ 855 $ 1,326 $ -- $ 2,181 Annuities 44 988 -- 1,032 Employer Markets: Retirement Products 20 -- -- 20 Group Protection -- 281 -- 281 ---------- ----------- -------- ------- Total goodwill $ 919 $ 2,595 $ -- $ 3,514 ========== =========== ======== =======
S-29 The gross carrying amounts and accumulated amortization (in millions) for each major specifically identifiable intangible asset class by reportable segment were as follows:
AS OF DECEMBER 31, ---------------------------------------------- 2007 2006 ---------------------- ---------------------- GROSS GROSS CARRYING ACCUMULATED CARRYING ACCUMULATED AMOUNT AMORTIZATION AMOUNT AMORTIZATION -------- ------------ -------- ------------ Individual Markets -- Life Insurance: Sales force $ 100 $ 7 $ 100 $ 3 Employer Markets -- Retirement Products: Mutual fund contract rights(1) 3 -- -- -- -------- ------------ -------- ------------ Total $ 103 $ 7 $ 100 $ 3 ======== ============ ======== ============
- ---------- (1) No amortization recorded as the intangible asset has indefinite life. Future estimated amortization of specifically identifiable intangible assets (in millions) as of December 31, 2007 was as follows: 2008 $ 4 2009 4 2010 4 2011 4 2012 4 Thereafter 73 --- Total $93 ===
- -------------------------------------------------------------------------------- 10. SEPARATE ACCOUNTS AND GUARANTEED BENEFIT FEATURES We issue variable contracts through our separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder (traditional variable annuities). We also issue variable annuity and life contracts through separate accounts that include various types of GMDB, GMWB and GIB features. The GMDB features include those where we contractually guarantee to the contract holder either (a) return of no less than total deposits made to the contract less any partial withdrawals ("return of net deposits"), (b) total deposits made to the contract less any partial withdrawals plus a minimum return ("minimum return"), or (c) the highest contract value on any contract anniversary date through age 80 minus any payments or withdrawals following the contract anniversary ("anniversary contract value"). Information in the event of death on the GMDB features outstanding (dollars in millions) was as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 -------- -------- RETURN OF NET DEPOSIT Separate account value $ 44,833 $ 38,306 Net amount at risk(1) 93 65 Average attained age of contract holders 55 years 54 years MINIMUM RETURN Separate account value $ 355 $ 405 Net amount at risk(1) 25 34 Average attained age of contract holders 68 years 67 years Guaranteed minimum return 5% 5% ANNIVERSARY CONTRACT VALUE Separate account value $ 25,537 $ 22,487 Net amount at risk(1) 359 193 Average attained age of contract holders 64 years 64 years
- ---------- (1) Represents the amount of death benefit in excess of the current account balance at the balance sheet date. S-30 The determination of GMDB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The following summarizes the balances of and changes in the liabilities for GMDB (in millions), which were recorded in future contract benefits on our Consolidated Balance Sheets:
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 ----- ----- Balance at beginning-of-year $ 23 $ 15 Cumulative effect of adoption of SOP 05-1 (4) -- Changes in reserves 25 14 Benefits paid (6) (6) ----- ----- Balance at end-of-year $ 38 $ 23 ===== =====
The changes to the benefit reserves amounts above are reflected in benefits on our Consolidated Statements of Income. Also included in benefits are the results of the hedging program, which included losses of $2 million and $5 million for GMDB in 2007 and 2006, respectively. We utilize a delta hedging strategy for variable annuity products with a GMDB feature, which uses futures on U.S.-based equity market indices to hedge against movements in equity markets. The hedging strategy is designed so that changes in the value of the hedge contracts move in the opposite direction of equity market driven changes in the reserve for GMDB contracts subject to the hedging strategy. While we actively manage our hedge positions, these hedge positions may not be totally effective to offset changes in the reserve due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments or our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. Account balances of variable annuity contracts with guarantees (in millions) were invested in separate account investment options as follows:
AS OF DECEMBER 31, --------------------- 2007 2006 ------- ------- ASSET TYPE Domestic equity $44,982 $39,260 International equity 8,076 5,905 Bonds 8,034 6,399 Money market 6,545 5,594 ------- ------- Total $67,637 $57,158 ======= ======= Percent of total variable annuity separate account values 97% 87%
- -------------------------------------------------------------------------------- 11. OTHER CONTRACT HOLDER FUNDS Details of other contract holder funds (in millions) were as follows:
AS OF DECEMBER 31, --------------------- 2007 2006 ------- ------- Account values and other contract holder funds $56,668 $57,383 Deferred front-end loads 768 572 Contract holder dividends payable 524 531 Premium deposit funds 113 130 Undistributed earnings on participating business 95 102 ------- ------- Total other contract holder funds $58,168 $58,718 ======= =======
S-31 - -------------------------------------------------------------------------------- 12. SHORT-TERM AND LONG-TERM DEBT Details underlying short-term and long-term debt (in millions) were as follows:
AS OF DECEMBER 31, -------------------- 2007 2006 ------ ------ Short-term debt(1) $ 18 $ 21 Note due LNC, due September 2008 155 -- ------ ------ Total short-term debt $ 173 $ 21 ====== ====== Long-term debt: Note due LNC, due September 2008 $ -- $ 139 LIBOR + 1.00% note, due 2037 375 -- Surplus Notes due LNC: 9.76% surplus note, due 2024 50 50 6.56% surplus note, due 2028 500 500 6.03% surplus note, due 2028 750 750 ------ ------ Total surplus notes 1,300 1,300 ------ ------ Total long-term debt $1,675 $1,439 ====== ======
- ---------- (1) The short-term debt represents short-term notes payable to LNC. A consolidated subsidiary of LNL issued a note for an amount not to exceed $150 million to LNC in 2006. Also in 2006, the Board of Directors of LNC issued a Board Certificate guaranteeing that the consolidated subsidiary of LNL will maintain capital and surplus sufficient to meet the statutory surplus requirements of the insurance regulatory authority for the consolidated subsidiary of LNL and provide funds in cash to the consolidated subsidiary of LNL to ensure the timely payment of its obligations. Pursuant to that Board Certificate, as of December 31, 2007, $155 million had been advanced to us. This note calls for us to pay the principal amount of the notes on or before September 30, 2008 and interest to be paid monthly at a rate equal to the Federal Reserve Board's 30 day AA- financial commercial paper rate plus ten basis points. On October 9, 2007, we issued a note of $375 million to LNC. This note calls for us to pay the principal amount of the note on or before October 9, 2037 and interest to be paid quarterly at an annual rate of LIBOR + 1.00%. During 2007, our surplus note for $50 million to HARCO Capital Corporation was transferred to LNC. This note calls for us to pay the principal amount of the note on or before September 30, 2024 and interest to be paid semiannually at an annual rate of 9.76%. 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 twice per year. Any payment of interest or repayment of principal may be paid only if we have obtained the prior written approval of the Indiana Insurance Commissioner, have adequate earned surplus funds for such payment and if such payment would not cause us to violate the statutory capital requirements as set forth in the General Statutes of Indiana. We issued a surplus note for $500 million to LNC in 1998. This note calls for us 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. Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital surplus as of the date of note issuance of $2.3 billion, and subject to approval by the Indiana Insurance Commissioner. We issued a surplus note for $750 million to LNC in 1998. This note calls for us 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. Any payment of interest or repayment of principal may be paid only out of our statutory earnings, only if our statutory capital surplus exceeds our statutory capital surplus as of the date of note issuance of $2.4 billion, and subject to approval by the Indiana Insurance Commissioner. - -------------------------------------------------------------------------------- 13. CONTINGENCIES AND COMMITMENTS CONTINGENCIES REGULATORY AND LITIGATION MATTERS Federal and state regulators continue to focus on issues relating to fixed and variable insurance products, including, but not limited to, suitability, replacements and sales to seniors. Like others in the industry, we have received inquiries including requests for information regarding sales to seniors from the Financial Industry Regulation Authority. We are in the process of responding to these inquiries. We continue to cooperate fully with such authority. In the ordinary course of its business, LNL is involved in various pending or threatened legal proceedings, including purported class actions, arising from the conduct of business. In some instances, these proceedings include claims for unspecified or substantial 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 these proceedings, after consideration of any reserves and rights to indemnification, ultimately will be resolved without materially affecting the consolidated financial position of LNL. However, given the large and indeterminate amounts sought in certain of these proceedings and the inherent difficulty in predicting the outcome of such legal proceedings, it is possible S-32 that an adverse outcome in certain matters could be material to our operating results for any particular reporting period. COMMITMENTS LEASES We lease our home office in Fort Wayne, Indiana 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 us with the right of first refusal to purchase the properties during the terms of the lease, including renewal periods, at a price defined in the agreements. We also have 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 period ending in 2009 or the last day of any of the renewal periods. In 2006, we exercised the right and option to extend the Fort Wayne lease for two extended terms such that the lease shall expire in 2019. We retain our right and option to exercise the remaining four extended terms of 5 years each in accordance with the lease agreement. Total rental expense on operating leases for the years ended December 31, 2007, 2006 and 2005 was $56 million, $47 million and $55 million, respectively. Future minimum rental commitments (in millions) as of December 31, 2007 were as follows: 2008 $ 47 2009 32 2010 21 2011 16 2012 12 Thereafter 33 - ---- ---- Total $161 ====
INFORMATION TECHNOLOGY COMMITMENT In February 1998, LNC signed a seven-year contract with IBM Global Services for information technology services for the Fort Wayne operations. In February 2004, LNC completed renegotiations and extended the contract through Febru-ary 2010. Annual costs are dependent on usage but are expected to be approximately $8 million. VULNERABILITY FROM CONCENTRATIONS As of December 31, 2007, we did not have a concentration of: 1) business transactions with a particular customer or lender; 2) sources of supply of labor or services used in the business; or 3) 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 our financial position. Although we do not have any significant concentration of customers, our American Legacy Variable Annuity product offered in our Individual Markets - Annuities segment is significant to this segment. The American Legacy Variable Annuity product accounted for 46%, 48% and 48% of Individual Markets - Annuities variable annuity product deposits in December 31, 2007, 2006 and 2005, respectively, and represented approximately 66%, 67% and 67% of our total Individual Markets - Annuities variable annuity product account values as of December 31, 2007, 2006 and 2005 respectively. In addition, fund choices for certain of our other variable annuity products offered in our Individual Markets - -Annuities segment include American Fund Insurance Series(SM)("AFIS") funds. For the Individual Markets - Annuities segment, AFIS funds accounted for 55%, 58% and 57% of variable annuity product deposits in 2007, 2006 and 2005 respectively and represented 75% of the segment's total variable annuity product account values as of December 31, 2007, 2006 and 2005. OTHER CONTINGENCY MATTERS State guaranty funds assess insurance companies to cover losses to contract holders of insolvent or rehabilitated companies. Mandatory assessments may be partially recovered through a reduction in future premium taxes in some states. We have accrued for expected assessments net of estimated future premium tax deductions. GUARANTEES We have guarantees with off-balance-sheet risks having contractual values of $2 million and $3 million as of December 31, 2007 and 2006, respectively, whose contractual amounts represent credit exposure. We have sold commercial mortgage loans through grantor trusts, which issued pass-through certificates. We have 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. In case of default by borrowers, we have recourse to the underlying real estate. 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 us. These guarantees expire in 2009. S-33 - -------------------------------------------------------------------------------- 14. STOCKHOLDER'S EQUITY STOCKHOLDER'S EQUITY All authorized and issued shares of LNL are owned by LNC. ACCUMULATED OCI The following summarizes the components and changes in accumulated OCI (in millions):
FOR THE YEARS ENDED DECEMBER 31, --------------------- 2007 2006 2005 ----- ----- ----- UNREALIZED GAINS ON AVAILABLE-FOR-SALE SECURITIES Balance at beginning-of-year $ 421 $ 452 $ 781 Other comprehensive income (loss): Unrealized holding losses arising during the year (871) (96) (805) Change in DAC, VOBA and other contract holder funds 177 29 269 Income tax benefit 243 23 188 Change in foreign currency exchange rate adjustment 18 5 5 Less: Reclassification adjustment for gains (losses) included in net income (164) 24 32 Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds 29 (37) (53) Income tax benefit 47 5 7 ----- ----- ----- Balance at end-of-year $ 76 $ 421 $ 452 ===== ===== =====
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ---- ---- ---- UNREALIZED GAINS (LOSSES) ON DERIVATIVE INSTRUMENTS Balance at beginning-of-year $ (9) $ 7 $ 14 Other comprehensive income (loss): Unrealized holding gains (losses) arising during the year 14 (22) 5 Change in DAC, VOBA and other contract holder funds (6) 1 (7) Income tax benefit 11 2 (6) Change in foreign currency exchange rate adjustment (30) 4 -- Less: Reclassification adjustment for (gains) losses included in net income (2) 2 (2) Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds 1 -- 1 Income tax expense -- (1) -- ---- ---- ---- Balance at end-of-year $(19) $ (9) $ 7 ==== ==== ==== MINIMUM PENSION LIABILITY ADJUSTMENT Balance at beginning-of-year $ -- $ (6) $(13) Other comprehensive income (loss): Adjustment arising during the year -- 6 7 ---- ---- ---- Balance at end-of-year $ -- $ -- $ (6) ==== ==== ==== FUNDED STATUS OF EMPLOYEE BENEFIT PLANS Balance at beginning-of-year $ 4 $ -- $ -- Other comprehensive income (loss): Adjustment arising during the year (13) -- -- Income tax benefit 5 -- -- Adjustment for adoption of SFAS 158, net of tax -- 4 -- ---- ---- ---- Balance at end-of-year $ (4) $ 4 $ -- ==== ==== ====
S-34 - -------------------------------------------------------------------------------- 15. UNDERWRITING, ACQUISITION, INSURANCE, RESTRUCTURING AND OTHER EXPENSES Details underlying underwriting, acquisition, insurance and other expenses (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, --------------------------- 2007 2006 2005 ------- ------- ------- Commissions $ 2,051 $ 1,527 $ 899 General and administrative expenses 1,234 1,093 965 DAC and VOBA deferrals and interest, net of amortization (1,101) (722) (430) Other intangibles amortization 4 3 -- Taxes, licenses and fees 192 158 81 Merger-related expenses 92 27 29 ------- ------- ------- Total $ 2,472 $ 2,086 $ 1,544 ======= ======= =======
All restructuring charges are included in underwriting, acquisition, insurance and other expenses primarily within Other Operations on our Consolidated Statements of Income in the year incurred and are reflected within merger-related expenses in the table above. 2006 RESTRUCTURING PLAN Upon completion of LNC's merger with Jefferson-Pilot, a restructuring plan was implemented relating to the integration of LNC's legacy operations with those of Jefferson-Pilot. The realignment will enhance productivity, efficiency and scalability while positioning LNC and its affiliates for future growth. Details underlying reserves for restructuring charges (in millions) were as follows:
TOTAL ----- Restructuring reserve at December 31, 2006 $ 7 Amounts incurred in 2007 Employee severance and termination benefits 6 Other 14 ----- Total 2007 restructuring charges 20 Amounts expended in 2007 (25) Restructuring reserve at December 31, 2007 $ 2 Additional amounts expended in 2007 that do not qualify as restructuring charges $ 72 Total expected costs 180 Expected completion date: 4th Quarter 2009
The total expected costs include both restructuring charges and additional expenses that do not qualify as restructuring charges that are associated with the integration activities. In addition, involuntary employee termination benefits were recorded in goodwill as part of the purchase price allocation, see Note 3. Merger integration costs relating to employee severance and termination benefits of $13 million were included in other liabilities in the purchase price allocation. In the first quarter of 2007, an additional $9 million was recorded to goodwill and other liabilities as part of the final adjustment to the purchase price allocation related to employee severance and termination benefits. - -------------------------------------------------------------------------------- 16. EMPLOYEE BENEFIT PLANS Our employees, other than our U.S. insurance agents, are included in LNC's various benefit plans that provide for pension and other postretirement benefit plans, 401(k) and profit sharing plans and deferred compensation plans. Our U.S. insurance agents are included in various plans sponsored by either LNL or LNC, including pension and other postretirement benefit plans, 401(k) and profit sharing plans and deferred compensation plans. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS LNC maintains funded defined benefit pension plans for most of its U.S. employees, including those of LNL, and prior to January 1, 1995, most full-time agents, including those of LNL. All benefits accruing under the defined benefit plan for agents were frozen as of December 31, 1994. On May 1, 2007, LNC announced plans to change the retirement benefits provided to employees, including those of LNL, including the "freeze" or cessation of benefit accruals under LNC's primary traditional defined benefit pension plans. The freeze became effective December 31, 2007. This prospective change in benefits will not impact any of the pension retirement benefits that were accrued up through December 31, 2007. Effective January 1, 2002, the employees' pension plan was converted to a cash balance formula. Eligible employees retiring before 2012 will have their benefits, which were frozen effective December 31, 2007, calculated under both the old final average pay formula and the cash balance formula and will receive the greater of the two calculations. Employees retiring in 2012 or after will receive their frozen benefit under the cash balance formula. Benefits under the cash balance formula will continue to accrue interest credits. Benefits under the final average pay formula are based on total years of service and the highest 60 months of compensation during the last 10 years of employment. Under the cash balance formula, employees have guaranteed account balances that earn annual benefit credits and interest credits each year. Annual benefit credits are based on years of service and base salary plus bonus. As a result of the merger with Jefferson-Pilot, LNC maintains funded defined benefit pension plans for the former U.S. employees and agents of Jefferson-Pilot. Eligible retiring employees receive benefits based on years of service and final average earnings. The plans were funded through group annuity contracts with LNL. The assets of the plans were those of the related contracts, and were primarily held our separate accounts. During the fourth quarter of 2007, the group annuity S-35 contracts were liquidated. The assets were moved to a tax-exempt trust and are invested as described in the Plan Assets section below. The plans are funded by contributions to tax-exempt trusts. Our funding policy is consistent with the funding requirements of Federal law and regulations. Contributions were intended to provide not only the benefits attributed to service to date, but also those expected to be earned in the future. Effective January 1, 2005, LNC amended the employees' pension plan to include 100% of eligible bonus amounts as compensation under the cash balance formula only. During 2006 and 2007, LNC sponsored three types of unfunded, nonqualified, defined benefit plans for certain U.S. employees and agents, including those of LNL: the Salary Continuation Plan for Executives of Lincoln National Corporation and Affiliates (the "ESC"), the Jefferson-Pilot Executive Special Supplemental Benefit Plan (the "ESSB") and supplemental retirement plans, a salary continuation plan and supplemental executive retirement plans. As a result of the merger with Jefferson-Pilot, LNC also sponsored an unfunded, nonqualified supplemental retirement plan for certain former employees of Jefferson-Pilot. The supplemental retirement plans provided defined benefit pension benefits in excess of limits imposed by Federal tax law. The ESC and ESSB were terminated effective December 31, 2007. The accrued benefits under the ESC and the ESSB on that date were converted to actuarial equivalent lump sum amounts and credited to special opening accounts (the "ESC Opening Balance Account" and the "ESSB Opening Balance Account") in the Lincoln National Corporation Deferred Compensation & Supplemental/Excess Retirement Plan (the "DC SERP"), which was formerly known as The Lincoln National Corporation Executive Deferred Compensation Plan for Employees. In both cases, the accrued benefits were calculated as if our executives had received a distribution at age 62, reduced under the relevant age 62 early retirement reduction factors provided under each plan (as if the executive had remained employed until age 62). The supplemental executive retirement plan provided defined pension benefits for certain executives who became our employees as a result of the acquisition of a block of individual life insurance and annuity business from CIGNA Corporation ("CIGNA"). Effective January 1, 2000, this plan was amended to freeze benefits payable under this plan and a second supplemental executive retirement plan was established for this same group of executives. The benefits payable to the executives under this plan will not be less than they would have been under the pre-acquisition plan. The benefit is based on an average compensation figure that is not less than the minimum three-year average compensation figure in effect for these executives as of December 31, 1999. Any benefits payable from this plan are reduced by benefits payable from our employees' defined benefit pension plan. LNC also sponsors unfunded plans that provide postretirement medical, dental and life insurance benefits to full-time U.S. employees who, depending on the plan, have worked for LNC for 10 years and attained age 55 (age 60 for agents), including those of LNL. Medical and dental benefits are also available to spouses and other dependents of employees and agents. For medical and dental benefits, limited contributions are required from individuals who retired prior to November 1, 1988. Contributions for later retirees, which can be adjusted annually, are based on such items as years of service at retirement and age at retirement. Effective April 1, 2004, the employees' postretirement plan was amended to provide that employees and agents not attaining age 50 by that date will not be eligible to receive life insurance benefits when they retire. Life insurance benefits for retirees are noncontributory for employees and agents that attained the age of 50 by April 1, 2004 and meet the eligibility requirements at the time they retire; however, these participants can elect supplemental contributory life benefits up to age 70. Effective July 1, 1999, the agents' postretirement plan was amended to require agents retiring on or after that date to pay the full medical and dental premium costs. Beginning January 1, 2002, the employees' postretire-ment plan was amended to require employees not yet age 50 with five years of service by the end of 2001 to pay the full medical and dental premium cost when they retire. Effective January 1, 2008, the postretirement plan providing benefits to former employees of Jefferson-Pilot was amended such that only employees attaining age 55 and having 10 years of service by December 31, 2007 who retire on or after age 60 with 15 years of service will be eligible to receive life insurance benefits when they retire. S-36 OBLIGATIONS, FUNDED STATUS AND ASSUMPTIONS Information (in millions) with respect to our defined benefit plan asset activity and defined benefit plan obligations subsequent to the adoption of SFAS 158 was as follows:
AS OF AND FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------- 2007 2006 2007 2006 ----- ----- ---- ---- OTHER PENSION BENEFITS POSTRETIREMENT BENEFITS ------------------- -------------------------- CHANGE IN PLAN ASSETS Fair value at beginning-of-year $ 141 $ 93 $ -- $ -- Actual return on plan assets 8 15 -- -- Company contributions (1) -- 2 2 Benefits paid (8) (7) (2) (2) Purchase accounting adjustments -- 40 -- -- ----- ----- ---- ---- Fair value at end-of-year 140 141 -- -- ----- ----- ---- ---- CHANGE IN BENEFIT OBLIGATION Balance at beginning-of-year 117 92 19 22 Interest cost 7 6 1 1 Plan participants' contributions -- -- 1 1 Actuarial gains -- (3) (4) (3) Benefits paid (8) (7) (3) (2) Purchase accounting adjustments -- 29 -- -- ----- ----- ---- ---- Balance at end-of-year 116 117 14 19 ----- ----- ---- ---- Funded status of the plans $ 24 $ 24 $(14) $(19) ===== ===== ==== ==== AMOUNTS RECOGNIZED ON THE CONSOLIDATED BALANCE SHEETS Other assets $ 25 $ 25 $ -- $ -- Other liabilities (1) (1) (14) (19) ----- ----- ---- ---- Net amount recognized $ 24 $ 24 $(14) $(19) ===== ===== ==== ==== AMOUNTS RECOGNIZED IN ACCUMULATED OCI, NET OF TAX Net (gain) loss $ 8 $ (2) $ (4) $ (2) ----- ----- ---- ---- Net amount recognized $ 8 $ (2) $ (4) $ (2) ===== ===== ==== ==== WEIGHTED-AVERAGE ASSUMPTIONS Weighted-average discount rate 6.00% 5.75% 6.00% 5.75% Expected return on plan assets 8.00% 8.00% 0.00% 0.00% RATE OF INCREASE IN COMPENSATION Salary continuation plan 4.00% 4.00% 4.00% 4.00%
We use December 31 as the measurement date for the pension and postretirement plans. The expected return on plan assets was determined based on historical and expected future returns of the various asset classes, using the target plan allocations. LNC reevaluates this assumption at an interim date each plan year. For 2008, the expected return on plan assets for the pension plan will be 8%. The calculation of the accumulated postretirement benefits obligation assumes a weighted-average annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) of 12% for 2007. It further assumes the rate will gradually decrease to 5% by 2017 and remain at that level in future periods. The health care cost trend rate assumption has a significant effect on the amounts reported. A one-percentage point increase and decrease in assumed health care cost trend rates would have an immaterial effect on accumulated postretirement benefit obligations and total service and interest cost components. S-37 Information for our pension plans with accumulated benefit obligations in excess of plan assets (in millions) was as follows:
AS OF DECEMBER 31, ------------------ 2007 2006 ---- ---- Accumulated benefit obligation $ 1 $ 1 Projected benefit obligation 1 1 Fair value of plan assets(1) -- --
- ---------- (1) The plan is unfunded. COMPONENTS OF NET PERIODIC BENEFIT COST The components of net defined benefit pension plan and postretirement benefit plan expense (in millions) were as follows:
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS --------------------- ------------------------------ 2007 2006 2005 2007 2006 2005 ---- ---- ---- ---- ---- ---- Interest cost $ 7 $ 6 $ 5 $ 1 $ 1 $ 1 Expected return on plan assets (11) (9) (6) -- -- -- Recognized net actuarial (gain) loss -- 1 1 (1) -- -- ---- ---- ---- ---- ---- ---- Net periodic benefit expense (recovery) $ (4) $(2) $ -- $ -- $ 1 $ 1 ==== === ==== ==== ==== ====
LNC maintains a defined contribution plan for its U.S. financial planners and advisors ("agents"), including those of LNL. Contributions to this plan are based on a percentage of the agents' annual compensation as defined in the plan. Effective January 1, 1998, LNC assumed the liabilities for a non-contributory defined contribution plan covering certain highly compensated former CIGNA agents and employees. Contributions to this plan are made annually based upon varying percentages of annual eligible earnings as defined in the plan. Contributions to this plan are in lieu of any contributions to the qualified agent defined contribution plan. Effective January 1, 2000, this plan was expanded to include certain highly compensated LNC agents. The combined expenses for these plans were $4 million for the year ended December 31, 2007 and $3 million for the years ended December 31, 2006 and 2005. These expenses reflect both the contribution as well as changes in the measurement of the liabilities under these plans. PLAN ASSETS Our pension plan asset allocations by asset category (in millions) based on estimated fair values were as follows:
AS OF DECEMBER 31, ------------------ 2007 2006 ---- ---- Equity securities 52% 66% Fixed income securities 48% 32% Cash and cash equivalents 0% 2% ---- ---- Total plan asset allocations 100% 100% ==== ====
The primary investment objective of our defined benefit pension plan is for capital appreciation with an emphasis on avoiding undue risk. Investments can be made using the following asset classes: domestic and international equity, fixed income securities, real estate and other asset classes the investment managers deem prudent. Three- and five-year time horizons are utilized as there are inevitably short-run fluctuations, which will cause variations in investment performance. Each managed fund is expected to rank in the upper 50% of similar funds over the three-year periods and above an appropriate index over five-year periods. Managers are monitored for adherence to guidelines, changes in material factors and legal or regulatory actions. Managers not meeting these criteria will be subject to additional due diligence review, corrective action or possible termination. The following short-term ranges have been established for weightings in the various asset categories:
WEIGHTING RANGE --------------- TARGET RANGE ------ ----- Domestic large cap equity 35% 30%-40% International equity 15% 10%-20% Fixed income 50% 45%-55% Cash equivalents 0% 0%-5%
Within the broad ranges provided above, we currently target asset weightings as follows: domestic equity allocations (35%) are split into large cap growth (15%), large cap value (15%) and small cap (5%). Fixed income allocations are weighted between core fixed income and long term bonds to track changes in the plan's liability duration. The performance of the plan and the managed funds are monitored on a quarterly basis relative to the plan's objectives. The performance of the managed fund is measured against the following indices: Russell 1000, Europe, Australia and Far East, Lehman Aggregate and Citi-group 90-day T-Bill. LNC reviews this investment policy on an annual basis. The expected return on plan assets was determined based on historical and expected future returns of the various asset classes, using the plan target allocations. LNC reevaluates this assumption at an interim date each plan year. S-38 Prior to 2007, our plan assets were principally managed by LNC's Investment Management segment. During 2007, the management of the equity portion of the plan assets was transferred to third-party managers. LNC's Investment Management segment continues to manage the plan's fixed income securities, which comprise approximately 50% of plan assets. PLAN CASH FLOWS LNC does not expect to contribute to the qualified defined benefit pension plans in 2008. LNC expects to fund approximately the following amounts (in millions) for benefit payments for LNC's unfunded non-qualified defined benefit plan and postretirement benefit plan:
PENSION PLANS POSTRETIREMENT PLANS ------------------------------- ------------------------------ NON- QUALIFIED NOT DEFINED REFLECTING REFLECTING BENEFIT MEDICARE MEDICARE MEDICARE PENSION PART D PART D PART D PLANS SUBSIDY SUBSIDY SUBSIDY --------- ---------- -------- ---------- 2008 $ -- $1 $(1) $2 2009 -- 1 (1) 2 2010 -- 1 (1) 2 2011 -- 1 (1) 2 2012 -- 1 (1) 2 Thereafter -- 6 (1) 7
401(k), MONEY PURCHASE AND PROFIT SHARING PLANS LNC also sponsors contributory defined contribution plans for eligible U.S. employees and agents, including those of LNL. These plans include 401(k) plans and defined contribution money purchase plans for eligible agents of the former Jefferson-Pilot. LNC's contribution to both the employees' and agents' 401(k) plans, excluding the former Jefferson-Pilot agents, is equal to 50% of each participant's pre-tax contribution, not to exceed 6% of eligible compensation, and is invested as directed by the participant. As of April 3, 2006, LNC's contributions to the employees' 401(k) plan on behalf of the former Jefferson-Pilot employees were the same as the contribution provided to eligible Lincoln participants. LNC's contributions to the agents' 401(k) Plan on behalf of the former Jefferson-Pilot agents is equal to 10% of each participant's pre-tax contributions, not to exceed 6% of eligible compensation. An additional discretionary contribution of up to 100% may be made with respect to a participant's pre-tax contribution (up to 6% of base pay plus cash bonus). The amount of discretionary contribution varies according to whether LNC has met certain performance-based criteria as determined by the Compensation Committee of LNC's Board of Directors. On May 1, 2007, simultaneous with LNC's announcement of the freeze of the primary defined benefit pension plans, LNC announced a number of enhancements to their employees' 401(k) plan effective January 1, 2008. For all participants, including those of LNL, a number of new features will apply: 1) an increase in the basic employer match from $0.50 per each $1.00 that a participant contributes each pay period, up to 6% of eligible compensation, to $1.00 per each $1.00 that a participant contributes each pay period, up to 6% of eligible compensation (the 50% match will become a 100% match); 2) a guaranteed "core" employer contribution of 4% of eligible compensation per pay period which will be made regardless of whether the eligible employee elects to defer salary into the Plan; and 3) certain eligible employees will also qualify for a "transition" employer contribution between 0.2% and 8.0% of eligible compensation per pay. Eligibility to receive the additional transition employer contributions will be based on a combination of age and years of service, with a minimum 10-year service requirement for legacy LNC employees and a minimum 5-year service requirement for former Jefferson-Pilot employees. Eligibility for transition employer contributions will be determined based on age and service on December 31, 2007 (i.e., participants will not "grow" into transition credits thereafter). Transition employer contributions will cease on December 31, 2017. The discretionary employer match feature will be eliminated effective January 1, 2008. The Jefferson-Pilot Life Insurance Company Agents' Retirement Plan is a money purchase plan for eligible agents that provides for an employer contribution equal to 5% of a participant's eligible compensation. Expense for the 401(k) and profit sharing plans was $31 million, $22 million and $25 million for the years ended December 31, 2007, 2006 and 2005, respectively. DEFERRED COMPENSATION PLANS LNC sponsors the DC SERP for certain U.S. employees, including those of LNL, and deferred compensation plans for certain agents, including those of LNL. Plan participants may elect to defer payment of a portion of their compensation as defined by the plans. Plan participants may select from a menu of "phantom" investment options (identical to those offered under LNC's qualified savings plans) used as investment measures for calculating the investment return notionally credited to their deferrals. Under the terms of these plans, LNC agrees to pay out amounts based upon the aggregate performance of the investment measures selected by the participant. LNC makes matching contributions to these plans based upon amounts placed into the deferred compensation plans by individuals when participants exceed applicable limits of the Internal Revenue Code. The amount of LNC's contribution is calculated in a manner similar to the employer match calculation described in the 401(k) plans section above. Expense for these plans was $11 million, $17 million and $11 million for the years ended December 31, 2007, 2006 and 2005, respectively. These expenses reflect both our employer matching contributions of $1 million, $4 million and $3 million, respectively, as well as increases in the measurement of our liabilities net of the total return swap, described in Note 5, under these plans of $10 million, $13 million and $8 million for the years ended December 31, 2007, 2006 and 2005, respectively. The terms of the deferred compensation plans provide that plan participants who select LNC stock as the measure for their investment return will receive shares of LNC stock in settlement of this portion of their accounts at the time of distribution. In addition, participants are precluded from S-39 diversifying any portion of their deferred compensation plan account that has been credited to the stock unit fund. Consequently, changes in value of our stock do not affect the expenses associated with this portion of the deferred compensation plans. LNC also sponsors a deferred compensation plan for certain eligible agents, including those of LNL. Plan participants receive contributions based on their earnings. Plan participants may select from a menu of "phantom" investment options used as investment measures for calculating the investment return notionally credited to their deferrals. Under the terms of these plans, LNC agrees to pay out amounts based upon the aggregate performance of the investment measures selected by the participant. As a result of the merger with Jefferson-Pilot, LNC also sponsors a deferred compensation plan for former agents of Jefferson-Pilot. Plan participants may elect to defer payment of a portion of their compensation, as defined by the plan. Plan participants may select from a menu of "phantom" investment options used as investment measures for calculating the investment return notionally credited to their deferrals. Under the terms of the plan, LNC agrees to pay out amounts based upon the aggregate performance of the investment measures selected by the participant. LNC does not make matching contributions to this plan, and LNC stock is not an investment option of the plan. LNC also sponsors a deferred compensation plan for certain former agents of Jefferson-Pilot that participate in the Jefferson-Pilot Life Insurance Company Agents' Retirement Plan. The Plan provides for company contributions equal to 5% of eligible compensation for earnings in excess of the limits imposed by the Federal government. The total liabilities associated with the employee and agent plans were $137 million and $158 million as of December 31, 2007 and 2006, respectively. - -------------------------------------------------------------------------------- 17. STOCK-BASED INCENTIVE COMPENSATION PLANS Our employees are included in LNC's various incentive plans that provide for the issuance of stock options, stock incentive awards, SARs, restricted stock awards, performance shares (performance-vested shares as opposed to time-vested shares) and deferred stock units - also referred to as "restricted stock units." LNC has a policy of issuing new shares to satisfy option exercises. Total compensation expense (in millions) for all of our stock-based incentive compensation plans was as follows:
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ---- ---- ---- Stock options $ 10 $ 3 $ -- Shares 3 19 14 Cash awards -- 1 1 SARs 5 (1) 2 Restricted stock 6 1 1 ---- ---- ---- Total stock-based incentive compensation expense $ 24 $ 23 $ 18 ==== ==== ==== Recognized tax benefit $ 8 $ 8 $ 6
- -------------------------------------------------------------------------------- 18. STATUTORY INFORMATION AND RESTRICTIONS We prepare financial statements on the basis of SAP prescribed or permitted by the insurance departments of LNL and LLANY's states of domicile. Prescribed SAP includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners ("NAIC") as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. SAP differs from GAAP primarily due to charging policy acquisition costs to expense as incurred instead of deferring them to the extent recoverable and amortizing them as described in Note 1 above, establishing future contract benefit liabilities using different actuarial assumptions and valuing investments on a different basis. Statutory net income was $971 million, $299 million and $544 million for the years ended December 31, 2007, 2006 and 2005. The increase in statutory net income from 2006 to 2007 was driven primarily by two factors. The first factor was the release of statutory reserves as a result of the merger of JPL and JPFIC into LNL as described in Note 1. The second factor was an internal transfer of ownership of FPP from LNL to our parent company, LNC, as referenced in Note 1. As a result of this transfer, we recognized a realized gain for the cumulative unrealized gain of our investment in FPP as the date of the transfer. Statutory capital and surplus was $5.1 billion and $3.0 billion as of December 31, 2007 and 2006, respectively. LNL is domiciled in Indiana. The state of Indiana has adopted certain prescribed accounting practices that differ from those found in NAIC SAP. We calculate reserves on universal life policies based on the Indiana universal life method, which caused statutory surplus to be higher than NAIC statutory surplus by $246 million and $227 million as of December 31, 2007 and 2006, respectively. We are also permitted by Indiana to use a more conservative valuation interest rate on certain S-40 annuities, which caused statutory surplus to be lower than NAIC statutory surplus by $14 million as of December 31, 2007 and 2006. A new statutory reserving standard, Actuarial Guideline VACARVM, is being developed by the NAIC with an expected effective date of December 31, 2008. This standard could lead to higher benefit reserves, lower risk-based capital ratios and potentially reduce future dividend capacity from our insurance subsidiaries. LNL is subject to certain insurance department regulatory restrictions as to the transfer of funds and payment of dividends to the holding company. Generally, these restrictions pose no short-term liquidity concerns for the holding company. For example, under Indiana laws and regulations, we may pay dividends to LNC without prior approval of the Indiana Insurance Commissioner (the "Commissioner"), or must receive prior approval of the Commissioner to pay a dividend if such dividend, along with all other dividends paid within the preceding twelve consecutive months, exceed the statutory limitation. The current statutory limitation is the greater of (i) 10% of the insurer's policyholders' surplus, as shown on its last annual statement on file with the Commissioner; or (ii) the insurer's statutory net gain from operations for the previous twelve months. Indiana law gives the Commissioner broad discretion to disapprove requests for dividends in excess of these limits. We paid dividends of $144 million, $568 million and $200 million to LNC during the years ended December 31, 2007, 2006 and 2005, respectively, which did not require prior approval of the Commissioner. In addition, we paid cash dividends of $626 million and a non-cash dividend of $292 million (attributable to the FPP dividend) in 2007 after approval was received from the Commissioner. Based upon anticipated ongoing positive statutory earnings and favorable credit markets, LNL expects that we could pay dividends of approximately $895 million in 2008 without prior approval from the Commissioner. - -------------------------------------------------------------------------------- 19. FAIR VALUE OF FINANCIAL INSTRUMENTS The following discussion outlines the methodologies and assumptions used to determine the fair value of our 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 our financial instruments. FIXED MATURITY AND EQUITY SECURITIES Fair values for fixed maturity securities are based upon quoted market prices, where available. The fair value of private placements 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. For securities that are not actively traded and are not private placements, fair values are estimated using values obtained from independent pricing services. The fair values for equity securities are based on quoted market prices. MORTGAGE LOANS ON REAL ESTATE The fair value of mortgage loans on real estate is 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, quality 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. DERIVATIVE INSTRUMENTS We employ several different methods for determining the fair value of our derivative instruments. Fair values for derivative contracts are based on current settlement values. These values are based on: 1) quoted market prices; 2) industry standard models that are commercially available; and 3) broker quotes. These techniques project cash flows of the derivatives using current and implied future market conditions. We calculate the present value of the cash flows to determine the derivatives' current fair market value. OTHER INVESTMENTS AND CASH AND INVESTED CASH The carrying value of our assets classified as other investments and cash and invested cash on our Consolidated Balance Sheets approximates their fair value. Other investments include limited partnership and other privately held investments that are accounted for using the equity method of accounting. OTHER CONTRACT HOLDER FUNDS Future contract benefits and other contract holder funds on our Consolidated Balance Sheets include account values of investment contracts and certain guaranteed interest contracts. The fair values for the investment 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 other contract holder 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, nor have we determined the fair value of such contracts. SHORT-TERM AND LONG-TERM DEBT Fair values for our senior notes and capital securities are based on quoted market prices or estimated using discounted cash S-41 flow analysis based on our incremental borrowing rate at the balance sheet date for similar types of borrowing arrangements where quoted prices are not available. Fair values for junior subordinated debentures issued to affiliated trusts are based on quoted market prices. For short-term debt, excluding current maturities of long-term debt, the carrying value approximates fair value. GUARANTEES Our guarantees relate to mortgage loan pass-through certificates. Based on historical performance where repurchases have been negligible and the current status of the debt, none of the loans are delinquent and the fair value liability for the guarantees related to mortgage loan pass-through certificates is insignificant. INVESTMENT COMMITMENTS Fair values for commitments to make investments in fixed maturity securities (primarily private placements), limited partnerships, 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 Consolidated Balance Sheets and the commitment date. These estimates take into account changes in interest rates, the counterparties' credit standing and the remaining terms of the commitments. SEPARATE ACCOUNTS We report assets held in separate accounts at fair value. The related liabilities are reported at an amount equivalent to the separate account assets. The carrying values and estimated fair values of our financial instruments (in millions) were as follows:
AS OF DECEMBER 31, ----------------------------------------- 2007 2006 ------------------ ------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE -------- -------- -------- -------- ASSETS Available-for-sale securities: Fixed maturities $ 53,405 $ 53,405 $ 54,697 $ 54,697 Equity 134 134 218 218 Trading securities 2,533 2,533 2,820 2,820 Mortgage loans on real estate 7,117 7,291 7,344 7,530 Derivative instruments 172 172 245 245 Other investments 986 986 783 783 Cash and invested cash 1,395 1,395 1,762 1,762 LIABILITIES Other contract holder funds: Account value of certain investment contracts (21,173) (20,515) (28,628) (28,605) Remaining guaranteed interest and similar contracts (619) (619) (668) (668) Embedded derivative instruments -- living benefits (liabilities) contra liabilities (229) (229) 52 52 Reinsurance related derivative liability (211) (211) (218) (218) Short-term debt (173) (173) (21) (21) Long-term debt (1,675) (1,569) (1,439) (1,394) OFF-BALANCE-SHEET Guarantees -- (2) -- (3) Investment commitments -- -- -- (1,308)
S-42 - -------------------------------------------------------------------------------- 20. SEGMENT INFORMATION We provide products and services in two operating businesses, Individual Markets and Employer Markets, and report results through four business segments. We also have Other Operations which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the current manner by which our chief operating decision makers view and manage the business. The following is a brief description of these segments and Other Operations. INDIVIDUAL MARKETS The Individual Markets business provides its products through two segments: Annuities and Life Insurance. The Annuities segment provides tax-deferred investment growth and lifetime income opportunities for its clients by offering individual fixed annuities, including indexed annuities and variable annuities. The Annuities segment also offers broker-dealer services. The Life Insurance segment offers wealth protection and transfer opportunities through term insurance, a linked-benefit product (which is a universal life insurance policy linked with riders that provide for long-term care costs) and both single and survivorship versions of universal life and variable universal life. EMPLOYER MARKETS The Employer Markets business provides its products through two segments: Retirement Products and Group Protection. The Retirement Products segment includes two major lines of business: Defined Contribution and Executive Benefits. The Defined Contribution business provides employer-sponsored fixed and variable annuities and mutual fund-based programs in the 401(k), 403(b) and 457 plan marketplaces through a wide range of intermediaries including advisors, consultants, brokers, banks, wirehouses, third-party administrators and individual planners. The Executive Benefits business offers corporate-owned universal and variable universal life insurance and bank-owned universal and variable universal life insurance to small to mid-sized banks and mid to large-sized corporations, mostly through executive benefit brokers. The Group Protection segment offers group term life, disability and dental insurance to employers. OTHER OPERATIONS Other Operations includes the financial data for operations that are not directly related to the business segments, unallocated corporate items (such as investment income on investments related to the amount of statutory surplus that is not allocated to our business units and other corporate investments, interest expense on short-term and long-term borrowings, and certain expenses, including restructuring and merger-related expenses), along with the ongoing amortization of deferred gain on the indemnity reinsurance portion of the transaction with Swiss Re. Other Operations also includes the eliminations of intercompany transactions. Segment operating revenues and income (loss) from operations are internal measures used by our management to evaluate and assess the results of our segments. Operating revenues are GAAP revenues excluding net realized gains and losses and the amortization of deferred gain arising from reserve development on business sold through reinsurance. Income (loss) from operations is GAAP net income excluding net realized investment gains and losses, losses on early retirement of debt and reserve development net of related amortization on business sold through reinsurance. Our management and Board of Directors believe that operating revenues and income (loss) from operations explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in our current businesses because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Operating revenues and income (loss) from operations do not replace revenues and net income as the GAAP measures of our consolidated results of operations. Segment information (in millions) was as follows:
FOR THE YEARS ENDED DECEMBER 31, --------------------------- 2007 2006 2005 ------- ------- ------- REVENUES Operating revenues: Individual Markets: Annuities $ 2,237 $ 1,914 $ 1,309 Life Insurance 3,696 3,178 1,840 ------- ------- ------- Total Individual Markets 5,933 5,092 3,149 ------- ------- ------- Employer Markets: Retirement Products 1,423 1,356 1,168 Group Protection 1,500 1,032 -- ------- ------- ------- Total Employer Markets 2,923 2,388 1,168 ------- ------- ------- Other Operations 285 310 309 Realized loss(1) (112) (2) (16) Amortization of deferred gain on indemnity reinsurance related to reserve developments 9 1 1 ------- ------- ------- Total revenues $ 9,038 $ 7,789 $ 4,611 ======= ======= =======
- ---------- (1) See Note 4 for the pre-tax detail of the realized loss. S-43
FOR THE YEARS ENDED DECEMBER 31, -------------------------- 2007 2006 2005 ------- ------- ----- NET INCOME Operating income: Individual Markets: Annuities $ 401 $ 323 $ 197 Life Insurance 623 470 238 ------- ------- ----- Total Individual Markets 1,024 793 435 ------- ------- ----- Employer Markets: Retirement Products 225 249 206 Group Protection 114 99 -- ------- ------- ----- Total Employer Markets 339 348 206 ------- ------- ----- Other Operations (45) 20 12 Realized loss(1) (72) (1) (10) Reserve development, net of related amortization on business sold through indemnity reinsurance (7) 1 1 ------- ------- ----- Net income $ 1,239 $ 1,161 $ 644 ======= ======= =====
- ---------- (1) See Note 4 for the pre-tax detail of the realized loss.
FOR THE YEARS ENDED DECEMBER 31, 2007 2006 2005 ------ ------ ------ NET INVESTMENT INCOME Individual Markets: Annuities $1,028 $1,033 $ 608 Life Insurance 1,762 1,502 907 ------ ------ ------ Total Individual Markets 2,790 2,535 1,515 ------ ------ ------ Employer Markets: Retirement Products 1,100 1,054 892 Group Protection 115 80 -- ------ ------ ------ Total Employer Markets 1,215 1,134 892 ------ ------ ------ Other Operations 183 200 185 ------ ------ ------ Total net investment income $4,188 $3,869 $2,592 ====== ====== ======
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ---- ---- ----- AMORTIZATION OF DAC AND VOBA, NET OF INTEREST Individual Markets: Annuities $337 $316 $ 183 Life Insurance 467 436 259 ---- ---- ----- Total Individual Markets 804 752 442 ---- ---- ----- Employer Markets: Retirement Products 112 84 63 Group Protection 31 16 -- ---- ---- ----- Total Employer Markets 143 100 63 ---- ---- ----- Other Operations -- 1 (1) ---- ---- ----- Total amortization of DAC and VOBA $947 $853 $ 504 ==== ==== =====
FOR THE YEARS ENDED DECEMBER 31, ------------------- 2007 2006 2005 ----- ---- ----- FEDERAL INCOME TAX EXPENSE (BENEFIT) Individual Markets: Annuities $ 114 $ 46 $ 40 Life Insurance 317 235 115 ----- ---- ----- Total Individual Markets 431 281 155 ----- ---- ----- Employer Markets: Retirement Products 90 97 80 Group Protection 61 53 -- ----- ---- ----- Total Employer Markets 151 150 80 ----- ---- ----- Other Operations (35) 29 (6) Realized loss (39) -- (6) Loss on early retirement of debt -- -- -- Amortization of deferred gain on idemnity reinsurance related to reserve developments (4) -- -- ----- ---- ----- Total income tax expense $ 504 $460 $223 ===== ==== ====
S-44
AS OF DECEMBER 31, ------------------ 2007 2006 -------- -------- ASSETS Individual Markets: Annuities $ 81,112 $ 70,736 Life Insurance 40,780 42,177 -------- -------- Total Individual Markets 121,892 112,913 -------- -------- Employer Markets: Retirement Products 38,271 37,274 Group Protection 1,471 1,849 -------- -------- Total Employer Markets 39,742 39,123 -------- -------- Other Operations 12,692 12,780 -------- -------- Total assets $174,326 $164,816 ======== ========
- -------------------------------------------------------------------------------- 21. TRANSACTIONS WITH AFFILIATES Cash and short-term investments at December 31, 2007 and 2006 include our participation in a cash management agreement with LNC of $420 million and $389 million, respectively. Related investment income was $30 million, $14 million and $6 million in 2007, 2006 and 2005, respectively. Short-term debt represents notes payable to LNC of $18 million and $21 million at December 31, 2007 and 2006, respectively. Total interest expense for this short-term debt was $1 million, $2 million and $1 million for the years ended December 31, 2007, 2006 and 2005, respectively. As shown in Note 12, LNC supplied funding to us totaling $1.7 billion in 2007 and $1.4 billion in 2006, in exchange for notes. The interest expense on these notes was $96 million, $84 million and $78 million for the years ended December 31, 2007, 2006 and 2005, respectively. In accordance with service agreements with LNC and other subsidiaries of LNC for personnel and facilities usage, general management services and investment management services, we receive services from and provide services to affiliated companies and also receive an allocation of corporate overhead from LNC. Corporate overhead expenses are assigned based on specific methodologies for each function. The majority of the expenses are assigned based on the following methodologies: assets by product, assets under management, weighted number of policy applications, weighted policies in force, and sales. This resulted in net payments of $99 million, $59 million and $122 million for the years ended December 31, 2007, 2006 and 2005, respectively, which is reflected in underwriting, acquisition, insurance and other expenses on our Consolidated Statements of Income. Our related accounts payable to affiliates, which is included in other assets on our Consolidated Balance Sheets, was $10 million and $8 million as of December 31, 2007 and 2006, respectively. A transfer pricing arrangement is in place between LFD and Delaware Management Holdings, Inc. ("DMH"), a wholly owned subsidiary of LNC, related to the wholesaling of DMH's investment products. As a result, we received fees of $62 million, $36 million and $41 million from DMH for transfer pricing in 2007, 2006, and 2005. DMH is responsible for the management of our general account investments. We paid fees of $38 million, $57 million and $72 million for the years ended December 31, 2007, 2006 and 2005, respectively, to DMH for investment management services. These fees are reflected in net investment income on our Consolidated Statements of Income. We cede and accept reinsurance from affiliated companies. As discussed in Note 8, we cede certain Guaranteed Benefit risks (including certain GMDB and GMWB benefits) to Lincoln National Reinsurance Company (Barbados) Ltd. ("LNR Barbados"). We also cede certain risks for certain UL policies, which resulted from recent actuarial reserving guidelines, to LNR Barbados. The caption insurance premiums, on the accompanying Consolidated Statements of Income, was reduced for premiums paid on these contracts for the years ended December 31, 2007, 2006 and 2005 by $308 million, $234 million and $219 million, respectively. Future contract benefits on the accompanying Consolidated Balance Sheets have been reduced by $1.3 billion and $1.1 billion as of December 31, 2007 and 2006, respectively. Substantially all reinsurance ceded to affiliated companies is with unauthorized companies. To take a reserve credit for such reinsurance, we hold assets from the reinsurer, including funds held under reinsurance treaties, and are the beneficiary on letters of credit aggregating $1.4 billion and $1.1 billion at December 31, 2007 and 2006, respectively. The letters of credit are issued by banks and represent guarantees of performance under the reinsurance agreement, and are guaranteed by LNC. S-45 22. Supplemental Disclosures of Cash Flow Information The following summarizes our supplemental cash flow data (in millions):
FOR THE YEARS ENDED DECEMBER 31, ------------------------- 2007 2006 2005 ------- -------- ---- Interest paid $ 104 $ 85 $59 Income taxes paid 194 310 75 Significant non-cash investing and financing transactions: Business combinations: Fair value of assets acquired (includes cash and invested cash) $ 41 $ 37,356 $-- Fair value of liabilities assumed (50) (30,424) -- ------- -------- ---- Total purchase price $ (9) $ 6,932 $-- ======= ======== ==== Dividend of FPP: Carrying value of assets (includes cash and invested cash) $ 2,772 $ -- $-- Carrying value of liabilities (2,280) -- -- ------- -------- ---- Total dividend of FPP $ 492 $ -- $-- ======= ======== ====
S-46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors The Lincoln National Life Insurance Company We have audited the accompanying consolidated balance sheets of The Lincoln National Life Insurance Company and its subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2007. 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 consolidated financial position of The Lincoln National Life Insurance Company and its subsidiaries at December 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, in 2007 the Company changed its method of accounting for deferred acquisition costs in connection with modifications or exchanges of insurance contracts as well as its method of accounting for uncertainty in income taxes. Also, as discussed in Note 2 of the consolidated financial statements, in 2006 the Company changed its method of accounting for defined benefit pension and other post retirement plans. /s/ Ernst & Young LLP Philadelphia, Pennsylvania March 28, 2008 S-47 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M M-1 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007
MORTALITY & EXPENSE CONTRACT CONTRACT GUARANTEE PURCHASES REDEMPTIONS CHARGES DUE FROM DUE TO PAYABLE TO THE LINCOLN THE LINCOLN THE LINCOLN NATIONAL LIFE NATIONAL LIFE NATIONAL LIFE INSURANCE INSURANCE INSURANCE SUBACCOUNT INVESTMENTS COMPANY TOTAL ASSETS COMPANY COMPANY NET ASSETS - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $21,597,771 $ -- $21,597,771 $189 $1,414 $21,596,168 AIM V.I. Core Equity 24,062,382 6,397 24,068,779 -- 1,570 24,067,209 AIM V.I. Diversified Income 707,566 -- 707,566 70 46 707,450 AIM V.I. International Growth 10,773,878 18,824 10,792,702 -- 702 10,792,000 ABVPSF Global Technology Class A 2,508,849 13,803 2,522,652 -- 149 2,522,503 ABVPSF Growth and Income Class A 16,978,108 2,395 16,980,503 -- 1,018 16,979,485 ABVPSF International Value Class A 4,799,910 50,146 4,850,056 -- 238 4,849,818 ABVPSF Large Cap Growth Class A 2,556,462 10,120 2,566,582 -- 162 2,566,420 ABVPSF Small/Mid Cap Value Class A 12,052,137 5,165 12,057,302 -- 695 12,056,607 American Century VP Inflation Protection 7,334,038 8,328 7,342,366 -- 394 7,341,972 American Funds Global Growth Class 2 12,370,685 100,801 12,471,486 -- 672 12,470,814 American Funds Global Small Capitalization Class 2 31,822,982 17,870 31,840,852 -- 1,911 31,838,941 American Funds Growth Class 2 118,884,767 793,808 119,678,575 -- 7,177 119,671,398 American Funds Growth-Income Class 2 90,436,412 671,155 91,107,567 -- 5,456 91,102,111 American Funds International Class 2 57,612,545 97,936 57,710,481 -- 3,401 57,707,080 Delaware VIPT Capital Reserves 224,489 313 224,802 -- 13 224,789 Delaware VIPT Diversified Income 12,257,630 101,096 12,358,726 -- 647 12,358,079 Delaware VIPT Emerging Markets 27,841,170 70,093 27,911,263 -- 1,645 27,909,618 Delaware VIPT High Yield 14,403,694 10,370 14,414,064 -- 853 14,413,211 Delaware VIPT REIT 23,544,919 13,177 23,558,096 -- 1,375 23,556,721 Delaware VIPT Small Cap Value 39,555,289 29,052 39,584,341 -- 2,433 39,581,908 Delaware VIPT Trend 22,378,052 3,901 22,381,953 -- 1,414 22,380,539 Delaware VIPT U.S. Growth 945,772 4 945,776 -- 57 945,719 Delaware VIPT Value 15,104,162 18,067 15,122,229 -- 895 15,121,334 DWS VIP Equity 500 Index 60,633,798 6,231 60,640,029 -- 3,782 60,636,247 DWS VIP Small Cap Index 13,620,871 1,654 13,622,525 -- 828 13,621,697 Fidelity VIP Asset Manager 869,705 -- 869,705 428 57 869,220 Fidelity VIP Contrafund Service Class 61,582,014 84,805 61,666,819 -- 3,636 61,663,183 Fidelity VIP Equity-Income 4,826,014 -- 4,826,014 3,560 318 4,822,136 Fidelity VIP Equity-Income Service Class 7,684,363 17,583 7,701,946 -- 479 7,701,467 Fidelity VIP Growth Service Class 10,001,760 -- 10,001,760 3,943 627 9,997,190 Fidelity VIP Growth Opportunities Service Class 4,453,331 -- 4,453,331 194 288 4,452,849 Fidelity VIP High Income Service Class 1,626,625 1,897 1,628,522 -- 108 1,628,414 Fidelity VIP Investment Grade Bond 2,533,413 -- 2,533,413 494 166 2,532,753 Fidelity VIP Mid Cap Service Class 7,500,757 34,891 7,535,648 -- 380 7,535,268 Fidelity VIP Overseas Service Class 6,797,354 6,887 6,804,241 -- 392 6,803,849 FTVIPT Franklin Income Securities 3,605,027 7,086 3,612,113 -- 179 3,611,934 FTVIPT Franklin Small-Mid Cap Growth Securities 9,845,377 2,741 9,848,118 -- 581 9,847,537 FTVIPT Mutual Shares Securities 2,852,452 4,029 2,856,481 -- 145 2,856,336 FTVIPT Templeton Foreign Securities 4,124,931 -- 4,124,931 221 272 4,124,438 FTVIPT Templeton Foreign Securities Class 2 7,764,263 1,310 7,765,573 -- 511 7,765,062 FTVIPT Templeton Global Asset Allocation 870,912 -- 870,912 39 57 870,816 FTVIPT Templeton Global Income Securities 3,963,583 115,246 4,078,829 -- 195 4,078,634 FTVIPT Templeton Growth Securities 9,847,066 4,150 9,851,216 -- 595 9,850,621 FTVIPT Templeton Growth Securities Class 2 3,716,886 -- 3,716,886 36 245 3,716,605 Janus Aspen Series Balanced 13,156,456 -- 13,156,456 530 867 13,155,059 Janus Aspen Series Balanced Service Shares 7,146,310 2,257 7,148,567 -- 454 7,148,113 Janus Aspen Series Global Technology Service Shares 1,783,262 1,213 1,784,475 -- 116 1,784,359
See accompanying notes. M-2
MORTALITY & EXPENSE CONTRACT CONTRACT GUARANTEE PURCHASES REDEMPTIONS CHARGES DUE FROM DUE TO PAYABLE TO THE LINCOLN THE LINCOLN THE LINCOLN NATIONAL LIFE NATIONAL LIFE NATIONAL LIFE INSURANCE INSURANCE INSURANCE SUBACCOUNT INVESTMENTS COMPANY TOTAL ASSETS COMPANY COMPANY NET ASSETS - -------------------------------------------------------------------------------------------------------------------------------- Janus Aspen Series Mid Cap Growth Service Shares $ 5,738,966 $ 2,121 $ 5,741,087 $ -- $ 364 $ 5,740,723 Janus Aspen Series Worldwide Growth 14,508,366 3,255 14,511,621 -- 937 14,510,684 Janus Aspen Series Worldwide Growth Service Shares 3,350,457 28 3,350,485 -- 219 3,350,266 Lincoln VIPT Baron Growth Opportunities 174,539 56 174,595 -- 10 174,585 Lincoln VIPT Baron Growth Opportunities Service Class 6,522,616 1,503 6,524,119 -- 405 6,523,714 Lincoln VIPT Capital Growth 3,063 -- 3,063 -- -- 3,063 Lincoln VIPT Cohen & Steers Global Real Estate 1,867,400 10,326 1,877,726 -- 106 1,877,620 Lincoln VIPT Delaware Bond 55,668,769 20,000 55,688,769 -- 3,372 55,685,397 Lincoln VIPT Delaware Growth and Income 1,105,567 426 1,105,993 -- 54 1,105,939 Lincoln VIPT Delaware Social Awareness 3,703,315 14,145 3,717,460 -- 224 3,717,236 Lincoln VIPT Delaware Special Opportunities 101,073 -- 101,073 -- 6 101,067 Lincoln VIPT FI Equity-Income 6,085,619 645 6,086,264 -- 380 6,085,884 Lincoln VIPT Janus Capital Appreciation 7,052,823 5,060 7,057,883 -- 443 7,057,440 Lincoln VIPT Marsico International Growth 809,215 1,970 811,185 -- 48 811,137 Lincoln VIPT MFS Value 167,526 11,258 178,784 -- 9 178,775 Lincoln VIPT Mid-Cap Growth 151,466 2,527 153,993 -- 7 153,986 Lincoln VIPT Mid-Cap Value 650,789 1,791 652,580 -- 31 652,549 Lincoln VIPT Mondrian International Value 23,330,275 11,973 23,342,248 -- 1,378 23,340,870 Lincoln VIPT Money Market 47,114,522 57,261 47,171,783 -- 2,737 47,169,046 Lincoln VIPT S&P 500 Index 1,388,207 9,540 1,397,747 -- 74 1,397,673 Lincoln VIPT Small-Cap Index 286,087 4,782 290,869 -- 15 290,854 Lincoln VIPT T. Rowe Price Growth Stock 227,325 1,582 228,907 -- 12 228,895 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 1,592,909 381 1,593,290 -- 94 1,593,196 Lincoln VIPT Templeton Growth 76,290 927 77,217 -- 4 77,213 Lincoln VIPT UBS Global Asset Allocation 2,857,494 3,287 2,860,781 -- 170 2,860,611 Lincoln VIPT Value Opportunities 11,674 62 11,736 -- 1 11,735 Lincoln VIPT Wilshire 2010 Profile 7,200 -- 7,200 -- -- 7,200 Lincoln VIPT Wilshire 2020 Profile 12,442 -- 12,442 -- 1 12,441 Lincoln VIPT Wilshire 2030 Profile 195,268 -- 195,268 -- 9 195,259 Lincoln VIPT Wilshire 2040 Profile 186,192 -- 186,192 -- 8 186,184 Lincoln VIPT Wilshire Aggressive Profile 3,555,869 30,407 3,586,276 -- 172 3,586,104 Lincoln VIPT Wilshire Conservative Profile 1,987,842 950 1,988,792 -- 89 1,988,703 Lincoln VIPT Wilshire Moderate Profile 17,568,812 -- 17,568,812 143,151 850 17,424,811 Lincoln VIPT Wilshire Moderately Aggressive Profile 19,047,259 67,655 19,114,914 -- 904 19,114,010 M Fund Brandes International Equity 2,814,829 2,300 2,817,129 -- 132 2,816,997 M Fund Business Opportunity Value 1,156,569 -- 1,156,569 -- 51 1,156,518 M Fund Frontier Capital Appreciation 929,406 1,533 930,939 -- 46 930,893 M Fund Turner Core Growth 1,516,505 1,533 1,518,038 -- 73 1,517,965 MFS VIT Core Equity 937,098 24 937,122 -- 59 937,063 MFS VIT Emerging Growth 13,303,220 -- 13,303,220 375 863 13,301,982 MFS VIT Total Return 30,361,476 -- 30,361,476 750 1,892 30,358,834 MFS VIT Utilities 28,891,936 71,610 28,963,546 -- 1,809 28,961,737 NB AMT Mid-Cap Growth 23,178,186 3,749 23,181,935 -- 1,432 23,180,503 NB AMT Partners 2,825,585 -- 2,825,585 100 184 2,825,301 NB AMT Regency 8,543,792 1,218 8,545,010 -- 520 8,544,490 PIMCO VIT OPCAP Global Equity 519,250 -- 519,250 4,658 34 514,558 PIMCO VIT OPCAP Managed 691,016 106 691,122 -- 46 691,076 Putnam VT Growth & Income Class IB 2,425,289 -- 2,425,289 229 155 2,424,905 Putnam VT Health Sciences Class IB 2,081,318 353 2,081,671 -- 136 2,081,535
M-3 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2007
DIVIDENDS FROM MORTALITY AND NET INVESTMENT EXPENSE INVESTMENT SUBACCOUNT INCOME GUARANTEE CHARGES INCOME (LOSS) - ------------------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation $ -- $(168,216) $ (168,216) AIM V.I. Core Equity 269,317 (192,811) 76,506 AIM V.I. Diversified Income 53,148 (5,873) 47,275 AIM V.I. International Growth 43,545 (83,150) (39,605) ABVPSF Global Technology Class A -- (13,773) (13,773) ABVPSF Growth and Income Class A 244,852 (123,546) 121,306 ABVPSF International Value Class A 36,872 (19,089) 17,783 ABVPSF Large Cap Growth Class A -- (16,842) (16,842) ABVPSF Small/Mid Cap Value Class A 107,070 (84,348) 22,722 American Century VP Inflation Protection 296,805 (41,020) 255,785 American Funds Global Growth Class 2 296,462 (66,930) 229,532 American Funds Global Small Capitalization Class 2 867,689 (217,377) 650,312 American Funds Growth Class 2 902,484 (825,959) 76,525 American Funds Growth-Income Class 2 1,385,759 (651,463) 734,296 American Funds International Class 2 802,836 (358,345) 444,491 Delaware VIPT Capital Reserves 9,415 (1,345) 8,070 Delaware VIPT Diversified Income 278,209 (66,044) 212,165 Delaware VIPT Emerging Markets 343,871 (163,211) 180,660 Delaware VIPT High Yield 898,284 (101,720) 796,564 Delaware VIPT REIT 388,950 (205,853) 183,097 Delaware VIPT Small Cap Value 217,778 (327,462) (109,684) Delaware VIPT Trend -- (172,224) (172,224) Delaware VIPT U.S. Growth -- (5,980) (5,980) Delaware VIPT Value 237,065 (113,214) 123,851 DWS VIP Equity 500 Index 926,620 (467,269) 459,351 DWS VIP Small Cap Index 124,956 (106,699) 18,257 Fidelity VIP Asset Manager 49,251 (6,399) 42,852 Fidelity VIP Contrafund Service Class 495,491 (398,613) 96,878 Fidelity VIP Equity-Income 91,745 (41,657) 50,088 Fidelity VIP Equity-Income Service Class 137,262 (60,415) 76,847 Fidelity VIP Growth Service Class 47,878 (59,269) (11,391) Fidelity VIP Growth Opportunities Service Class -- (32,457) (32,457) Fidelity VIP High Income Service Class 134,928 (13,046) 121,882 Fidelity VIP Investment Grade Bond 102,643 (20,117) 82,526 Fidelity VIP Mid Cap Service Class 40,117 (34,735) 5,382 Fidelity VIP Overseas Service Class 186,706 (39,203) 147,503 FTVIPT Franklin Income Securities 67,683 (12,400) 55,283 FTVIPT Franklin Small-Mid Cap Growth Securities -- (66,007) (66,007) FTVIPT Mutual Shares Securities 26,211 (10,773) 15,438 FTVIPT Templeton Foreign Securities 83,270 (32,010) 51,260 FTVIPT Templeton Foreign Securities Class 2 149,240 (60,590) 88,650 FTVIPT Templeton Global Asset Allocation 150,960 (7,106) 143,854 FTVIPT Templeton Global Income Securities 70,806 (15,549) 55,257 FTVIPT Templeton Growth Securities 150,584 (74,662) 75,922 FTVIPT Templeton Growth Securities Class 2 51,446 (33,641) 17,805 Janus Aspen Series Balanced 327,111 (101,770) 225,341 Janus Aspen Series Balanced Service Shares 160,901 (54,438) 106,463 Janus Aspen Series Global Technology Service Shares 5,666 (12,943) (7,277) Janus Aspen Series Mid Cap Growth Service Shares 3,221 (33,113) (29,892) Janus Aspen Series Worldwide Growth 112,041 (116,411) (4,370) Janus Aspen Series Worldwide Growth Service Shares 19,453 (27,768) (8,315) Lincoln VIPT Baron Growth Opportunities -- (593) (593) Lincoln VIPT Baron Growth Opportunities Service Class -- (48,665) (48,665) Lincoln VIPT Capital Growth 3 (4) (1) Lincoln VIPT Cohen & Steers Global Real Estate 8,818 (5,899) 2,919 Lincoln VIPT Core -- (332) (332) Lincoln VIPT Delaware Bond 2,672,906 (386,770) 2,286,136
See accompanying notes. M-4
NET INCREASE DIVIDENDS NET CHANGE (DECREASE) FROM TOTAL IN UNREALIZED IN NET ASSETS NET REALIZED NET REALIZED NET REALIZED APPRECIATION OR RESULTING GAIN (LOSS) GAIN ON GAIN (LOSS) DEPRECIATION FROM SUBACCOUNT ON INVESTMENTS INVESTMENTS ON INVESTMENTS ON INVESTMENTS OPERATIONS - ----------------------------------------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $ 171,232 $ -- $ 171,232 $ 2,220,040 $ 2,223,056 AIM V.I. Core Equity 414,594 -- 414,594 1,250,159 1,741,259 AIM V.I. Diversified Income (11,435) -- (11,435) (29,178) 6,662 AIM V.I. International Growth 907,674 -- 907,674 483,020 1,351,089 ABVPSF Global Technology Class A 98,017 -- 98,017 205,740 289,984 ABVPSF Growth and Income Class A 353,081 831,050 1,184,131 (599,752) 705,685 ABVPSF International Value Class A 80,063 121,944 202,007 (156,791) 62,999 ABVPSF Large Cap Growth Class A 83,023 -- 83,023 204,789 270,970 ABVPSF Small/Mid Cap Value Class A 227,492 791,824 1,019,316 (1,016,136) 25,902 American Century VP Inflation Protection (9,409) -- (9,409) 308,473 554,849 American Funds Global Growth Class 2 240,774 396,089 636,863 411,467 1,277,862 American Funds Global Small Capitalization Class 2 1,695,142 2,222,222 3,917,364 580,010 5,147,686 American Funds Growth Class 2 2,283,343 7,635,743 9,919,086 1,853,036 11,848,647 American Funds Growth-Income Class 2 2,052,775 2,872,458 4,925,233 (2,172,000) 3,487,529 American Funds International Class 2 1,147,471 2,385,089 3,532,560 4,672,460 8,649,511 Delaware VIPT Capital Reserves (509) -- (509) (385) 7,176 Delaware VIPT Diversified Income 43,319 22,747 66,066 400,063 678,294 Delaware VIPT Emerging Markets 1,598,909 1,487,098 3,086,007 3,837,556 7,104,223 Delaware VIPT High Yield 105,852 -- 105,852 (643,699) 258,717 Delaware VIPT REIT 370,406 5,821,161 6,191,567 (10,559,288) (4,184,624) Delaware VIPT Small Cap Value 1,480,025 3,459,818 4,939,843 (7,941,065) (3,110,906) Delaware VIPT Trend 1,175,440 147,762 1,323,202 947,189 2,098,167 Delaware VIPT U.S. Growth 37,815 -- 37,815 62,736 94,571 Delaware VIPT Value 445,255 374,178 819,433 (1,513,653) (570,369) DWS VIP Equity 500 Index 1,795,030 -- 1,795,030 501,507 2,755,888 DWS VIP Small Cap Index 321,572 915,729 1,237,301 (1,606,185) (350,627) Fidelity VIP Asset Manager 10,125 21,375 31,500 34,354 108,706 Fidelity VIP Contrafund Service Class 1,037,259 14,785,193 15,822,452 (7,516,155) 8,403,175 Fidelity VIP Equity-Income 146,689 404,566 551,255 (523,276) 78,067 Fidelity VIP Equity-Income Service Class 149,036 645,127 794,163 (824,165) 46,845 Fidelity VIP Growth Service Class 395,245 8,203 403,448 1,337,221 1,729,278 Fidelity VIP Growth Opportunities Service Class 128,839 -- 128,839 731,990 828,372 Fidelity VIP High Income Service Class 512 -- 512 (92,910) 29,484 Fidelity VIP Investment Grade Bond (2,603) -- (2,603) 8,244 88,167 Fidelity VIP Mid Cap Service Class 74,183 349,507 423,690 273,187 702,259 Fidelity VIP Overseas Service Class 151,305 336,779 488,084 124,089 759,676 FTVIPT Franklin Income Securities 6,890 12,035 18,925 (56,708) 17,500 FTVIPT Franklin Small-Mid Cap Growth Securities 218,294 657,547 875,841 36,382 846,216 FTVIPT Mutual Shares Securities 7,189 56,999 64,188 (90,525) (10,899) FTVIPT Templeton Foreign Securities 160,564 172,420 332,984 174,147 558,391 FTVIPT Templeton Foreign Securities Class 2 390,496 340,399 730,895 212,013 1,031,558 FTVIPT Templeton Global Asset Allocation 2,637 195,464 198,101 (265,967) 75,988 FTVIPT Templeton Global Income Securities 24,011 -- 24,011 180,165 259,433 FTVIPT Templeton Growth Securities 336,496 423,849 760,345 (658,128) 178,139 FTVIPT Templeton Growth Securities Class 2 547,712 164,149 711,861 (613,956) 115,710 Janus Aspen Series Balanced 218,287 -- 218,287 714,675 1,158,303 Janus Aspen Series Balanced Service Shares 168,985 -- 168,985 357,975 633,423 Janus Aspen Series Global Technology Service Shares 56,717 -- 56,717 252,818 302,258 Janus Aspen Series Mid Cap Growth Service Shares 151,235 22,356 173,591 643,493 787,192 Janus Aspen Series Worldwide Growth 86,888 -- 86,888 1,159,335 1,241,853 Janus Aspen Series Worldwide Growth Service Shares 179,277 -- 179,277 124,669 295,631 Lincoln VIPT Baron Growth Opportunities (60) -- (60) (5,089) (5,742) Lincoln VIPT Baron Growth Opportunities Service Class 516,588 663,374 1,179,962 (959,789) 171,508 Lincoln VIPT Capital Growth 1 -- 1 56 56 Lincoln VIPT Cohen & Steers Global Real Estate (11,278) -- (11,278) (224,374) (232,733) Lincoln VIPT Core 16,710 -- 16,710 (14,242) 2,136 Lincoln VIPT Delaware Bond 3,051 -- 3,051 143,052 2,432,239
M-5
DIVIDENDS FROM MORTALITY AND NET INVESTMENT EXPENSE INVESTMENT SUBACCOUNT INCOME GUARANTEE CHARGES INCOME (LOSS) - ---------------------------------------------------------------------------------------------- Lincoln VIPT Delaware Growth and Income $ 12,482 $ (5,818) $ 6,664 Lincoln VIPT Delaware Social Awareness 32,580 (27,445) 5,135 Lincoln VIPT Delaware Special Opportunities 767 (166) 601 Lincoln VIPT FI Equity-Income 74,329 (46,374) 27,955 Lincoln VIPT Growth -- (165) (165) Lincoln VIPT Growth Opportunities -- (230) (230) Lincoln VIPT Janus Capital Appreciation 17,529 (48,203) (30,674) Lincoln VIPT Marsico International Growth 5,684 (1,285) 4,399 Lincoln VIPT MFS Value 1,458 (239) 1,219 Lincoln VIPT Mid-Cap Growth -- (180) (180) Lincoln VIPT Mid-Cap Value 924 (1,315) (391) Lincoln VIPT Mondrian International Value 451,785 (157,308) 294,477 Lincoln VIPT Money Market 2,231,811 (334,477) 1,897,334 Lincoln VIPT S&P 500 Index 12,683 (2,694) 9,989 Lincoln VIPT Small-Cap Index 1,262 (431) 831 Lincoln VIPT T. Rowe Price Growth Stock 290 (284) 6 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth -- (8,291) (8,291) Lincoln VIPT Templeton Growth 857 (99) 758 Lincoln VIPT UBS Global Asset Allocation 44,595 (18,780) 25,815 Lincoln VIPT Value Opportunities 2 (2) -- Lincoln VIPT Wilshire 2010 Profile 34 (11) 23 Lincoln VIPT Wilshire 2020 Profile 42 (15) 27 Lincoln VIPT Wilshire 2030 Profile 407 (230) 177 Lincoln VIPT Wilshire 2040 Profile 1,236 (261) 975 Lincoln VIPT Wilshire Aggressive Profile 27,133 (14,153) 12,980 Lincoln VIPT Wilshire Conservative Profile 34,369 (5,480) 28,889 Lincoln VIPT Wilshire Moderate Profile 219,398 (80,932) 138,466 Lincoln VIPT Wilshire Moderately Aggressive Profile 247,724 (71,429) 176,295 M Fund Brandes International Equity 57,034 (14,681) 42,353 M Fund Business Opportunity Value 7,511 (5,697) 1,814 M Fund Frontier Capital Appreciation -- (5,237) (5,237) M Fund Turner Core Growth 5,360 (7,655) (2,295) MFS VIT Core Equity 2,916 (6,796) (3,880) MFS VIT Emerging Growth -- (97,950) (97,950) MFS VIT Total Return 748,290 (228,782) 519,508 MFS VIT Utilities 223,101 (188,931) 34,170 NB AMT Mid-Cap Growth -- (166,582) (166,582) NB AMT Partners 17,858 (21,823) (3,965) NB AMT Regency 44,302 (72,681) (28,379) PIMCO VIT OPCAP Global Equity 5,049 (4,708) 341 PIMCO VIT OPCAP Managed 15,223 (5,799) 9,424 Putnam VT Growth & Income Class IB 34,257 (20,352) 13,905 Putnam VT Health Sciences Class IB 17,451 (17,471) (20)
See accompanying notes. M-6
NET INCREASE DIVIDENDS NET CHANGE (DECREASE) FROM NET TOTAL IN UNREALIZED IN NET ASSETS NET REALIZED REALIZED NET REALIZED APPRECIATION OR RESULTING GAIN (LOSS) GAIN ON GAIN (LOSS) DEPRECIATION FROM SUBACCOUNT ON INVESTMENTS INVESTMENTS ON INVESTMENTS ON INVESTMENTS OPERATIONS - ------------------------------------------------------------------------------------------------------------------------------- Lincoln VIPT Delaware Growth and Income $ 6,009 $ -- $ 6,009 $ 34,794 $ 47,467 Lincoln VIPT Delaware Social Awareness 146,781 -- 146,781 (75,366) 76,550 Lincoln VIPT Delaware Special Opportunities (112) 766 654 (4,458) (3,203) Lincoln VIPT FI Equity-Income 106,975 593,421 700,396 (550,656) 177,695 Lincoln VIPT Growth 9,860 -- 9,860 (3,826) 5,869 Lincoln VIPT Growth Opportunities 5,170 -- 5,170 (1,336) 3,604 Lincoln VIPT Janus Capital Appreciation 18,189 -- 18,189 1,128,323 1,115,838 Lincoln VIPT Marsico International Growth (3,881) -- (3,881) (6,450) (5,932) Lincoln VIPT MFS Value (168) -- (168) (3,590) (2,539) Lincoln VIPT Mid-Cap Growth 4,285 -- 4,285 1,649 5,754 Lincoln VIPT Mid-Cap Value (15,993) -- (15,993) (29,375) (45,759) Lincoln VIPT Mondrian International Value 945,366 563,271 1,508,637 300,686 2,103,800 Lincoln VIPT Money Market -- -- -- -- 1,897,334 Lincoln VIPT S&P 500 Index (2,621) -- (2,621) (35,517) (28,149) Lincoln VIPT Small-Cap Index (2,900) -- (2,900) (7,706) (9,775) Lincoln VIPT T. Rowe Price Growth Stock 35 -- 35 3,555 3,596 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 61,311 -- 61,311 41,302 94,322 Lincoln VIPT Templeton Growth 78 -- 78 (1,361) (525) Lincoln VIPT UBS Global Asset Allocation 51,010 120,192 171,202 (59,561) 137,456 Lincoln VIPT Value Opportunities (3) -- (3) (186) (189) Lincoln VIPT Wilshire 2010 Profile 11 -- 11 258 292 Lincoln VIPT Wilshire 2020 Profile (2) -- (2) (48) (23) Lincoln VIPT Wilshire 2030 Profile (3) -- (3) 1,621 1,795 Lincoln VIPT Wilshire 2040 Profile 351 -- 351 5,061 6,387 Lincoln VIPT Wilshire Aggressive Profile 11,842 33,501 45,343 137,855 196,178 Lincoln VIPT Wilshire Conservative Profile (2,962) 1,483 (1,479) 25,130 52,540 Lincoln VIPT Wilshire Moderate Profile 320,770 59,767 380,537 580,918 1,099,921 Lincoln VIPT Wilshire Moderately Aggressive Profile 118,986 150,077 269,063 466,961 912,319 M Fund Brandes International Equity 84,476 373,393 457,869 (337,550) 162,672 M Fund Business Opportunity Value 10,174 91,335 101,509 (54,430) 48,893 M Fund Frontier Capital Appreciation 36,004 83,007 119,011 (21,030) 92,744 M Fund Turner Core Growth 58,293 105,820 164,113 102,691 264,509 MFS VIT Core Equity 61,130 -- 61,130 28,913 86,163 MFS VIT Emerging Growth 137,894 -- 137,894 2,251,957 2,291,901 MFS VIT Total Return 273,806 715,454 989,260 (531,758) 977,010 MFS VIT Utilities 1,141,931 1,617,142 2,759,073 2,856,478 5,649,721 NB AMT Mid-Cap Growth 995,220 -- 995,220 3,367,908 4,196,546 NB AMT Partners 86,782 279,457 366,239 (143,022) 219,252 NB AMT Regency 660,823 266,219 927,042 (694,928) 203,735 PIMCO VIT OPCAP Global Equity 14,714 146,859 161,573 (126,475) 35,439 PIMCO VIT OPCAP Managed 6,719 51,334 58,053 (50,148) 17,329 Putnam VT Growth & Income Class IB 203,748 393,646 597,394 (789,249) (177,950) Putnam VT Health Sciences Class IB 54,079 -- 54,079 (83,327) (29,268)
M-7 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M STATEMENTS OF CHANGES IN NET ASSETS YEARS ENDED DECEMBER 31, 2006 AND 2007
AIM V.I. AIM V.I. AIM V.I. CAPITAL AIM V.I. CORE DIVERSIFIED INTERNATIONAL APPRECIATION EQUITY INCOME GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $ 2,731,708 $ -- $616,093 $ 7,184,524 Changes From Operations: - Net investment income (loss) (104,348) 4,782 38,050 23,946 - Net realized gain (loss) on investments (103,767) 4,178 (5,577) 397,532 - Net change in unrealized appreciation or depreciation on investments (48,502) 1,857,990 (9,733) 1,585,965 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (256,617) 1,866,950 22,740 2,007,443 Change From Unit Transactions: - Contract purchases 1,523,903 1,527,099 50,066 700,703 - Contract withdrawals (2,136,190) (2,064,442) (50,419) (783,625) - Contract transfers 18,681,969 22,502,769 68,627 657,549 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 18,069,682 21,965,426 68,274 574,627 ----------- ----------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 17,813,065 23,832,376 91,014 2,582,070 ----------- ----------- -------- ----------- NET ASSETS AT DECEMBER 31, 2006 20,544,773 23,832,376 707,107 9,766,594 Changes From Operations: - Net investment income (loss) (168,216) 76,506 47,275 (39,605) - Net realized gain (loss) on investments 171,232 414,594 (11,435) 907,674 - Net change in unrealized appreciation or depreciation on investments 2,220,040 1,250,159 (29,178) 483,020 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,223,056 1,741,259 6,662 1,351,089 Change From Unit Transactions: - Contract purchases 1,957,872 2,119,037 49,737 678,827 - Contract withdrawals (2,351,142) (2,953,356) (76,453) (688,624) - Contract transfers (778,391) (672,107) 20,397 (315,886) ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (1,171,661) (1,506,426) (6,319) (325,683) ----------- ----------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,051,395 234,833 343 1,025,406 ----------- ----------- -------- ----------- NET ASSETS AT DECEMBER 31, 2007 $21,596,168 $24,067,209 $707,450 $10,792,000 =========== =========== ======== ===========
See accompanying notes. M-8
ABVPSF GLOBAL ABVPSF GROWTH ABVPSF ABVPSF LARGE ABVPSF TECHNOLOGY AND INCOME INTERNATIONAL CAP GROWTH SMALL/MID CAP CLASS A CLASS A VALUE CLASS A CLASS A VALUE CLASS A SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $1,381,231 $12,437,386 $ -- $2,451,924 $ 7,360,063 Changes From Operations: - Net investment income (loss) (11,973) 90,067 (2,711) (18,176) (26,487) - Net realized gain (loss) on investments 58,674 864,651 19,856 77,086 757,708 - Net change in unrealized appreciation or depreciation on investments 75,314 1,224,706 146,894 (119,063) 364,894 ---------- ----------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 122,015 2,179,424 164,039 (60,153) 1,096,115 Change From Unit Transactions: - Contract purchases 376,030 2,184,169 172,700 272,522 1,803,648 - Contract withdrawals (206,418) (1,212,933) (44,253) (192,178) (788,456) - Contract transfers 7,374 531,603 1,298,260 (304,378) 650,876 ---------- ----------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 176,986 1,502,839 1,426,707 (224,034) 1,666,068 ---------- ----------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 299,001 3,682,263 1,590,746 (284,187) 2,762,183 ---------- ----------- ---------- ---------- ----------- NET ASSETS AT DECEMBER 31, 2006 1,680,232 16,119,649 1,590,746 2,167,737 10,122,246 Changes From Operations: - Net investment income (loss) (13,773) 121,306 17,783 (16,842) 22,722 - Net realized gain (loss) on investments 98,017 1,184,131 202,007 83,023 1,019,316 - Net change in unrealized appreciation or depreciation on investments 205,740 (599,752) (156,791) 204,789 (1,016,136) ---------- ----------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 289,984 705,685 62,999 270,970 25,902 Change From Unit Transactions: - Contract purchases 216,328 1,693,662 1,595,290 253,372 1,737,751 - Contract withdrawals (255,112) (1,175,967) (426,344) (166,217) (857,386) - Contract transfers 591,071 (363,544) 2,027,127 40,558 1,028,094 ---------- ----------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 552,287 154,151 3,196,073 127,713 1,908,459 ---------- ----------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 842,271 859,836 3,259,072 398,683 1,934,361 ---------- ----------- ---------- ---------- ----------- NET ASSETS AT DECEMBER 31, 2007 $2,522,503 $16,979,485 $4,849,818 $2,566,420 $12,056,607 ========== =========== ========== ========== =========== AMERICAN AMERICAN AMERICAN FUNDS AMERICAN CENTURY FUNDS GLOBAL SMALL FUNDS VP INFLATION GLOBAL GROWTH CAPITALIZATION GROWTH PROTECTION CLASS 2 CLASS 2 CLASS 2 SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $3,912,014 $ 3,337,337 $18,068,003 $ 84,660,023 Changes From Operations: - Net investment income (loss) 133,389 9,884 (62,370) 73,245 - Net realized gain (loss) on investments (9,305) 82,764 2,150,733 2,413,697 - Net change in unrealized appreciation or depreciation on investments (65,029) 845,893 2,326,952 5,856,775 ---------- ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 59,055 938,541 4,415,315 8,343,717 Change From Unit Transactions: - Contract purchases 1,345,728 1,688,472 2,806,249 14,945,964 - Contract withdrawals (442,748) (467,710) (1,947,899) (8,773,852) - Contract transfers 730,983 1,462,417 1,779,145 818,724 ---------- ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,633,963 2,683,179 2,637,495 6,990,836 ---------- ----------- ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 1,693,018 3,621,720 7,052,810 15,334,553 ---------- ----------- ----------- ------------ NET ASSETS AT DECEMBER 31, 2006 5,605,032 6,959,057 25,120,813 99,994,576 Changes From Operations: - Net investment income (loss) 255,785 229,532 650,312 76,525 - Net realized gain (loss) on investments (9,409) 636,863 3,917,364 9,919,086 - Net change in unrealized appreciation or depreciation on investments 308,473 411,467 580,010 1,853,036 ---------- ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 554,849 1,277,862 5,147,686 11,848,647 Change From Unit Transactions: - Contract purchases 1,381,429 2,287,772 3,359,709 14,216,364 - Contract withdrawals (530,576) (1,255,746) (2,383,321) (10,646,586) - Contract transfers 331,238 3,201,869 594,054 4,258,397 ---------- ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,182,091 4,233,895 1,570,442 7,828,175 ---------- ----------- ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS 1,736,940 5,511,757 6,718,128 19,676,822 ---------- ----------- ----------- ------------ NET ASSETS AT DECEMBER 31, 2007 $7,341,972 $12,470,814 $31,838,941 $119,671,398 ========== =========== =========== ============
M-9
AMERICAN AMERICAN DELAWARE FUNDS GROWTH- FUNDS DELAWARE VIPT INCOME INTERNATIONAL VIPT CAPITAL DIVERSIFIED CLASS 2 CLASS 2 RESERVES INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $68,532,346 $30,470,221 $ 49,341 $ 4,692,653 Changes From Operations: - Net investment income (loss) 630,790 365,579 2,855 46,752 - Net realized gain (loss) on investments 3,109,727 1,572,160 (18) 5,365 - Net change in unrealized appreciation or depreciation on investments 6,276,149 4,067,050 251 403,127 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 10,016,666 6,004,789 3,088 455,244 Change From Unit Transactions: - Contract purchases 10,588,456 6,502,318 63,020 1,693,572 - Contract withdrawals (6,278,998) (2,680,392) (9,970) (574,243) - Contract transfers (1,403,245) 1,436,645 15,222 1,401,495 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 2,906,213 5,258,571 68,272 2,520,824 ----------- ----------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 12,922,879 11,263,360 71,360 2,976,068 ----------- ----------- -------- ----------- NET ASSETS AT DECEMBER 31, 2006 81,455,225 41,733,581 120,701 7,668,721 Changes From Operations: - Net investment income (loss) 734,296 444,491 8,070 212,165 - Net realized gain (loss) on investments 4,925,233 3,532,560 (509) 66,066 - Net change in unrealized appreciation or depreciation on investments (2,172,000) 4,672,460 (385) 400,063 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,487,529 8,649,511 7,176 678,294 Change From Unit Transactions: - Contract purchases 11,345,875 6,740,454 147,979 2,645,774 - Contract withdrawals (8,467,147) (3,434,663) (26,982) (803,203) - Contract transfers 3,280,629 4,018,197 (24,085) 2,168,493 ----------- ----------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 6,159,357 7,323,988 96,912 4,011,064 ----------- ----------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 9,646,886 15,973,499 104,088 4,689,358 ----------- ----------- -------- ----------- NET ASSETS AT DECEMBER 31, 2007 $91,102,111 $57,707,080 $224,789 $12,358,079 =========== =========== ======== ===========
See accompanying notes. M-10
DELAWARE VIPT DELAWARE DELAWARE EMERGING VIPT DELAWARE VIPT SMALL DELAWARE MARKETS HIGH YIELD VIPT REIT CAP VALUE VIPT TREND SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $15,081,737 $10,057,594 $ 19,807,181 $36,186,924 $22,013,285 Changes From Operations: - Net investment income (loss) 98,476 639,911 254,262 (207,496) (169,825) - Net realized gain (loss) on investments 1,874,278 48,138 2,001,527 3,865,079 687,227 - Net change in unrealized appreciation or depreciation on investments 1,703,790 582,744 4,337,375 1,953,090 999,871 ----------- ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,676,544 1,270,793 6,593,164 5,610,673 1,517,273 Change From Unit Transactions: - Contract purchases 2,171,262 1,975,390 3,509,836 4,782,684 2,651,030 - Contract withdrawals (2,486,999) (935,014) (2,279,152) (5,081,900) (2,689,740) - Contract transfers (448,792) 730,096 1,090,387 1,920,813 (1,238,610) ----------- ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (764,529) 1,770,472 2,321,071 1,621,597 (1,277,320) ----------- ----------- ------------ ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,912,015 3,041,265 8,914,235 7,232,270 239,953 ----------- ----------- ------------ ----------- ----------- NET ASSETS AT DECEMBER 31, 2006 17,993,752 13,098,859 28,721,416 43,419,194 22,253,238 Changes From Operations: - Net investment income (loss) 180,660 796,564 183,097 (109,684) (172,224) - Net realized gain (loss) on investments 3,086,007 105,852 6,191,567 4,939,843 1,323,202 - Net change in unrealized appreciation or depreciation on investments 3,837,556 (643,699) (10,559,288) (7,941,065) 947,189 ----------- ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,104,223 258,717 (4,184,624) (3,110,906) 2,098,167 Change From Unit Transactions: - Contract purchases 2,761,671 2,081,592 3,479,305 4,484,344 2,293,159 - Contract withdrawals (1,914,230) (1,110,062) (2,325,364) (4,137,428) (2,429,800) - Contract transfers 1,964,202 84,105 (2,134,012) (1,073,296) (1,834,225) ----------- ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 2,811,643 1,055,635 (980,071) (726,380) (1,970,866) ----------- ----------- ------------ ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 9,915,866 1,314,352 (5,164,695) (3,837,286) 127,301 ----------- ----------- ------------ ----------- ----------- NET ASSETS AT DECEMBER 31, 2007 $27,909,618 $14,413,211 $ 23,556,721 $39,581,908 $22,380,539 =========== =========== ============ =========== =========== DELAWARE DELAWARE DWS VIP DWS VIP VIPT VIPT EQUITY SMALL CAP U.S. GROWTH VALUE 500 INDEX INDEX SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 836,244 $ 7,687,908 $57,222,262 $11,235,210 Changes From Operations: - Net investment income (loss) (6,226) 62,597 237,922 (15,144) - Net realized gain (loss) on investments 30,730 324,758 1,650,882 1,020,709 - Net change in unrealized appreciation or depreciation on investments (19,831) 1,774,757 5,970,517 909,942 --------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,673 2,162,112 7,859,321 1,915,507 Change From Unit Transactions: - Contract purchases 149,013 2,042,852 5,946,918 1,639,149 - Contract withdrawals (151,755) (1,011,025) (7,269,968) (1,170,537) - Contract transfers (30,339) 2,951,437 (4,259,121) 371,691 --------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (33,081) 3,983,264 (5,582,171) 840,303 --------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS (28,408) 6,145,376 2,277,150 2,755,810 --------- ----------- ----------- ----------- NET ASSETS AT DECEMBER 31, 2006 807,836 13,833,284 59,499,412 13,991,020 Changes From Operations: - Net investment income (loss) (5,980) 123,851 459,351 18,257 - Net realized gain (loss) on investments 37,815 819,433 1,795,030 1,237,301 - Net change in unrealized appreciation or depreciation on investments 62,736 (1,513,653) 501,507 (1,606,185) --------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 94,571 (570,369) 2,755,888 (350,627) Change From Unit Transactions: - Contract purchases 214,338 2,443,254 5,255,541 1,452,424 - Contract withdrawals (85,760) (1,349,504) (6,249,383) (1,172,239) - Contract transfers (85,266) 764,669 (625,211) (298,881) --------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 43,312 1,858,419 (1,619,053) (18,696) --------- ----------- ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 137,883 1,288,050 1,136,835 (369,323) --------- ----------- ----------- ----------- NET ASSETS AT DECEMBER 31, 2007 $ 945,719 $15,121,334 $60,636,247 $13,621,697 ========= =========== =========== ===========
M-11
FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP ASSET CONTRAFUND EQUITY- EQUITY-INCOME MANAGER SERVICE CLASS INCOME SERVICE CLASS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 734,702 $36,885,328 $5,453,343 $6,161,370 Changes From Operations: - Net investment income (loss) 13,317 175,682 129,975 164,681 - Net realized gain (loss) on investments (1,328) 4,623,408 741,203 958,625 - Net change in unrealized appreciation or depreciation on investments 32,650 (389,442) 48,493 70,293 --------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 44,639 4,409,648 919,671 1,193,599 Change From Unit Transactions: - Contract purchases 81,627 7,464,266 371,241 775,755 - Contract withdrawals (93,981) (4,826,835) (764,922) (551,218) - Contract transfers (18,537) 4,485,745 (573,772) 19,160 --------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (30,891) 7,123,176 (967,453) 243,697 --------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 13,748 11,532,824 (47,782) 1,437,296 --------- ----------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2006 748,450 48,418,152 5,405,561 7,598,666 Changes From Operations: - Net investment income (loss) 42,852 96,878 50,088 76,847 - Net realized gain (loss) on investments 31,500 15,822,452 551,255 794,163 - Net change in unrealized appreciation or depreciation on investments 34,354 (7,516,155) (523,276) (824,165) --------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 108,706 8,403,175 78,067 46,845 Change From Unit Transactions: - Contract purchases 72,960 7,514,169 327,288 832,349 - Contract withdrawals (132,791) (4,868,543) (798,527) (559,584) - Contract transfers 71,895 2,196,230 (190,253) (216,809) --------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 12,064 4,841,856 (661,492) 55,956 --------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 120,770 13,245,031 (583,425) 102,801 --------- ----------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 869,220 $61,663,183 $4,822,136 $7,701,467 ========= =========== ========== ==========
See accompanying notes. M-12
FIDELITY VIP FIDELITY VIP GROWTH FIDELITY VIP FIDELITY VIP FIDELITY VIP GROWTH OPPORTUNITIES HIGH INCOME INVESTMENT MID CAP SERVICE CLASS SERVICE CLASS SERVICE CLASS GRADE BOND SERVICE CLASS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $ 7,058,638 $ 4,579,023 $1,714,771 $2,612,574 $ 925,977 Changes From Operations: - Net investment income (loss) (36,225) (3,187) 106,387 81,002 (9,851) - Net realized gain (loss) on investments 90,126 27,002 (3,552) 278 134,738 - Net change in unrealized appreciation or depreciation on investments 353,516 148,283 54,484 6,675 84,190 ----------- ----------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 407,417 172,098 157,319 87,955 209,077 Change From Unit Transactions: - Contract purchases 1,080,587 422,162 181,734 202,666 1,307,785 - Contract withdrawals (620,138) (1,234,862) (194,078) (293,368) (230,919) - Contract transfers (394,847) (59,553) (248,966) 42,964 1,156,903 ----------- ----------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 65,602 (872,253) (261,310) (47,738) 2,233,769 ----------- ----------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 473,019 (700,155) (103,991) 40,217 2,442,846 ----------- ----------- ---------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2006 7,531,657 3,878,868 1,610,780 2,652,791 3,368,823 Changes From Operations: - Net investment income (loss) (11,391) (32,457) 121,882 82,526 5,382 - Net realized gain (loss) on investments 403,448 128,839 512 (2,603) 423,690 - Net change in unrealized appreciation or depreciation on investments 1,337,221 731,990 (92,910) 8,244 273,187 ----------- ----------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,729,278 828,372 29,484 88,167 702,259 Change From Unit Transactions: - Contract purchases 999,425 323,905 144,091 221,418 1,806,508 - Contract withdrawals (1,319,774) (406,808) (178,428) (440,193) (548,037) - Contract transfers 1,056,604 (171,488) 22,487 10,570 2,205,715 ----------- ----------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 736,255 (254,391) (11,850) (208,205) 3,464,186 ----------- ----------- ---------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,465,533 573,981 17,634 (120,038) 4,166,445 ----------- ----------- ---------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 9,997,190 $ 4,452,849 $1,628,414 $2,532,753 $7,535,268 =========== =========== ========== ========== ========== FTVIPT FTVIPT FRANKLIN FIDELITY VIP FRANKLIN SMALL-MID CAP FTVIPT MUTUAL OVERSEAS INCOME GROWTH SHARES SERVICE CLASS SECURITIES SECURITIES SECURITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $3,312,085 $ -- $6,037,721 $ -- Changes From Operations: - Net investment income (loss) (2,235) (1,437) (48,527) (1,166) - Net realized gain (loss) on investments 188,248 8,142 162,685 196 - Net change in unrealized appreciation or depreciation on investments 484,760 35,424 376,371 40,025 ---------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 670,773 42,129 490,529 39,055 Change From Unit Transactions: - Contract purchases 881,349 262,048 1,221,396 220,751 - Contract withdrawals (383,074) (24,088) (550,254) (23,183) - Contract transfers 338,594 477,292 45,153 506,061 ---------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 836,869 715,252 716,295 703,629 ---------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,507,642 757,381 1,206,824 742,684 ---------- ---------- ---------- ----------- NET ASSETS AT DECEMBER 31, 2006 4,819,727 757,381 7,244,545 742,684 Changes From Operations: - Net investment income (loss) 147,503 55,283 (66,007) 15,438 - Net realized gain (loss) on investments 488,084 18,925 875,841 64,188 - Net change in unrealized appreciation or depreciation on investments 124,089 (56,708) 36,382 (90,525) ---------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 759,676 17,500 846,216 (10,899) Change From Unit Transactions: - Contract purchases 740,646 1,239,781 1,233,809 1,170,001 - Contract withdrawals (353,032) (201,894) (679,468) (179,578) - Contract transfers 836,832 1,799,166 1,202,435 1,134,128 ---------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,224,446 2,837,053 1,756,776 2,124,551 ---------- ---------- ---------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,984,122 2,854,553 2,602,992 2,113,652 ---------- ---------- ---------- ----------- NET ASSETS AT DECEMBER 31, 2007 $6,803,849 $3,611,934 $9,847,537 $ 2,856,336 ========== ========== ========== ===========
M-13
FTVIPT FTVIPT FTVIPT FTVIPT TEMPLETON TEMPLETON TEMPLETON TEMPLETON FOREIGN FOREIGN GLOBAL ASSET GLOBAL INCOME SECURITIES SECURITIES CLASS 2 ALLOCATION SECURITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $3,514,129 $ 6,992,790 $ 954,825 $ 675,128 Changes From Operations: - Net investment income (loss) 21,067 28,746 66,889 24,233 - Net realized gain (loss) on investments 62,403 408,540 92,683 6,593 - Net change in unrealized appreciation or depreciation on investments 622,442 864,772 19,682 90,062 ---------- ----------- --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 705,912 1,302,058 179,254 120,888 Change From Unit Transactions: - Contract purchases 264,103 683,910 53,767 443,507 - Contract withdrawals (495,805) (1,325,112) (72,623) (69,163) - Contract transfers 19,863 (371,397) (132,371) 271,556 ---------- ----------- --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (211,839) (1,012,599) (151,227) 645,900 ---------- ----------- --------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 494,073 289,459 28,027 766,788 ---------- ----------- --------- ---------- NET ASSETS AT DECEMBER 31, 2006 4,008,202 7,282,249 982,852 1,441,916 Changes From Operations: - Net investment income (loss) 51,260 88,650 143,854 55,257 - Net realized gain (loss) on investments 332,984 730,895 198,101 24,011 - Net change in unrealized appreciation or depreciation on investments 174,147 212,013 (265,967) 180,165 ---------- ----------- --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 558,391 1,031,558 75,988 259,433 Change From Unit Transactions: - Contract purchases 238,968 623,962 37,904 1,066,197 - Contract withdrawals (684,184) (1,031,044) (135,904) (194,248) - Contract transfers 3,061 (141,663) (90,024) 1,505,336 ---------- ----------- --------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (442,155) (548,745) (188,024) 2,377,285 ---------- ----------- --------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 116,236 482,813 (112,036) 2,636,718 ---------- ----------- --------- ---------- NET ASSETS AT DECEMBER 31, 2007 $4,124,438 $ 7,765,062 $ 870,816 $4,078,634 ========== =========== ========= ==========
See accompanying notes. M-14
FTVIPT FTVIPT JANUS ASPEN TEMPLETON TEMPLETON JANUS ASPEN SERIES GLOBAL GROWTH GROWTH JANUS ASPEN SERIES BALANCED TECHNOLOGY SECURITIES SECURITIES CLASS 2 SERIES BALANCED SERVICE SHARES SERVICE SHARES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $7,027,823 $ 4,304,206 $13,105,959 $ 7,107,234 $1,521,215 Changes From Operations: - Net investment income (loss) 54,110 24,486 161,290 74,892 (11,866) - Net realized gain (loss) on investments 551,726 300,695 236,319 260,957 15,023 - Net change in unrealized appreciation or depreciation on investments 996,127 537,309 787,175 282,836 100,737 ---------- ----------- ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,601,963 862,490 1,184,784 618,685 103,894 Change From Unit Transactions: - Contract purchases 1,377,332 247,625 1,262,380 779,020 207,920 - Contract withdrawals (896,063) (450,545) (2,597,321) (433,773) (221,619) - Contract transfers 582,569 23,667 (446,024) (1,278,005) (130,062) ---------- ----------- ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,063,838 (179,253) (1,780,965) (932,758) (143,761) ---------- ----------- ----------- ----------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,665,801 683,237 (596,181) (314,073) (39,867) ---------- ----------- ----------- ----------- ---------- NET ASSETS AT DECEMBER 31, 2006 9,693,624 4,987,443 12,509,778 6,793,161 1,481,348 Changes From Operations: - Net investment income (loss) 75,922 17,805 225,341 106,463 (7,277) - Net realized gain (loss) on investments 760,345 711,861 218,287 168,985 56,717 - Net change in unrealized appreciation or depreciation on investments (658,128) (613,956) 714,675 357,975 252,818 ---------- ----------- ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 178,139 115,710 1,158,303 633,423 302,258 Change From Unit Transactions: - Contract purchases 1,257,951 255,203 1,081,756 674,762 182,567 - Contract withdrawals (892,743) (483,425) (1,456,770) (722,119) (165,479) - Contract transfers (386,350) (1,158,326) (138,008) (231,114) (16,335) ---------- ----------- ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (21,142) (1,386,548) (513,022) (278,471) 753 ---------- ----------- ----------- ----------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 156,997 (1,270,838) 645,281 354,952 303,011 ---------- ----------- ----------- ----------- ---------- NET ASSETS AT DECEMBER 31, 2007 $9,850,621 $ 3,716,605 $13,155,059 $ 7,148,113 $1,784,359 ========== =========== =========== =========== ========== JANUS ASPEN JANUS ASPEN SERIES LINCOLN VIPT SERIES MID JANUS ASPEN WORLDWIDE BARON CAP GROWTH SERIES WORLDWIDE GROWTH SERVICE GROWTH SERVICE SHARES GROWTH SHARES OPPORTUNITIES SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $3,439,648 $13,440,012 $3,054,651 $ -- Changes From Operations: - Net investment income (loss) (26,928) 129,427 25,919 -- - Net realized gain (loss) on investments 196,291 (263,181) 75,833 -- - Net change in unrealized appreciation or depreciation on investments 219,446 2,303,041 389,957 -- ---------- ----------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 388,809 2,169,287 491,709 -- Change From Unit Transactions: - Contract purchases 466,571 1,504,871 362,635 -- - Contract withdrawals (435,243) (1,734,331) (273,663) -- - Contract transfers (343,028) (1,017,712) (204,324) -- ---------- ----------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (311,700) (1,247,172) (115,352) -- ---------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 77,109 922,115 376,357 -- ---------- ----------- ---------- -------- NET ASSETS AT DECEMBER 31, 2006 3,516,757 14,362,127 3,431,008 -- Changes From Operations: - Net investment income (loss) (29,892) (4,370) (8,315) (593) - Net realized gain (loss) on investments 173,591 86,888 179,277 (60) - Net change in unrealized appreciation or depreciation on investments 643,493 1,159,335 124,669 (5,089) ---------- ----------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 787,192 1,241,853 295,631 (5,742) Change From Unit Transactions: - Contract purchases 422,860 1,358,110 294,311 12,939 - Contract withdrawals (313,951) (1,538,538) (351,825) (7,625) - Contract transfers 1,327,865 (912,868) (318,859) 175,013 ---------- ----------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,436,774 (1,093,296) (376,373) 180,327 ---------- ----------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,223,966 148,557 (80,742) 174,585 ---------- ----------- ---------- -------- NET ASSETS AT DECEMBER 31, 2007 $5,740,723 $14,510,684 $3,350,266 $174,585 ========== =========== ========== ========
M-15
LINCOLN VIPT BARON LINCOLN VIPT GROWTH LINCOLN VIPT COHEN & STEERS OPPORTUNITIES CAPITAL GLOBAL LINCOLN VIPT SERVICE CLASS GROWTH REAL ESTATE CORE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 5,780,762 $ -- $ -- $ 18,624 Changes From Operations: - Net investment income (loss) (47,855) -- -- 470 - Net realized gain (loss) on investments 402,384 -- -- 262 - Net change in unrealized appreciation or depreciation on investments 471,701 -- -- 13,965 ----------- ------ ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 826,230 -- -- 14,697 Change From Unit Transactions: - Contract purchases 654,404 -- -- 50,700 - Contract withdrawals (881,713) -- -- (7,696) - Contract transfers (190,364) -- -- 91,260 ----------- ------ ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (417,673) -- -- 134,264 ----------- ------ ---------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 408,557 -- -- 148,961 ----------- ------ ---------- --------- NET ASSETS AT DECEMBER 31, 2006 6,189,319 -- -- 167,585 Changes From Operations: - Net investment income (loss) (48,665) (1) 2,919 (332) - Net realized gain (loss) on investments 1,179,962 1 (11,278) 16,710 - Net change in unrealized appreciation or depreciation on investments (959,789) 56 (224,374) (14,242) ----------- ------ ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 171,508 56 (232,733) 2,136 Change From Unit Transactions: - Contract purchases 707,233 664 301,624 738 - Contract withdrawals (1,073,269) (205) (47,524) (2,237) - Contract transfers 528,923 2,548 1,856,253 (168,222) ----------- ------ ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 162,887 3,007 2,110,353 (169,721) ----------- ------ ---------- --------- TOTAL INCREASE (DECREASE) IN NET ASSETS 334,395 3,063 1,877,620 (167,585) ----------- ------ ---------- --------- NET ASSETS AT DECEMBER 31, 2007 $ 6,523,714 $3,063 $1,877,620 $ -- =========== ====== ========== =========
See accompanying notes. M-16
LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT DELAWARE DELAWARE DELAWARE LINCOLN VIPT GROWTH AND SOCIAL SPECIAL LINCOLN VIPT FI DELAWARE BOND INCOME AWARENESS OPPORTUNITIES EQUITY-INCOME SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $41,896,349 $ 11,675 $3,020,847 $ -- $5,198,551 Changes From Operations: - Net investment income (loss) 1,718,443 4,193 5,870 -- 29,240 - Net realized gain (loss) on investments (88,545) 190 79,088 -- 526,352 - Net change in unrealized appreciation or 126,887 41,522 282,559 -- (8,835) depreciation on investments ----------- ---------- ---------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,756,785 45,905 367,517 -- 546,757 Change From Unit Transactions: - Contract purchases 7,086,448 112,705 576,835 -- 511,081 - Contract withdrawals (4,297,739) (23,547) (350,447) -- (608,326) - Contract transfers 2,582,666 501,387 (12,418) -- 194,245 ----------- ---------- ---------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 5,371,375 590,545 213,970 -- 97,000 ----------- ---------- ---------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 7,128,160 636,450 581,487 -- 643,757 ----------- ---------- ---------- -------- ---------- NET ASSETS AT DECEMBER 31, 2006 49,024,509 648,125 3,602,334 -- 5,842,308 Changes From Operations: - Net investment income (loss) 2,286,136 6,664 5,135 601 27,955 - Net realized gain (loss) on investments 3,051 6,009 146,781 654 700,396 - Net change in unrealized appreciation or depreciation on investments 143,052 34,794 (75,366) (4,458) (550,656) ----------- ---------- ---------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,432,239 47,467 76,550 (3,203) 177,695 Change From Unit Transactions: - Contract purchases 6,276,903 183,936 383,943 33,283 449,408 - Contract withdrawals (4,780,320) (49,059) (290,583) (3,172) (531,975) - Contract transfers 2,732,066 275,470 (55,008) 74,159 148,448 ----------- ---------- ---------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 4,228,649 410,347 38,352 104,270 65,881 ----------- ---------- ---------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 6,660,888 457,814 114,902 101,067 243,576 ----------- ---------- ---------- -------- ---------- NET ASSETS AT DECEMBER 31, 2007 $55,685,397 $1,105,939 $3,717,236 $101,067 $6,085,884 =========== ========== ========== ======== ========== LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT MARSICO GROWTH GROWTH JANUS CAPITAL INTERNATIONAL SUBACCOUNT OPPORTUNITIES APPRECIATION GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 21,340 $ 6,003 $5,669,248 $ -- Changes From Operations: - Net investment income (loss) (342) (470) (32,842) -- - Net realized gain (loss) on investments (4,056) (3,776) (104,222) -- - Net change in unrealized appreciation or depreciation on investments 2,257 983 615,297 -- -------- -------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,141) (3,263) 478,233 -- Change From Unit Transactions: - Contract purchases 37,588 53,179 760,964 -- - Contract withdrawals (9,519) (9,108) (725,216) -- - Contract transfers 19,665 32,304 (376,607) -- -------- -------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 47,734 76,375 (340,859) -- -------- -------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS 45,593 73,112 137,374 -- -------- -------- ---------- -------- NET ASSETS AT DECEMBER 31, 2006 66,933 79,115 5,806,622 -- Changes From Operations: - Net investment income (loss) (165) (230) (30,674) 4,399 - Net realized gain (loss) on investments 9,860 5,170 18,189 (3,881) - Net change in unrealized appreciation or depreciation on investments (3,826) (1,336) 1,128,323 (6,450) -------- -------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,869 3,604 1,115,838 (5,932) Change From Unit Transactions: - Contract purchases 12,042 4,045 786,005 162,178 - Contract withdrawals (4,271) (3,771) (646,134) (19,115) - Contract transfers (80,573) (82,993) (4,891) 674,006 -------- -------- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (72,802) (82,719) 134,980 817,069 -------- -------- ---------- -------- TOTAL INCREASE (DECREASE) IN NET ASSETS (66,933) (79,115) 1,250,818 811,137 -------- -------- ---------- -------- NET ASSETS AT DECEMBER 31, 2007 $ -- $ -- $7,057,440 $811,137 ======== ======== =========== ========
M-17
LINCOLN LINCOLN LINCOLN VIPT VIPT VIPT MONDRIAN LINCOLN VIPT MID-CAP MID-CAP INTERNATIONAL MFS VALUE GROWTH VALUE VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ----------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ -- $ -- $ -- $11,453,277 Changes From Operations: - Net investment income (loss) -- -- -- 374,443 - Net realized gain (loss) on investments -- -- -- 352,229 - Net change in unrealized appreciation or depreciation on investments -- -- -- 3,165,523 -------- -------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS -- -- -- 3,892,195 Change From Unit Transactions: - Contract purchases -- -- -- 2,200,652 - Contract withdrawals -- -- -- (1,237,213) - Contract transfers -- -- -- 3,102,696 -------- -------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS -- -- -- 4,066,135 -------- -------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- -- -- 7,958,330 -------- -------- -------- ----------- NET ASSETS AT DECEMBER 31, 2006 -- -- -- 19,411,607 Changes From Operations: - Net investment income (loss) 1,219 (180) (391) 294,477 - Net realized gain (loss) on investments (168) 4,285 (15,993) 1,508,637 - Net change in unrealized appreciation or depreciation on investments (3,590) 1,649 (29,375) 300,686 -------- -------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,539) 5,754 (45,759) 2,103,800 Change From Unit Transactions: - Contract purchases 65,144 38,784 331,704 2,477,912 - Contract withdrawals (5,169) (4,497) (28,415) (1,742,042) - Contract transfers 121,339 113,945 395,019 1,089,593 -------- -------- -------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 181,314 148,232 698,308 1,825,463 -------- -------- -------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 178,775 153,986 652,549 3,929,263 -------- -------- -------- ----------- NET ASSETS AT DECEMBER 31, 2007 $178,775 $153,986 $652,549 $23,340,870 ======== ======== ======== ===========
See accompanying notes. M-18
LINCOLN VIPT T. ROWE PRICE LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT STRUCTURED MONEY S&P 500 SMALL CAP T. ROWE PRICE MID-CAP MARKET INDEX INDEX GROWTH STOCK GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 35,376,424 $ -- $ -- $ -- $ 410,348 Changes From Operations: - Net investment income (loss) 1,526,320 -- -- -- (3,497) - Net realized gain (loss) on investments -- -- -- -- 18,289 - Net change in unrealized appreciation or depreciation on investments -- -- -- -- 24,044 ------------ ---------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,526,320 -- -- -- 38,836 Change From Unit Transactions: - Contract purchases 46,255,766 -- -- -- 148,904 - Contract withdrawals (9,431,292) -- -- -- (67,901) - Contract transfers (32,652,572) -- -- -- (2,271) ------------ ---------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 4,171,902 -- -- -- 78,732 ------------ ---------- -------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 5,698,222 -- -- -- 117,568 ------------ ---------- -------- -------- ---------- NET ASSETS AT DECEMBER 31, 2006 41,074,646 -- -- -- 527,916 Changes From Operations: - Net investment income (loss) 1,897,334 9,989 831 6 (8,291) - Net realized gain (loss) on investments -- (2,621) (2,900) 35 61,311 - Net change in unrealized appreciation or depreciation on investments -- (35,517) (7,706) 3,555 41,302 ------------ ---------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,897,334 (28,149) (9,775) 3,596 94,322 Change From Unit Transactions: - Contract purchases 71,426,003 399,500 110,206 29,687 381,380 - Contract withdrawals (8,328,188) (53,300) (10,277) (4,239) (146,710) - Contract transfers (58,900,749) 1,079,622 200,700 199,851 736,288 ------------ ---------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 4,197,066 1,425,822 300,629 225,299 970,958 ------------ ---------- -------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 6,094,400 1,397,673 290,854 228,895 1,065,280 ------------ ---------- -------- -------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 47,169,046 $1,397,673 $290,854 $228,895 $1,593,196 ============ ========== ======== ======== ========== LINCOLN VIPT LINCOLN VIPT UBS LINCOLN VIPT LINCOLN VIPT TEMPLETON GLOBAL ASSET VALUE WILSHIRE 2010 GROWTH ALLOCATION OPPORTUNITIES PROFILE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------ NET ASSETS AT JANUARY 1, 2006 $ -- $ 1,576,476 $ -- $ -- Changes From Operations: - Net investment income (loss) -- 12,030 -- -- - Net realized gain (loss) on investments -- 111,067 -- -- - Net change in unrealized appreciation or depreciation on investments -- 115,808 -- -- ------- ----------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS -- 238,905 -- -- Change From Unit Transactions: - Contract purchases -- 322,463 -- -- - Contract withdrawals -- (143,711) -- -- - Contract transfers -- 171,751 -- -- ------- ----------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS -- 350,503 -- -- ------- ----------- ------- ------ TOTAL INCREASE (DECREASE) IN NET ASSETS -- 589,408 -- -- ------- ----------- ------- ------ NET ASSETS AT DECEMBER 31, 2006 -- 2,165,884 -- -- Changes From Operations: - Net investment income (loss) 758 25,815 -- 23 - Net realized gain (loss) on investments 78 171,202 (3) 11 - Net change in unrealized appreciation or depreciation on investments (1,361) (59,561) (186) 258 ------- ----------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (525) 137,456 (189) 292 Change From Unit Transactions: - Contract purchases 34,900 599,240 269 135 - Contract withdrawals (3,998) (243,667) (65) (93) - Contract transfers 46,836 201,698 11,720 6,866 ------- ----------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 77,738 557,271 11,924 6,908 ------- ----------- ------- ------ TOTAL INCREASE (DECREASE) IN NET ASSETS 77,213 694,727 11,735 7,200 ------- ----------- ------- ------ NET ASSETS AT DECEMBER 31, 2007 $77,213 $ 2,860,611 $11,735 $7,200 ======= =========== ======= ======
M-19
LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT WILSHIRE WILSHIRE 2020 WILSHIRE 2030 WILSHIRE 2040 AGGRESSIVE PROFILE PROFILE PROFILE PROFILE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - -------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ -- $ -- $ -- $ 148,138 Changes From Operations: - Net investment income (loss) -- -- -- 2,572 - Net realized gain (loss) on investments -- -- -- 808 - Net change in unrealized appreciation or depreciation on investments -- -- -- 115,001 -------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS -- -- -- 118,381 Change From Unit Transactions: - Contract purchases -- -- -- 611,560 - Contract withdrawals -- -- -- (151,965) - Contract transfers -- -- -- 556,476 -------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS -- -- -- 1,016,071 -------- -------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS -- -- -- 1,134,452 -------- -------- -------- ---------- NET ASSETS AT DECEMBER 31, 2006 -- -- -- 1,282,590 Changes From Operations: - Net investment income (loss) 27 177 975 12,980 - Net realized gain (loss) on investments (2) (3) 351 45,343 - Net change in unrealized appreciation or depreciation on investments (48) 1,621 5,061 137,855 -------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (23) 1,795 6,387 196,178 Change From Unit Transactions: - Contract purchases 2,469 94,778 27,243 1,092,143 - Contract withdrawals (257) (13,662) (11,489) (258,226) - Contract transfers 10,252 112,348 164,043 1,273,419 -------- -------- -------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 12,464 193,464 179,797 2,107,336 -------- -------- -------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 12,441 195,259 186,184 2,303,514 -------- -------- -------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 12,441 $195,259 $186,184 $3,586,104 ======== ======== ======== ==========
See accompanying notes. M-20
LINCOLN VIPT LINCOLN VIPT LINCOLN VIPT WILSHIRE M FUND M FUND WILSHIRE WILSHIRE MODERATELY BRANDES BUSINESS CONSERVATIVE MODERATE AGGRESSIVE INTERNATIONAL OPPORTUNITY PROFILE PROFILE PROFILE EQUITY VALUE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - --------------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 40,388 $ 5,008,456 $ 2,104,287 $1,508,085 $ 540,753 Changes From Operations: - Net investment income (loss) 1,106 45,675 36,363 17,440 531 - Net realized gain (loss) on investments 226 29,923 37,344 211,706 60,725 - Net change in unrealized appreciation or depreciation on investments 7,332 732,912 570,631 191,648 34,041 ---------- ----------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,664 808,510 644,338 420,794 95,297 Change From Unit Transactions: - Contract purchases 18,606 1,998,877 3,594,181 434,810 196,697 - Contract withdrawals (7,000) (552,681) (775,130) (130,438) (56,565) - Contract transfers 101,230 3,037,523 1,898,746 13,893 105,037 ---------- ----------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 112,836 4,483,719 4,717,797 318,265 245,169 ---------- ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 121,500 5,292,229 5,362,135 739,059 340,466 ---------- ----------- ----------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2006 161,888 10,300,685 7,466,422 2,247,144 881,219 Changes From Operations: - Net investment income (loss) 28,889 138,466 176,295 42,353 1,814 - Net realized gain (loss) on investments (1,479) 380,537 269,063 457,869 101,509 - Net change in unrealized appreciation or depreciation on investments 25,130 580,918 466,961 (337,550) (54,430) ---------- ----------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,540 1,099,921 912,319 162,672 48,893 Change From Unit Transactions: - Contract purchases 70,263 4,351,843 5,858,887 436,341 193,339 - Contract withdrawals (44,024) (1,132,404) (1,506,052) (265,683) (153,605) - Contract transfers 1,748,036 2,804,766 6,382,434 236,523 186,672 ---------- ----------- ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 1,774,275 6,024,205 10,735,269 407,181 226,406 ---------- ----------- ----------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,826,815 7,124,126 11,647,588 569,853 275,299 ---------- ----------- ----------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2007 $1,988,703 $17,424,811 $19,114,010 $2,816,997 $1,156,518 ========== =========== =========== ========== ========== M FUND FRONTIER M FUND MFS VIT MFS VIT CAPITAL TURNER CORE CORE EMERGING APPRECIATION GROWTH EQUITY GROWTH SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 347,327 $ 910,852 $ 748,013 $12,351,770 Changes From Operations: - Net investment income (loss) (3,799) 654 (2,570) (93,628) - Net realized gain (loss) on investments 76,581 64,877 9,725 (208,430) - Net change in unrealized appreciation or depreciation on investments (9,128) 7,841 91,051 1,070,404 --------- ---------- --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 63,654 73,372 98,206 768,346 Change From Unit Transactions: - Contract purchases 120,605 119,434 84,472 1,272,442 - Contract withdrawals (40,523) (48,079) (63,451) (1,615,748) - Contract transfers 304,761 28,892 35,148 (1,041,915) --------- ---------- --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 384,843 100,247 56,169 (1,385,221) --------- ---------- --------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 448,497 173,619 154,375 (616,875) --------- ---------- --------- ----------- NET ASSETS AT DECEMBER 31, 2006 795,824 1,084,471 902,388 11,734,895 Changes From Operations: - Net investment income (loss) (5,237) (2,295) (3,880) (97,950) - Net realized gain (loss) on investments 119,011 164,113 61,130 137,894 - Net change in unrealized appreciation or depreciation on investments (21,030) 102,691 28,913 2,251,957 --------- ---------- --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 92,744 264,509 86,163 2,291,901 Change From Unit Transactions: - Contract purchases 140,917 128,310 64,767 1,127,030 - Contract withdrawals (124,593) (143,411) (175,188) (1,463,505) - Contract transfers 26,001 184,086 58,933 (388,339) --------- ---------- --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 42,325 168,985 (51,488) (724,814) --------- ---------- --------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS 135,069 433,494 34,675 1,567,087 --------- ---------- --------- ----------- NET ASSETS AT DECEMBER 31, 2007 $ 930,893 $1,517,965 $ 937,063 $13,301,982 ========= ========== ========= ===========
M-21
MFS VIT NB AMT TOTAL MFS VIT MID-CAP NB AMT RETURN UTILITIES GROWTH PARTNERS SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 25,878,371 $16,432,850 $16,353,094 $2,580,726 Changes From Operations: - Net investment income (loss) 417,822 210,617 (139,556) (2,303) - Net realized gain (loss) on investments 1,146,734 1,814,391 506,935 426,036 - Net change in unrealized appreciation or depreciation on investments 1,301,233 2,565,087 1,967,968 (139,353) ------------ ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,865,789 4,590,095 2,335,347 284,380 Change From Unit Transactions: - Contract purchases 3,733,278 1,810,426 2,793,671 275,671 - Contract withdrawals (3,329,048) (2,284,830) (2,102,565) (396,901) - Contract transfers (558,493) (832,873) 27,110 (20,365) ------------ ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (154,263) (1,307,277) 718,216 (141,595) ------------ ----------- ----------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 2,711,526 3,282,818 3,053,563 142,785 ------------ ----------- ----------- ---------- NET ASSETS AT DECEMBER 31, 2006 28,589,897 19,715,668 19,406,657 2,723,511 Changes From Operations: - Net investment income (loss) 519,508 34,170 (166,582) (3,965) - Net realized gain (loss) on investments 989,260 2,759,073 995,220 366,239 - Net change in unrealized appreciation or depreciation on investments (531,758) 2,856,478 3,367,908 (143,022) ------------ ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 977,010 5,649,721 4,196,546 219,252 Change From Unit Transactions: - Contract purchases 3,157,098 2,066,474 2,192,542 220,770 - Contract withdrawals (2,426,597) (2,015,524) (1,865,498) (209,457) - Contract transfers 61,426 3,545,398 (749,744) (128,775) ------------ ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 791,927 3,596,348 (422,700) (117,462) ------------ ----------- ----------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,768,937 9,246,069 3,773,846 101,790 ------------ ----------- ----------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 30,358,834 $28,961,737 $23,180,503 $2,825,301 ============ =========== =========== ==========
See accompanying notes. M-22
PUTNAM VT PUTNAM VT PIMCO VIT PIMCO VIT GROWTH & HEALTH NB AMT OPCAP OPCAP INCOME SCIENCES REGENCY GLOBAL EQUITY MANAGED CLASS IB CLASS IB SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT - ------------------------------------------------------------------------------------------------------------- NET ASSETS AT JANUARY 1, 2006 $ 8,365,230 $ 726,576 $ 789,317 $2,728,631 $2,290,195 Changes From Operations: - Net investment income (loss) (31,374) 438 7,241 22,003 (10,163) - Net realized gain (loss) on investments 778,550 109,806 83,859 94,588 50,858 - Net change in unrealized appreciation or depreciation on investments 188,075 11,114 (23,934) 304,931 (1,492) ----------- --------- --------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 935,251 121,358 67,166 421,522 39,203 Change From Unit Transactions: - Contract purchases 1,245,454 62,416 50,343 249,563 162,260 - Contract withdrawals (890,921) (301,590) (84,171) (170,185) (216,048) - Contract transfers 566,318 (16,745) (12,335) 43,442 (108,326) ----------- --------- --------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS 920,851 (255,919) (46,163) 122,820 (162,114) ----------- --------- --------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,856,102 (134,561) 21,003 544,342 (122,911) ----------- --------- --------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2006 10,221,332 592,015 810,320 3,272,973 2,167,284 Changes From Operations: - Net investment income (loss) (28,379) 341 9,424 13,905 (20) - Net realized gain (loss) on investments 927,042 161,573 58,053 597,394 54,079 - Net change in unrealized appreciation or depreciation on investments (694,928) (126,475) (50,148) (789,249) (83,327) ----------- --------- --------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 203,735 35,439 17,329 (177,950) (29,268) Change From Unit Transactions: - Contract purchases 967,040 40,919 44,181 230,172 128,747 - Contract withdrawals (892,242) (79,581) (113,841) (116,470) (212,523) - Contract transfers (1,955,375) (74,234) (66,913) (783,820) 27,295 ----------- --------- --------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM UNIT TRANSACTIONS (1,880,577) (112,896) (136,573) (670,118) (56,481) ----------- --------- --------- ---------- ---------- TOTAL INCREASE (DECREASE) IN NET ASSETS (1,676,842) (77,457) (119,244) (848,068) (85,749) ----------- --------- --------- ---------- ---------- NET ASSETS AT DECEMBER 31, 2007 $ 8,544,490 $ 514,558 $ 691,076 $2,424,905 $2,081,535 =========== ========= ========= ========== ==========
M-23 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. ACCOUNTING POLICIES AND VARIABLE ACCOUNT INFORMATION THE VARIABLE ACCOUNT: Lincoln Life Flexible Premium Variable Life Account M (the Variable Account) is a segregated investment account of The Lincoln National Life Insurance Company (the Company) and is registered as a unit investment trust with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended. The operations of the Variable Account, which commenced on June 18, 1998, are part of the operations of the Company. The Variable Account consists of fifteen variable universal life (VUL) products which are listed below. VUL-I Lincoln VUL(CV) Lincoln VUL(CV) II and Lincoln VUL Flex Lincoln VUL(CV)-III Lincoln VUL(CV)-IV Lincoln VUL(DB) and Lincoln VULDB Elite Lincoln VUL(DB)-II Lincoln VUL(DB)-IV VUL-Money Guard Lincoln VUL(ONE) Lincoln Momentum VUL(ONE) Lincoln VUL(ONE) 2005 Lincoln Momentum VUL(ONE) 2005 VUL(ONE) 2007 Momentum VUL(ONE) 2007 The assets of the Variable Account are owned by the Company. The portion of the Variable Account's assets supporting the variable life policies may not be used to satisfy liabilities arising from any other business of the Company. During 2007, Jefferson Pilot Life Insurance Company and Jefferson Pilot Financial Insurance Company merged into The Lincoln National Life Insurance Company. The merger did not affect the assets and liabilities of Lincoln Life Flexible Premium Variable Life Account M. BASIS OF PRESENTATION: The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States for unit investment trusts. In September 2006, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 157 "Fair Value Measurements" (Statement 157). Statement 157 establishes a framework for measuring fair value in U.S. generally accepted accounting principles, clarifies the definition of fair value within that framework and expands disclosures about the use of fair value measurements. Statement 157 is intended to increase consistency and comparability among fair value estimates used in financial reporting. Statement 157 is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of Statement 157 to have a material impact on the amounts reported in the financial statements. INVESTMENTS: The assets of the Variable Account are divided into variable subaccounts, each of which may be invested in shares of one of ninety-seven mutual funds (the Funds) of fifteen diversified open-end management investment companies, each Fund with its own investment objective. The Funds are: AIM Variable Insurance Funds (AIM V.I.): AIM V.I. Capital Appreciation (Series I) AIM V.I. Core Equity Fund (Series I) AIM V.I. Diversified Income Fund (Series I) AIM V.I. International Growth Fund (Series I) AllianceBernstein Variable Products Series Fund, Inc. (ABVPSF): ABVPSF Global Technology Portfolio (Class A) ABVPSF Growth and Income Portfolio (Class A) ABVPSF International Value Portfolio (Class A) ABVPSF Large Cap Growth Portfolio (Class A) ABVPSF Small/Mid Cap Value Portfolio (Class A) American Century Variable Portfolios, Inc. (American Century VP): American Century VP Inflation Protection (Class 1) American Funds Insurance Series (American Funds): American Funds Global Growth Fund (Class 2) American Funds Global Small Capitalization Fund (Class 2) American Funds Growth Fund (Class 2) American Funds Growth-Income Fund (Class 2) American Funds International Fund (Class 2) Delaware VIP Trust (Delaware VIPT)*: Delaware VIPT Capital Reserves Series (Standard Class) Delaware VIPT Diversified Income Series (Standard Class) Delaware VIPT Emerging Markets Series (Standard Class) Delaware VIPT High Yield Series (Standard Class) Delaware VIPT REIT Series (Standard Class) Delaware VIPT Small Cap Value Series (Standard Class) Delaware VIPT Trend Series (Standard Class) Delaware VIPT U.S. Growth Series (Standard Class) Delaware VIPT Value Series (Standard Class) DWS Scudder VIP Funds (DWS VIP): DWS VIP Equity 500 Index Fund DWS VIP Small Cap Index Fund Fidelity Variable Insurance Products Fund (Fidelity VIP): Fidelity VIP Asset Manager Portfolio Fidelity VIP Contrafund Portfolio (Service Class) Fidelity VIP Equity-Income Portfolio Fidelity VIP Equity-Income Portfolio (Service Class) Fidelity VIP Growth Portfolio (Service Class) Fidelity VIP Growth Opportunities Portfolio (Service Class) Fidelity VIP High Income Portfolio (Service Class) Fidelity VIP Investment Grade Bond Portfolio Fidelity VIP Mid Cap Portfolio (Service Class) Fidelity VIP Overseas Portfolio (Service Class) Franklin Templeton Variable Insurance Products Trust (FTVIPT): FTVIPT Franklin Income Securities Fund (Class 1) M-24 1. ACCOUNTING POLICIES AND VARIABLE ACCOUNT INFORMATION (CONTINUED) FTVIPT Franklin Small-Mid Cap Growth Securities Fund (Class 1) FTVIPT Mutual Shares Securities Fund (Class 1) FTVIPT Templeton Foreign Securities Fund (Class 1) FTVIPT Templeton Foreign Securities Fund (Class 2) FTVIPT Templeton Global Asset Allocation Fund (Class 1) FTVIPT Templeton Global Income Securities Fund (Class 1) FTVIPT Templeton Growth Securities Fund (Class 1) FTVIPT Templeton Growth Securities Fund (Class 2) Janus Aspen Series: Janus Aspen Series Balanced Portfolio Janus Aspen Series Balanced Portfolio (Service Shares) Janus Aspen Series Global Technology Portfolio (Service Shares) Janus Aspen Series Mid Cap Growth Portfolio (Service Shares) Janus Aspen Series Worldwide Growth Portfolio Janus Aspen Series Worldwide Growth Portfolio (Service Shares) Lincoln Variable Insurance Products Trust (Lincoln VIPT)*: Lincoln VIPT Baron Growth Opportunities Lincoln VIPT Baron Growth Opportunities Service Class Lincoln VIPT Capital Growth Lincoln VIPT Cohen & Steers Global Real Estate Lincoln VIPT Delaware Bond Lincoln VIPT Delaware Growth and Income Lincoln VIPT Delaware Social Awareness Lincoln VIPT Delaware Special Opportunities Lincoln VIPT FI Equity-Income Lincoln VIPT Janus Capital Appreciation Lincoln VIPT Marsico International Growth Lincoln VIPT MFS Value Lincoln VIPT Mid-Cap Growth Lincoln VIPT Mid-Cap Value Lincoln VIPT Mondrian International Value Lincoln VIPT Money Market Lincoln VIPT S & P 500 Index Lincoln VIPT Small-Cap Index Lincoln VIPT T. Rowe Price Growth Stock Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth Lincoln VIPT Templeton Growth Lincoln VIPT UBS Global Asset Allocation Lincoln VIPT Value Opportunities Lincoln VIPT Wilshire 2010 Profile Lincoln VIPT Wilshire 2020 Profile Lincoln VIPT Wilshire 2030 Profile Lincoln VIPT Wilshire 2040 Profile Lincoln VIPT Wilshire Aggressive Profile Lincoln VIPT Wilshire Conservative Profile Lincoln VIPT Wilshire Moderate Profile Lincoln VIPT Wilshire Moderately Aggressive Profile M Fund, Inc. (M Fund): M Fund Brandes International Equity Fund M Fund Business Opportunity Value Fund M Fund Frontier Capital Appreciation Fund M Fund Turner Core Growth Fund MFS Variable Insurance Trust (MFS VIT): MFS VIT Core Equity Series (Initial Class) MFS VIT Emerging Growth Series (Initial Class) MFS VIT Total Return Series (Initial Class) MFS VIT Utilities Series (Initial Class) Neuberger Berman Advisers Management Trust (NB AMT): NB AMT Mid-Cap Growth Portfolio (I Class) NB AMT Partners Portfolio (I Class) NB AMT Regency Portfolio (I Class) PIMCO Advisors VIT (PIMCO VIT OPCAP): PIMCO VIT OPCAP Global Equity Portfolio PIMCO VIT OPCAP Managed Portfolio Putnam Variable Trust (Putnam VT): Putnam VT Growth & Income Fund (Class IB) Putnam VT Health Sciences Fund (Class IB) * Denotes an affiliate of the Company Investments in the Funds are stated at the closing net asset value per share on December 31, 2007, which approximates fair value. The difference between cost and fair value is reflected as unrealized appreciation or 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 variable subaccounts on the payable date. Dividend income is recorded on the ex-dividend date. FEDERAL INCOME TAXES: Operations of the Variable Account form a part of and are taxed with operations of the Company, which is taxed as a "life insurance company" under the Internal Revenue Code. The Variable Account will not be taxed as a regulated invest- ment company under Subchapter M of the Internal Revenue Code, as amended. Under 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. INVESTMENT FUND CHANGES: During 2006, the AIM V.I. Core Equity Fund, the ABVPSF International Value Fund, the FTVIPT Franklin Income Securities Fund and M-25 1. ACCOUNTING POLICIES AND VARIABLE ACCOUNT INFORMATION (CONTINUED) the FTVIPT Mutual Shares Securities Fund became available as investment options for Account Contract owners. Accordingly, the 2006 statements of changes in net assets and total return and investment income ratios in note 3 for these subaccounts are for the period from the commencement of operations to December 31, 2006. Also during 2006, the Scudder Investments VIT Funds (Scudder VIT) family of funds changed its name to DWS Scudder VIP Funds (DWS VIP). During 2006, the AIM V.I. Growth Fund and the AIM V.I. Premier Equity Fund ceased to be available as investment options to Variable Account Contract owners. Also during 2006, the AIM V.I. Growth Fund merged into the AIM V.I. Capital Appreciation Fund and the AIM V.I. Premier Equity Fund merged into the AIM V.I Core Equity Fund. During 2007, the Lincoln VIPT Baron Growth Opportunities Fund, the Lincoln VIPT Capital Growth Fund, the Lincoln VIPT Cohen & Steers Global Real Estate Fund, the Lincoln VIPT Delaware Special Opportunities Fund, the Lincoln VIPT Marsico International Growth Fund, the Lincoln VIPT MFS Value Fund, the Lincoln VIPT Mid-Cap Growth Fund, the Lincoln VIPT Mid-Cap Value Fund, the Lincoln VIPT S&P 500 Index Fund, the Lincoln VIPT Small-Cap Index Fund, the Lincoln VIPT T. Rowe Price Growth Stock Fund, the Lincoln VIPT Templeton Growth Fund, the Lincon VIPT Value Opportunities Fund, the Lincoln VIPT Wilshire 2010 Profile Fund, the Lincoln VIPT Wilshire 2020 Profile Fund, the Lincoln VIPT Wilshire 2030 Profile Fund and the Lincoln VIPT Wilshire 2040 Profile Fund became available as investment options for Account Contract owners. Accordingly, the 2007 statement of operations and statements of changes in net assets and total return and investment income ratios in note 3 for these subaccounts are for the period from the commencement of operations to December 31, 2007. Also during 2007 the following funds changed their names:
PREVIOUS FUND NAME NEW FUND NAME - ----------------------------------------------- --------------------------------------------------------- Lincoln VIPT Bond Fund Lincoln VIPT Delaware Bond Fund Lincoln VIPT Growth and Income Fund Lincoln VIPT Delaware Growth and Income Fund Lincoln VIPT Social Awareness Fund Lincoln VIPT Delaware Social Awareness Fund Lincoln VIPT Equity-Income Fund Lincoln VIPT FI Equity-Income Fund Lincoln VIPT Capital Appreciation Fund Lincoln VIPT Janus Capital Appreciation Fund Lincoln VIPT International Fund Lincoln VIPT Mondrian International Value Fund Lincoln VIPT Aggressive Growth Fund Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth Fund Lincoln VIPT Global Asset Allocation Fund Lincoln VIPT UBS Global Asset Allocation Fund Lincoln VIPT Aggressive Profile Fund Lincoln VIPT Wilshire Aggressive Profile Fund Lincoln VIPT Conservative Profile Fund Lincoln VIPT Wilshire Conservative Profile Fund Lincoln VIPT Moderate Profile Fund Lincoln VIPT Wilshire Moderate Profile Fund Lincoln VIPT Moderately Aggressive Profile Fund Lincoln VIPT Wilshire Moderately Aggressive Profile Fund MFS VIT Capital Opportunities Series MFS VIT Core Equity Series
Also during 2007, the Lincoln VIPT Core Fund, the Lincoln VIPT Growth Fund and the Lincoln VIPT Growth Opportunities Fund ceased to be available as an investment option to Variable Account Contract owners. During 2007, the Lincoln Variable Insurance Products Trust (Lincoln VIPT) acquired the Baron Capital Asset Service Class Fund and renamed the fund Lincoln VIPT Baron Growth Opportunities Service Class Fund. This fund acquisition had no impact on the units outstanding or the unit prices to the Variable Account Contract owner. 2. MORTALITY AND EXPENSE GUARANTEES AND OTHER TRANSACTIONS WITH AFFILIATES Amounts are paid to the Company for mortality and expense guarantees at a percentage of the current value of the Variable Account each day. The mortality and expense risk charges for each of the variable subaccounts are reported in the statement of operations. The rates are as follows for the fifteen policy types within the Variable Account: - - VUL-I - annual rate of .80% for policy years one through twelve and .55% thereafter. - - Lincoln VULCV - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter. - - Lincoln VULCV-II & Lincoln VUL Flex - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter. - - Lincoln VULCV-III - annual rate of .75% for policy years one through ten, .35% for policy years eleven through twenty and .20% thereafter. M-26 2. MORTALITY AND EXPENSE GUARANTEES AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) - - Lincoln VULCV-IV - annual rate of .60% for policy years one through ten and .20% thereafter. - - Lincoln VULDB & Lincoln VULDB Elite - annual rate of .90% for policy years one through nineteen and .20% thereafter. - - Lincoln VULDB-II - annual rate of .90% for policy years one through nineteen and .20% thereafter. - - Lincoln VULDB-IV - annual rate of .90% for policy years one through nineteen and .20% thereafter. - - MONEYGUARD VUL - annual rate of 1.00%. - - Lincoln VULONE - annual rate of .50% for policy years one through ten and .20% thereafter. - - Lincoln Momentum VULONE - annual rate of .50% for policy years one through ten and .20% thereafter. - - Lincoln VULONE 2005 - annual rate of .50% for policy years one through ten and .20% thereafter. - - Lincoln Momentum VULONE 2005 - annual rate of .50% for policy years one through ten and .20% thereafter. - - Lincoln VULONE 2007 - annual rate of .60% for policy years one through ten and .20% thereafter. - - Lincoln Momentum VULONE 2007 - annual rate of .60% for policy years one through ten and .20% thereafter. Prior to the allocation of premiums to the Variable Account, the Company deducts a premium load, based on product, to cover state taxes and federal income tax liabilities and a portion of the sales expenses incurred by the Company. Refer to the product prospectuses for the applicable rate. The premium loads for the years ended December 31, 2007 and 2006 amounted to $10,922,160 and $8,890,567, respectively. The Company charges a monthly administrative fee for items such as premium billings and collection, policy value calculation, confirmations and periodic reports. Refer to the product prospectus for the applicable administrative fee rates. Administrative fees for the years ended December 31, 2007 and 2006 totaled $5,462,998 and $4,274,102, respectively. The Company assumes responsibility for providing the insurance benefit included in the policy. On a monthly basis, a cost of insurance charge is deducted proportionately from the value of each variable subaccount and/or fixed account funding option. The fixed account is part of the general account of the Company and is not included in these financial statements. The cost of insurance charge depends on the attained age, risk classification, gender classification (in accordance with state law) and the current net amount at risk. The cost of insurance charges for the years ended December 31, 2007 and 2006 amounted to $56,179,777 and $51,460,204, respectively. Under certain circumstances, the Company reserves the right to charge a transfer fee, refer to the product prospectus for applicable rates. No such fees were deducted for the years ended December 31, 2007 and 2006. The Company, upon full surrender of a policy, may charge a surrender charge. This charge is in part a deferred sales charge and in part a recovery of certain first year administrative costs. The amount of the surrender charge, if any, will depend on the amount of the death benefit, the amount of premium payments made during the first two policy years and the age of the policy. In no event will the surrender charge exceed the maximum allowed by state or federal law. No surrender charge is imposed on a partial surrender, but an administrative fee of $25 (not to exceed 2% of the amount withdrawn) is imposed, allocated pro-rata among the variable subac-counts (and, where applicable, the fixed account) from which the partial surrender proceeds are taken. Full surrender charges and partial surrender administrative charges paid to the Company attributable to the variable subaccounts for the years ended December 31, 2007 and 2006 were $3,021.909 and $3,701,133, respectively. 3. FINANCIAL HIGHLIGHTS A summary of the fee rates, unit values, units outstanding, net assets and total return and investment income ratios for variable life contracts as of and for each year or period in the five years ended December 31, 2007 follows.
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- AIM V.I. CAPITAL APPRECIATION 2007 0.75% 1.00% $ 7.79 $14.30 2,363,019 $21,596,168 10.90% 11.18% 0.00% 2006 0.75% 1.00% 12.33 12.33 2,498,659 20,544,773 5.45% 5.45% 0.08% 2005 0.80% 0.80% 11.69 11.69 233,722 2,731,708 7.97% 7.97% 0.07% 2004 0.80% 0.80% 10.83 10.83 252,859 2,737,256 5.78% 5.78% 0.00% 2003 0.80% 0.80% 10.23 10.23 278,064 2,845,726 28.49% 28.49% 0.00%
M-27 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - ----------------------------------------------------------------------------------------------------------------------------------- AIM V.I. CORE EQUITY 2007 0.75% 0.90% $10.12 $13.79 2,276,561 $24,067,209 7.15% 7.31% 1.10% 2006 4/28/06 0.75% 0.90% 9.43 12.85 2,410,740 23,832,376 8.50% 8.61% 0.56% AIM V.I. DIVERSIFIED INCOME 2007 0.80% 0.80% 12.15 12.15 58,213 707,450 0.91% 0.91% 7.24% 2006 0.80% 0.80% 12.04 12.04 58,717 707,107 3.65% 3.65% 6.80% 2005 0.80% 0.80% 11.62 11.62 53,025 616,093 2.08% 2.08% 6.04% 2004 0.80% 0.80% 11.38 11.38 64,670 736,082 4.20% 4.20% 5.84% 2003 0.80% 0.80% 10.92 10.92 63,029 688,507 8.37% 8.37% 6.38% AIM V.I. INTERNATIONAL GROWTH 2007 0.75% 1.00% 17.32 23.45 568,487 10,792,000 13.57% 13.86% 0.41% 2006 0.75% 1.00% 15.24 20.65 585,021 9,766,594 26.95% 27.28% 1.08% 2005 0.75% 1.00% 11.99 16.27 549,225 7,184,524 16.75% 17.05% 0.70% 2004 0.75% 1.00% 10.26 13.93 553,222 6,159,699 22.77% 23.08% 0.69% 2003 0.75% 1.00% 8.35 11.35 522,345 4,711,335 27.79% 28.10% 0.61% ABVPSF GLOBAL TECHNOLOGY CLASS A 2007 0.50% 1.00% 13.20 14.91 178,937 2,522,503 18.99% 19.60% 0.00% 2006 0.50% 1.00% 11.08 12.47 143,191 1,680,232 7.54% 8.10% 0.00% 2005 0.50% 1.00% 10.29 11.53 128,019 1,381,231 2.83% 3.35% 0.00% 2004 0.50% 1.00% 10.00 11.11 113,830 1,191,160 4.39% 4.67% 0.00% 2003 0.75% 1.00% 9.56 10.63 103,251 1,026,807 42.68% 43.01% 0.00% ABVPSF GROWTH AND INCOME CLASS A 2007 0.50% 1.00% 13.05 15.90 1,164,357 16,979,485 4.07% 4.59% 1.45% 2006 0.50% 1.00% 12.47 15.28 1,147,240 16,119,649 16.12% 16.70% 1.39% 2005 0.50% 1.00% 11.27 13.16 1,021,702 12,437,386 3.81% 4.34% 1.43% 2004 0.50% 1.00% 11.63 12.67 852,277 10,058,033 10.35% 10.63% 0.88% 2003 0.75% 1.00% 10.52 11.48 550,191 5,872,560 31.20% 31.51% 0.99% ABVPSF INTERNATIONAL VALUE CLASS A 2007 0.50% 0.90% 12.50 12.58 388,765 4,849,818 4.89% 5.31% 1.17% 2006 5/24/06 0.50% 0.90% 11.92 11.95 133,275 1,590,746 9.55% 24.74% 0.01% ABVPSF LARGE CAP GROWTH CLASS A 2007 0.50% 0.90% 12.73 14.48 191,705 2,566,420 12.90% 13.37% 0.00% 2006 0.50% 0.90% 11.27 12.77 183,380 2,167,737 -1.34% -0.94% 0.00% 2005 0.50% 0.90% 11.42 12.76 207,677 2,451,924 14.11% 14.57% 0.00% 2004 0.50% 0.90% 10.01 10.99 190,371 1,955,214 7.65% 7.81% 0.00% 2003 0.75% 0.90% 9.30 10.19 147,802 1,403,201 22.56% 22.74% 0.00% ABVPSF SMALL/MID CAP VALUE CLASS A 2007 0.50% 1.00% 12.94 21.98 756,901 12,056,607 0.69% 1.20% 0.90% 2006 0.50% 1.00% 12.79 21.82 625,164 10,122,246 13.28% 13.85% 0.42% 2005 0.50% 1.00% 11.68 19.26 490,156 7,360,063 5.85% 6.38% 0.71% 2004 0.50% 1.00% 13.97 18.20 395,464 5,991,252 18.12% 18.41% 0.17% 2003 0.75% 1.00% 11.80 15.41 240,638 3,164,836 39.87% 40.21% 0.57% AMERICAN CENTURY VP INFLATION PROTECTION 2007 0.50% 0.90% 11.10 11.98 634,123 7,341,972 8.69% 9.12% 4.77% 2006 0.50% 0.90% 10.17 10.98 525,134 5,605,032 0.97% 1.38% 3.51% 2005 0.50% 0.90% 10.19 10.83 368,148 3,912,014 0.90% 1.30% 4.95% 2004 5/11/04 0.50% 0.90% 10.07 10.69 142,887 1,525,342 0.16% 6.42% 2.31% AMERICAN FUNDS GLOBAL GROWTH CLASS 2 2007 0.50% 0.90% 16.10 18.01 732,305 12,470,814 13.82% 14.28% 2.92% 2006 0.50% 0.90% 14.09 15.76 460,526 6,959,057 19.35% 19.83% 0.86% 2005 0.50% 0.90% 12.23 13.15 261,330 3,337,337 13.05% 13.51% 0.65% 2004 5/18/04 0.50% 0.90% 10.78 11.59 60,634 701,402 2.66% 15.46% 0.08% AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION CLASS 2 2007 0.50% 1.00% 18.17 33.46 1,433,504 31,838,941 20.20% 20.82% 2.94% 2006 0.50% 1.00% 15.08 27.84 1,339,444 25,120,813 22.78% 23.43% 0.46% 2005 0.50% 1.00% 12.25 22.67 1,172,972 18,068,003 24.10% 24.73% 0.97% 2004 0.50% 1.00% 9.84 18.27 1,012,526 12,718,196 19.70% 19.98% 0.00% 2003 0.75% 1.00% 8.20 15.26 888,055 9,082,686 52.02% 52.38% 0.62%
M-28 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - ------------------------------------------------------------------------------------------------------------------------------------ AMERICAN FUNDS GROWTH CLASS 2 2007 0.50% 1.00% $11.94 $19.44 7,941,147 $119,671,398 11.23% 11.79% 0.80% 2006 0.50% 1.00% 10.71 17.48 7,394,487 99,994,576 9.12% 9.67% 0.83% 2005 0.50% 1.00% 9.79 16.02 6,865,411 84,660,023 15.04% 15.61% 0.74% 2004 0.50% 1.00% 8.49 13.92 6,022,896 64,124,987 11.37% 11.66% 0.19% 2003 0.75% 1.00% 7.60 12.50 5,272,519 48,481,609 35.45% 35.79% 0.13% AMERICAN FUNDS GROWTH-INCOME CLASS 2 2007 0.50% 1.00% 13.08 17.21 6,190,959 91,102,111 4.00% 4.52% 1.56% 2006 0.50% 1.00% 12.52 16.53 5,699,653 81,455,225 14.06% 14.63% 1.60% 2005 0.50% 1.00% 11.20 14.48 5,432,375 68,532,346 4.78% 5.30% 1.41% 2004 0.50% 1.00% 11.39 13.81 4,766,655 58,105,625 9.28% 9.55% 0.97% 2003 0.75% 1.00% 10.40 12.62 3,715,110 41,484,845 31.11% 31.44% 1.20% AMERICAN FUNDS INTERNATIONAL CLASS 2 2007 0.50% 1.00% 17.50 24.31 2,749,494 57,707,080 18.83% 19.42% 1.61% 2006 0.50% 1.00% 14.65 20.46 2,325,308 41,733,581 17.80% 18.38% 1.75% 2005 0.50% 1.00% 13.16 17.37 1,959,489 30,470,221 20.30% 20.90% 1.72% 2004 0.50% 1.00% 13.01 14.44 1,290,799 17,137,258 18.13% 18.43% 1.65% 2003 0.75% 1.00% 10.99 12.22 596,867 6,737,992 33.52% 33.84% 1.90% DELAWARE VIPT CAPITAL RESERVES 2007 0.50% 0.90% 10.67 10.92 20,715 224,789 3.53% 3.97% 4.83% 2006 0.50% 0.90% 10.46 10.50 11,544 120,701 3.78% 4.05% 4.52% 2005 7/13/05 0.50% 0.75% 10.08 10.09 4,896 49,341 0.21% 0.44% 1.97% DELAWARE VIPT DIVERSIFIED INCOME 2007 0.50% 0.90% 11.51 12.57 1,032,963 12,358,079 6.67% 7.10% 2.73% 2006 0.50% 0.90% 10.75 11.73 679,400 7,668,721 6.95% 7.38% 1.42% 2005 0.50% 0.90% 10.14 10.93 440,376 4,692,653 -1.34% -0.94% 0.66% 2004 5/26/04 0.50% 0.90% 10.25 11.03 79,095 871,216 0.62% 9.01% 0.00% DELAWARE VIPT EMERGING MARKETS 2007 0.50% 0.90% 21.96 50.18 779,035 27,909,618 37.61% 38.16% 1.52% 2006 0.50% 0.90% 15.89 36.46 659,640 17,993,752 26.00% 26.51% 1.35% 2005 0.50% 0.90% 14.56 28.94 631,793 15,081,737 26.34% 26.85% 0.29% 2004 0.50% 0.90% 21.04 22.90 302,211 6,330,954 32.28% 32.48% 2.59% 2003 0.75% 0.90% 15.89 17.32 196,841 3,323,709 69.02% 69.27% 2.48% DELAWARE VIPT HIGH YIELD 2007 0.50% 1.00% 12.03 17.47 1,007,976 14,413,211 1.77% 2.28% 6.42% 2006 0.50% 1.00% 11.81 17.17 923,725 13,098,859 11.33% 11.89% 6.34% 2005 0.50% 1.00% 10.60 15.42 771,649 10,057,594 2.55% 3.07% 6.37% 2004 0.50% 1.00% 10.93 15.04 693,889 9,065,390 13.11% 13.39% 5.50% 2003 0.75% 1.00% 9.64 13.30 573,981 6,418,558 27.48% 27.78% 5.06% DELAWARE VIPT REIT 2007 0.50% 0.90% 12.22 31.18 1,235,576 23,556,721 -14.71% -14.37% 1.38% 2006 0.50% 0.90% 14.27 36.55 1,186,561 28,721,416 31.44% 31.97% 1.81% 2005 0.50% 0.90% 11.64 27.81 1,021,761 19,807,181 6.21% 6.64% 1.83% 2004 0.50% 0.90% 16.15 26.18 963,937 19,156,672 30.20% 30.40% 2.06% 2003 0.75% 0.90% 12.40 20.11 749,573 11,829,767 32.82% 33.02% 2.12% DELAWARE VIPT SMALL CAP VALUE 2007 0.50% 1.00% 12.32 25.23 2,175,595 39,581,908 -7.55% -7.09% 0.50% 2006 0.50% 1.00% 13.26 27.26 2,116,606 43,419,194 15.04% 15.61% 0.24% 2005 0.50% 1.00% 12.08 23.67 1,958,046 36,186,924 8.33% 8.87% 0.36% 2004 0.50% 1.00% 14.45 21.83 1,861,598 32,820,027 20.28% 20.57% 0.20% 2003 0.75% 1.00% 12.00 18.13 1,439,653 21,938,961 40.57% 40.92% 0.36% DELAWARE VIPT TREND 2007 0.50% 1.00% 13.38 21.17 1,362,908 22,380,539 9.65% 10.20% 0.00% 2006 0.50% 1.00% 12.19 19.27 1,490,436 22,253,238 6.52% 7.06% 0.00% 2005 0.50% 1.00% 11.43 18.06 1,557,042 22,013,285 4.81% 5.33% 0.00% 2004 0.50% 1.00% 11.63 17.19 1,636,004 22,221,023 11.49% 11.76% 0.00% 2003 0.75% 1.00% 10.41 15.39 1,491,305 18,421,491 33.77% 34.09% 0.00%
M-29 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- DELAWARE VIPT U.S. GROWTH 2007 0.50% 0.90% $11.85 $14.51 74,970 $ 945,719 11.55% 12.00% 0.00% 2006 0.50% 0.90% 10.92 12.95 70,620 807,836 1.40% 1.80% 0.00% 2005 0.50% 0.90% 10.75 12.43 74,695 836,244 13.62% 14.08% 0.54% 2004 0.50% 0.90% 9.45 9.81 54,807 534,228 2.37% 2.53% 0.12% 2003 0.75% 0.90% 9.35 9.57 17,308 164,052 22.64% 22.83% 0.12% DELAWARE VIPT VALUE 2007 0.50% 0.90% 12.74 15.21 1,049,683 15,121,334 -3.59% -3.21% 1.52% 2006 0.50% 0.90% 13.17 15.75 915,132 13,833,284 22.99% 23.48% 1.36% 2005 0.50% 0.90% 11.39 12.79 617,122 7,687,908 5.08% 5.50% 1.47% 2004 0.50% 0.90% 11.83 12.15 371,986 4,474,824 13.90% 14.07% 1.47% 2003 0.75% 0.90% 10.37 10.65 239,935 2,536,779 27.15% 27.34% 0.92% DWS VIP EAFE EQUITY INDEX 2004 0.50% 0.90% 8.88 12.18 474,562 4,940,125 18.00% 18.18% 2.28% 2003 0.75% 0.90% 7.53 10.31 438,408 3,753,928 32.16% 32.36% 3.89% DWS VIP EQUITY 500 INDEX 2007 0.50% 0.90% 11.60 14.76 4,784,358 60,636,247 4.35% 4.77% 1.50% 2006 0.50% 0.90% 11.10 14.13 4,914,527 59,499,412 14.49% 14.95% 1.18% 2005 0.50% 0.90% 9.68 12.32 5,441,256 57,222,262 3.74% 4.15% 1.53% 2004 0.50% 0.90% 9.32 11.86 5,763,380 58,157,558 9.60% 9.77% 1.10% 2003 0.75% 0.90% 8.49 10.80 5,582,819 50,954,438 27.01% 27.20% 1.18% DWS VIP SMALL CAP INDEX 2007 0.50% 0.90% 13.03 18.52 862,949 13,621,697 -2.78% -2.39% 0.86% 2006 0.50% 0.90% 13.35 19.05 855,091 13,991,020 16.44% 16.91% 0.63% 2005 0.50% 0.90% 11.57 16.36 788,123 11,235,210 3.33% 3.74% 0.61% 2004 0.50% 0.90% 13.39 15.83 772,863 10,954,179 16.70% 16.88% 0.42% 2003 0.75% 0.90% 11.46 13.57 649,424 7,989,559 45.11% 45.33% 0.81% FIDELITY VIP ASSET MANAGER 2007 0.80% 0.80% 14.81 14.81 58,676 869,220 14.58% 14.58% 6.16% 2006 0.80% 0.80% 12.93 12.93 57,892 748,450 6.46% 6.46% 2.62% 2005 0.80% 0.80% 12.14 12.14 60,501 734,702 3.22% 3.22% 2.76% 2004 0.80% 0.80% 11.77 11.77 72,589 854,036 4.63% 4.63% 2.68% 2003 0.80% 0.80% 11.24 11.24 76,514 860,396 17.04% 17.04% 3.45% FIDELITY VIP CONTRAFUND SERVICE CLASS 2007 0.50% 0.90% 15.48 19.27 3,475,642 61,663,183 16.46% 16.92% 0.90% 2006 0.50% 0.90% 13.24 16.53 3,133,407 48,418,152 10.59% 11.03% 1.15% 2005 0.50% 0.90% 12.55 14.92 2,603,278 36,885,328 15.80% 16.26% 0.18% 2004 0.50% 0.90% 12.11 12.87 2,014,251 24,995,490 14.31% 14.48% 0.23% 2003 0.75% 0.90% 10.58 11.24 1,673,784 18,101,114 27.20% 27.39% 0.33% FIDELITY VIP EQUITY-INCOME 2007 0.80% 0.80% 16.28 16.28 296,277 4,822,136 0.72% 0.72% 1.76% 2006 0.80% 0.80% 16.16 16.16 334,521 5,405,561 19.24% 19.24% 3.31% 2005 0.80% 0.80% 13.55 13.55 402,396 5,453,343 5.02% 5.02% 1.61% 2004 0.80% 0.80% 12.90 12.90 421,341 5,437,053 10.64% 10.64% 1.57% 2003 0.80% 0.80% 11.66 11.66 427,784 4,989,282 29.29% 29.29% 1.80% FIDELITY VIP EQUITY-INCOME SERVICE CLASS 2007 0.50% 1.00% 13.52 16.24 511,636 7,701,467 0.42% 0.91% 1.72% 2006 0.50% 1.00% 13.45 16.17 507,718 7,598,666 18.89% 19.48% 3.21% 2005 0.50% 1.00% 11.30 13.60 490,143 6,161,370 4.71% 5.24% 1.39% 2004 0.50% 1.00% 12.00 12.99 412,976 4,987,854 10.28% 10.55% 1.42% 2003 0.75% 1.00% 10.87 11.78 315,071 3,452,894 28.94% 29.25% 1.14% FIDELITY VIP GROWTH SERVICE CLASS 2007 0.50% 0.90% 8.98 15.20 888,887 9,997,190 25.73% 26.24% 0.62% 2006 0.50% 0.90% 7.14 12.07 865,736 7,531,657 5.78% 6.20% 0.27% 2005 0.50% 0.90% 6.75 11.39 874,064 7,058,638 4.73% 5.15% 0.38% 2004 0.50% 0.90% 6.45 10.86 860,538 6,473,006 2.34% 2.49% 0.16% 2003 0.75% 0.90% 6.30 10.60 764,235 5,460,425 31.59% 31.79% 0.17%
M-30 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - --------------------------------------------------------------------------------------------------------------------------------- FIDELITY VIP GROWTH OPPORTUNITIES SERVICE CLASS 2007 0.75% 0.90% $10.26 $13.52 424,150 $4,452,849 21.94% 22.12% 0.00% 2006 0.75% 0.90% 8.40 11.07 450,665 3,878,868 4.36% 4.51% 0.70% 2005 0.75% 0.90% 8.04 10.59 559,457 4,579,023 7.89% 8.05% 0.82% 2004 0.75% 0.90% 7.44 9.80 583,852 4,435,752 6.10% 6.26% 0.47% 2003 0.75% 0.90% 7.00 9.22 603,056 4,305,467 28.50% 28.69% 0.63% FIDELITY VIP HIGH INCOME SERVICE CLASS 2007 0.75% 0.90% 11.24 14.34 139,905 1,628,414 1.74% 1.89% 8.35% 2006 0.75% 0.90% 11.05 14.08 140,532 1,610,780 10.18% 10.35% 7.39% 2005 0.75% 0.90% 10.03 12.76 165,831 1,714,771 1.60% 1.76% 16.08% 2004 0.75% 0.90% 9.87 12.54 273,178 2,754,143 8.49% 8.65% 8.34% 2003 0.75% 0.90% 9.10 11.54 288,482 2,676,502 25.83% 26.02% 5.44% FIDELITY VIP INVESTMENT GRADE BOND 2007 0.80% 0.80% 15.70 15.70 161,347 2,532,753 3.52% 3.52% 4.08% 2006 0.80% 0.80% 15.16 15.16 174,935 2,652,791 3.52% 3.52% 3.97% 2005 0.80% 0.80% 14.65 14.65 178,343 2,612,574 1.38% 1.38% 3.68% 2004 0.80% 0.80% 14.45 14.45 185,382 2,678,797 3.62% 3.62% 4.30% 2003 0.80% 0.80% 13.94 13.94 211,232 2,945,598 4.37% 4.37% 4.24% FIDELITY VIP MID CAP SERVICE CLASS 2007 0.50% 0.90% 12.07 15.72 494,616 7,535,268 14.45% 15.10% 0.71% 2006 0.50% 0.90% 13.57 13.66 251,713 3,368,823 11.58% 12.03% 0.15% 2005 6/2/05 0.50% 0.90% 12.16 12.19 76,026 925,977 -0.84% 16.52% 0.00% FIDELITY VIP OVERSEAS SERVICE CLASS 2007 0.50% 0.90% 17.07 21.12 356,920 6,803,849 16.16% 16.62% 3.36% 2006 0.50% 0.90% 14.64 18.15 290,728 4,819,727 16.89% 17.39% 0.68% 2005 0.50% 0.90% 13.08 15.51 225,598 3,312,085 17.91% 18.38% 0.49% 2004 0.50% 0.90% 12.26 13.13 147,382 1,861,724 12.47% 12.64% 0.89% 2003 0.75% 0.90% 10.90 11.66 55,890 632,379 41.92% 42.14% 0.36% FTVIPT FRANKLIN INCOME SECURITIES 2007 0.50% 0.90% 11.63 11.70 313,897 3,611,934 3.08% 3.49% 3.37% 2006 6/20/06 0.50% 0.90% 11.28 11.31 67,037 757,381 6.73% 12.84% 0.00% FTVIPT FRANKLIN SMALL-MID CAP GROWTH SECURITIES 2007 0.50% 1.00% 13.43 16.30 675,263 9,847,537 10.40% 10.95% 0.00% 2006 0.50% 1.00% 12.16 14.76 542,178 7,244,545 7.87% 8.41% 0.00% 2005 0.50% 1.00% 11.30 13.69 483,307 6,037,721 4.04% 4.56% 0.00% 2004 0.50% 1.00% 11.70 13.15 368,961 4,494,761 10.59% 10.87% 0.00% 2003 0.75% 1.00% 10.55 11.89 308,700 3,384,540 36.25% 36.58% 0.00% FTVIPT MUTUAL SHARES SECURITIES 2007 0.50% 0.90% 11.65 11.73 245,698 2,856,336 2.79% 3.21% 1.57% 2006 6/16/06 0.50% 0.90% 11.34 11.37 65,437 742,684 5.30% 14.90% 0.00% FTVIPT TEMPLETON FOREIGN SECURITIES 2007 0.80% 0.80% 18.24 18.24 226,059 4,124,438 14.87% 14.87% 2.08% 2006 0.80% 0.80% 15.88 15.88 252,347 4,008,202 20.73% 20.73% 1.37% 2005 0.80% 0.80% 13.16 13.16 267,099 3,514,129 9.60% 9.60% 1.29% 2004 0.80% 0.80% 12.00 12.00 296,333 3,557,383 17.93% 17.93% 1.17% 2003 0.80% 0.80% 10.18 10.18 323,559 3,293,782 31.50% 31.50% 1.91% FTVIPT TEMPLETON FOREIGN SECURITIES CLASS 2 2007 0.75% 0.90% 16.70 17.60 449,769 7,765,062 14.42% 14.59% 1.97% 2006 0.75% 0.90% 14.58 15.38 483,284 7,282,249 20.36% 20.54% 1.21% 2005 0.75% 0.90% 12.09 12.78 559,713 6,992,790 9.18% 9.35% 1.16% 2004 0.75% 0.90% 11.06 11.70 580,633 6,633,509 17.47% 17.64% 1.06% 2003 0.75% 0.90% 9.40 9.96 565,732 5,497,116 31.03% 31.23% 1.71% FTVIPT TEMPLETON GLOBAL ASSET ALLOCATION 2007 0.80% 0.80% 20.89 20.89 41,692 870,816 9.44% 9.44% 16.99% 2006 0.80% 0.80% 19.08 19.08 51,499 982,852 20.42% 20.42% 7.62% 2005 0.80% 0.80% 15.85 15.85 60,248 954,825 3.03% 3.03% 4.01% 2004 0.80% 0.80% 15.38 15.38 58,431 898,836 15.01% 15.01% 2.94% 2003 0.80% 0.80% 13.37 13.37 44,022 588,802 31.26% 31.26% 2.74%
M-31 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- FTVIPT TEMPLETON GLOBAL INCOME SECURITIES 2007 0.50% 0.90% $11.62 $12.39 333,508 $ 4,078,634 10.28% 10.72% 2.70% 2006 0.50% 0.90% 11.12 11.19 129,179 1,441,916 12.13% 12.58% 2.92% 2005 6/2/05 0.50% 0.90% 9.92 9.94 67,928 675,128 -0.48% 1.69% 0.36% FTVIPT TEMPLETON GROWTH SECURITIES 2007 0.50% 0.90% 13.77 20.36 607,307 9,850,621 1.63% 2.04% 1.48% 2006 0.50% 0.90% 13.49 20.01 599,467 9,693,624 21.11% 21.59% 1.43% 2005 0.50% 0.90% 11.83 16.51 514,487 7,027,823 8.08% 8.51% 1.17% 2004 0.50% 0.90% 11.99 15.26 446,802 5,700,642 15.21% 15.38% 1.25% 2003 0.75% 0.90% 10.41 13.23 316,203 3,544,172 31.43% 31.63% 1.63% FTVIPT TEMPLETON GROWTH SECURITIES CLASS 2 2007 0.75% 0.90% 15.86 20.14 191,240 3,716,605 1.43% 1.58% 1.21% 2006 0.75% 0.90% 15.61 19.86 260,667 4,987,443 20.72% 20.90% 1.32% 2005 0.75% 0.90% 12.91 16.45 271,772 4,304,206 7.89% 8.05% 1.13% 2004 0.75% 0.90% 11.95 15.25 264,563 3,879,934 14.99% 15.16% 1.21% 2003 0.75% 0.90% 10.38 13.26 216,959 2,765,506 30.95% 31.15% 1.43% JANUS ASPEN SERIES BALANCED 2007 0.75% 0.90% 14.15 15.69 856,695 13,155,059 9.55% 9.71% 2.57% 2006 0.75% 0.90% 12.90 14.33 893,064 12,509,778 9.73% 9.89% 2.10% 2005 0.75% 0.90% 11.74 13.06 1,027,833 13,105,959 6.98% 7.14% 2.25% 2004 0.75% 0.90% 10.95 12.20 1,151,972 13,708,028 7.55% 7.72% 2.23% 2003 0.75% 0.90% 10.17 11.35 1,291,957 14,293,025 13.03% 13.20% 2.14% JANUS ASPEN SERIES BALANCED SERVICE SHARES 2007 0.50% 0.90% 13.42 14.74 489,711 7,148,113 9.30% 9.74% 2.28% 2006 0.50% 0.90% 12.28 13.47 509,243 6,793,161 9.43% 9.86% 1.89% 2005 0.50% 0.90% 11.26 12.29 583,216 7,107,234 6.70% 7.12% 2.19% 2004 0.50% 0.90% 11.35 11.50 512,787 5,868,923 7.32% 7.48% 2.37% 2003 0.75% 0.90% 10.57 10.70 448,540 4,784,416 12.70% 12.87% 2.08% JANUS ASPEN SERIES GLOBAL TECHNOLOGY SERVICE SHARES 2007 0.75% 0.90% 5.05 9.28 340,300 1,784,359 20.61% 20.79% 0.35% 2006 0.75% 0.90% 4.19 7.68 340,533 1,481,348 6.86% 7.02% 0.00% 2005 0.75% 0.90% 3.92 7.18 370,850 1,521,215 10.55% 10.72% 0.00% 2004 0.75% 0.90% 3.55 6.48 412,417 1,524,164 -0.33% -0.18% 0.00% 2003 0.75% 0.90% 3.56 6.50 397,855 1,487,613 45.16% 45.38% 0.00% JANUS ASPEN SERIES MID CAP GROWTH SERVICE SHARES 2007 0.50% 0.90% 16.77 20.43 304,947 5,740,723 20.65% 21.13% 0.08% 2006 0.50% 0.90% 13.90 16.91 228,123 3,516,757 12.29% 12.74% 0.00% 2005 0.50% 0.90% 12.38 15.03 250,505 3,439,648 11.02% 11.47% 0.00% 2004 0.50% 0.90% 11.62 13.52 200,566 2,488,825 19.40% 19.58% 0.00% 2003 0.75% 0.90% 9.73 11.31 123,696 1,274,455 33.56% 33.76% 0.00% JANUS ASPEN SERIES WORLDWIDE GROWTH 2007 0.75% 0.90% 10.76 12.34 1,200,110 14,510,684 8.65% 8.81% 0.75% 2006 0.75% 0.90% 9.89 11.34 1,291,657 14,362,127 17.14% 17.32% 1.75% 2005 0.75% 0.90% 8.43 9.67 1,418,366 13,440,012 4.92% 5.07% 1.37% 2004 0.75% 0.90% 8.02 9.20 1,569,533 14,169,637 3.84% 4.00% 1.00% 2003 0.75% 0.90% 7.71 8.85 1,770,271 15,368,723 22.88% 23.06% 1.11% JANUS ASPEN SERIES WORLDWIDE GROWTH SERVICE SHARES 2007 0.75% 0.90% 13.28 13.67 248,332 3,350,266 8.38% 8.55% 0.56% 2006 0.75% 0.90% 12.25 12.60 275,922 3,431,008 16.88% 17.06% 1.64% 2005 0.75% 0.90% 10.48 10.76 287,389 3,054,651 4.62% 4.78% 1.16% 2004 0.75% 0.90% 10.02 10.27 334,656 3,398,641 3.59% 3.75% 0.93% 2003 0.75% 0.90% 9.67 9.90 319,416 3,124,511 22.57% 22.76% 0.92% LINCOLN VIPT BARON GROWTH OPPORTUNITIES 2007 6/7/07 0.50% 0.90% 10.41 13.63 14,413 174,585 -3.31% -2.19% 0.00% LINCOLN VIPT BARON GROWTH OPPORTUNITIES SERVICE CLASS 2007 0.50% 0.90% 10.93 22.40 369,942 6,523,714 2.49% 2.90% 0.00% 2006 0.50% 0.90% 17.10 21.85 315,556 6,189,319 14.49% 14.66% 0.00% 2005 0.75% 0.90% 14.91 19.09 330,460 5,780,762 2.44% 2.59% 0.00% 2004 0.75% 0.90% 14.54 18.63 332,877 5,640,416 24.51% 24.70% 0.00% 2003 0.75% 0.90% 11.66 14.96 306,309 4,162,432 28.85% 29.04% 0.00%
M-32 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- LINCOLN VIPT CAPITAL GROWTH 2007 9/11/07 0.50% 0.60% $10.78 $10.79 284 $ 3,063 1.62% 7.52% 0.13% LINCOLN VIPT COHEN & STEERS GLOBAL REAL ESTATE 2007 6/13/07 0.50% 0.90% 8.27 8.29 226,750 1,877,620 -13.91% -7.26% 0.60% LINCOLN VIPT CORE 2006 0.50% 0.90% 11.84 11.92 14,085 167,585 12.92% 13.38% 0.98% 2005 9/7/05 0.50% 0.90% 10.49 10.51 1,772 18,624 1.39% 3.56% 0.35% LINCOLN VIPT DELAWARE BOND 2007 0.50% 1.00% 11.04 16.01 4,094,308 55,685,397 4.40% 4.92% 5.12% 2006 0.50% 1.00% 10.52 15.30 3,729,565 49,024,509 3.67% 4.19% 4.61% 2005 0.50% 1.00% 10.20 14.72 3,239,974 41,896,349 1.62% 2.13% 4.28% 2004 0.50% 1.00% 11.79 14.45 2,769,349 36,532,839 4.25% 4.52% 4.12% 2003 0.75% 1.00% 11.30 13.82 2,498,495 32,267,258 6.22% 6.48% 4.37% LINCOLN VIPT DELAWARE GROWTH AND INCOME 2007 0.50% 0.90% 12.59 12.73 88,104 1,105,939 5.17% 5.59% 1.26% 2006 0.50% 0.90% 12.03 12.05 53,981 648,125 11.69% 11.80% 1.55% 2005 7/22/05 0.50% 0.60% 10.77 10.78 1,083 11,675 1.14% 4.83% 2.07% LINCOLN VIPT DELAWARE SOCIAL AWARENESS 2007 0.50% 0.90% 12.91 15.57 265,618 3,717,236 2.04% 2.45% 0.87% 2006 0.50% 0.90% 12.60 15.23 263,463 3,602,334 11.30% 11.75% 0.92% 2005 0.50% 0.90% 11.49 13.66 247,210 3,020,847 11.02% 11.47% 0.90% 2004 0.50% 0.90% 10.33 12.29 211,560 2,299,740 11.69% 11.86% 1.02% 2003 0.75% 0.90% 9.24 10.99 190,211 1,824,641 30.68% 30.88% 0.95% LINCOLN VIPT DELAWARE SPECIAL OPPORTUNITIES 2007 7/6/07 0.50% 0.90% 9.20 9.22 10,976 101,067 -8.87% 1.05% 1.55% LINCOLN VIPT FI EQUITY-INCOME 2007 0.50% 0.90% 12.34 16.05 428,276 6,085,884 3.42% 3.83% 1.22% 2006 0.50% 0.90% 11.93 15.52 423,391 5,842,308 10.25% 10.71% 1.31% 2005 0.50% 0.90% 11.75 14.07 412,915 5,198,551 3.56% 3.71% 1.18% 2004 0.75% 0.90% 11.32 13.59 415,672 5,087,500 8.78% 8.95% 1.11% 2003 0.75% 0.90% 10.39 12.49 409,366 4,588,426 31.16% 31.35% 1.14% LINCOLN VIPT GROWTH 2006 0.50% 0.90% 12.00 12.02 5,574 66,933 5.54% 5.65% 0.00% 2005 7/13/05 0.50% 0.60% 11.37 11.38 1,875 21,340 -0.76% 7.49% 0.00% LINCOLN VIPT GROWTH OPPORTUNITIES 2006 0.50% 0.90% 13.43 13.45 5,894 79,115 9.51% 9.62% 0.00% 2005 7/25/05 0.50% 0.60% 12.26 12.27 489 6,003 3.01% 5.88% 0.00% LINCOLN VIPT JANUS CAPITAL APPRECIATION 2007 0.50% 0.90% 10.49 14.84 638,505 7,057,440 19.34% 19.82% 0.28% 2006 0.50% 0.90% 8.79 12.42 637,508 5,806,622 8.68% 9.13% 0.19% 2005 0.50% 0.90% 8.09 11.41 681,042 5,669,248 3.27% 3.68% 0.21% 2004 0.50% 0.90% 7.83 11.03 1,008,127 8,028,411 4.34% 4.50% 0.00% 2003 0.75% 0.90% 7.51 10.56 1,001,397 7,619,032 31.27% 31.47% 0.00% LINCOLN VIPT MARSICO INTERNATIONAL GROWTH 2007 6/29/07 0.50% 0.90% 11.21 11.24 72,245 811,137 -0.35% 15.97% 1.57% LINCOLN VIPT MFS VALUE 2007 8/7/07 0.50% 0.90% 9.77 9.79 18,277 178,775 -2.54% 3.19% 1.52% LINCOLN VIPT MID-CAP GROWTH 2007 7/16/07 0.50% 0.90% 11.01 11.04 13,954 153,986 -2.02% 5.89% 0.00% LINCOLN VIPT MID-CAP VALUE 2007 6/20/07 0.50% 0.90% 8.69 8.71 74,959 652,549 -15.27% -7.42% 0.26% LINCOLN VIPT MONDRIAN INTERNATIONAL VALUE 2007 0.50% 0.90% 16.38 24.32 1,112,617 23,340,870 10.49% 10.93% 2.07% 2006 0.50% 0.90% 14.77 21.97 1,011,598 19,411,607 28.84% 29.36% 3.19% 2005 0.50% 0.90% 12.23 17.03 758,771 11,453,277 11.54% 11.98% 2.62% 2004 0.50% 0.90% 13.72 15.25 285,082 3,990,440 19.85% 20.03% 1.31% 2003 0.75% 0.90% 11.45 12.70 125,826 1,487,220 40.35% 40.56% 2.57%
M-33 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- LINCOLN VIPT MONEY MARKET 2007 0.50% 0.90% $10.99 $12.79 4,117,683 $47,169,046 4.03% 4.44% 4.85% 2006 0.50% 0.90% 10.56 12.28 3,687,559 41,074,646 3.74% 4.16% 4.60% 2005 0.50% 0.90% 10.18 11.82 3,272,520 35,376,424 1.87% 2.28% 2.77% 2004 0.50% 0.90% 10.00 11.60 3,162,521 33,594,587 -0.02% 0.13% 0.86% 2003 0.75% 0.90% 10.00 11.59 4,409,924 46,813,138 -0.22% -0.07% 0.69% LINCOLN VIPT S&P 500 INDEX 2007 4/27/07 0.50% 0.90% 9.69 11.95 120,389 1,397,673 -3.60% -0.29% 2.05% LINCOLN VIPT SMALL-CAP INDEX 2007 6/26/07 0.50% 0.90% 9.20 9.22 31,559 290,854 -8.71% 1.65% 0.98% LINCOLN VIPT T. ROWE PRICE GROWTH STOCK 2007 7/2/07 0.50% 0.90% 9.98 10.01 22,895 228,895 -5.41% 5.17% 0.33% LINCOLN VIPT T. ROWE PRICE STRUCTURED MID-CAP GROWTH 2007 0.50% 0.90% 14.15 15.63 107,858 1,593,196 12.57% 13.02% 0.00% 2006 0.50% 0.90% 12.52 13.86 39,575 527,916 8.30% 8.74% 0.00% 2005 0.50% 0.90% 12.18 12.78 32,958 410,348 8.83% 9.26% 0.00% 2004 0.50% 0.90% 11.19 11.72 26,784 305,886 12.65% 12.82% 0.00% 2003 0.75% 0.90% 9.93 10.39 13,346 135,291 31.44% 31.63% 0.00% LINCOLN VIPT TEMPLETON GROWTH 2007 7/6/07 0.50% 0.90% 9.85 9.87 7,824 77,213 -4.15% 7.45% 2.24% LINCOLN VIPT UBS GLOBAL ASSET ALLOCATION 2007 0.50% 0.90% 13.10 15.35 204,110 2,860,611 5.42% 5.84% 1.74% 2006 0.50% 0.90% 12.37 14.54 159,723 2,165,884 13.48% 13.94% 1.41% 2005 0.50% 0.90% 11.58 12.80 130,730 1,576,476 5.85% 6.27% 1.28% 2004 0.50% 0.90% 10.93 12.07 117,555 1,329,816 12.52% 12.69% 1.76% 2003 0.75% 0.90% 9.70 10.71 96,740 957,721 19.32% 19.50% 3.23% LINCOLN VIPT VALUE OPPORTUNITIES 2007 9/20/07 0.50% 0.60% 9.43 9.44 1,244 11,735 -6.60% -1.99% 0.16% LINCOLN VIPT WILSHIRE 2010 PROFILE 2007 9/14/07 0.50% 0.50% 10.53 10.53 684 7,200 3.68% 3.68% 0.46% LINCOLN VIPT WILSHIRE 2020 PROFILE 2007 10/5/07 0.50% 0.60% 10.36 10.37 1,201 12,441 -0.34% 0.22% 0.38% LINCOLN VIPT WILSHIRE 2030 PROFILE 2007 7/20/07 0.50% 0.90% 10.45 10.48 18,646 195,259 -0.03% 4.84% 0.52% LINCOLN VIPT WILSHIRE 2040 PROFILE 2007 8/17/07 0.50% 0.90% 10.28 10.30 18,079 186,184 -3.41% 7.38% 0.91% LINCOLN VIPT WILSHIRE AGGRESSIVE PROFILE 2007 0.50% 0.90% 14.37 14.52 248,522 3,586,104 10.02% 10.46% 1.13% 2006 0.50% 0.90% 13.06 13.15 97,709 1,282,590 15.50% 15.96% 1.06% 2005 6/15/05 0.50% 0.90% 11.31 11.34 13,081 148,138 3.23% 8.67% 0.00% LINCOLN VIPT WILSHIRE CONSERVATIVE PROFILE 2007 0.50% 0.90% 12.19 12.32 161,649 1,988,703 6.81% 7.24% 3.49% 2006 0.50% 0.90% 11.41 11.47 14,124 161,888 8.36% 8.69% 1.75% 2005 10/14/05 0.60% 0.90% 10.53 10.55 3,833 40,388 1.87% 2.75% 0.00% LINCOLN VIPT WILSHIRE MODERATE PROFILE 2007 0.50% 0.90% 12.99 13.13 1,331,965 17,424,811 8.29% 8.72% 1.58% 2006 0.50% 0.90% 12.00 12.08 853,856 10,300,685 11.03% 11.48% 1.22% 2005 7/8/05 0.50% 0.90% 10.81 10.83 462,412 5,008,456 1.28% 4.30% 0.00% LINCOLN VIPT WILSHIRE MODERATELY AGGRESSIVE PROFILE 2007 0.50% 0.90% 13.57 13.71 1,408,883 19,114,010 8.83% 9.26% 1.97% 2006 0.50% 0.90% 12.47 12.55 595,647 7,466,422 13.12% 13.57% 1.43% 2005 6/17/05 0.50% 0.90% 11.02 11.05 190,526 2,104,287 1.92% 5.70% 0.00% M FUND BRANDES INTERNATIONAL EQUITY 2007 0.50% 0.90% 15.75 26.21 155,389 2,816,997 7.04% 7.47% 2.21% 2006 0.50% 0.90% 14.65 24.45 129,365 2,247,144 25.65% 26.15% 1.55% 2005 0.50% 0.90% 12.70 19.43 107,617 1,508,085 9.56% 10.00% 2.47% 2004 0.50% 0.90% 17.66 17.71 22,323 390,111 22.88% 23.07% 1.69% 2003 8/6/03 0.75% 0.90% 14.37 14.39 3,400 48,903 9.97% 28.66% 1.23%
M-34 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- M FUND BUSINESS OPPORTUNITY VALUE 2007 0.50% 0.90% $13.22 $19.10 79,888 $ 1,156,518 4.50% 4.91% 0.70% 2006 0.50% 0.90% 12.60 18.25 62,077 881,219 12.87% 13.32% 0.62% 2005 0.50% 0.90% 12.43 16.14 42,021 540,753 6.84% 7.27% 1.15% 2004 0.50% 0.90% 15.05 15.05 819 10,760 21.50% 21.50% 2.62% 2003 12/11/03 0.90% 0.90% 12.39 12.39 6 70 4.61% 4.61% 0.00% M FUND FRONTIER CAPITAL APPRECIATION 2007 0.50% 0.90% 15.88 22.36 53,180 930,893 10.91% 11.36% 0.00% 2006 0.50% 0.90% 14.26 20.13 48,022 795,824 15.30% 15.77% 0.00% 2005 0.50% 0.90% 12.99 17.44 21,666 347,327 14.10% 14.55% 0.00% 2004 0.50% 0.90% 15.22 15.26 14,433 217,149 8.35% 8.51% 0.00% 2003 8/6/03 0.75% 0.90% 14.05 14.06 3,381 47,537 8.33% 25.31% 0.00% M FUND TURNER CORE GROWTH 2007 0.50% 0.90% 15.52 20.38 88,839 1,517,965 21.33% 21.82% 0.41% 2006 0.50% 0.90% 12.74 16.77 75,855 1,084,471 7.55% 7.98% 0.65% 2005 0.50% 0.90% 12.86 15.57 68,594 910,852 12.91% 13.35% 0.73% 2004 0.50% 0.90% 13.74 13.77 17,186 235,873 10.19% 10.36% 0.45% 2003 8/6/03 0.75% 0.90% 12.47 12.48 2,690 33,584 3.92% 15.88% 0.21% MFS VIT CORE EQUITY 2007 0.50% 0.90% 13.15 14.56 68,662 937,063 10.15% 10.60% 0.33% 2006 0.50% 0.90% 11.94 13.17 72,642 902,388 12.78% 13.23% 0.44% 2005 0.50% 0.90% 10.59 11.63 68,045 748,013 0.77% 1.18% 0.75% 2004 0.50% 0.90% 10.51 11.33 65,843 714,584 11.46% 11.62% 0.37% 2003 0.75% 0.90% 9.43 10.15 47,047 452,630 26.25% 26.44% 0.23% MFS VIT EMERGING GROWTH 2007 0.50% 0.90% 11.10 16.23 1,102,410 13,301,982 20.09% 20.57% 0.00% 2006 0.50% 0.90% 9.23 13.49 1,167,363 11,734,895 6.92% 7.36% 0.00% 2005 0.50% 0.90% 8.62 12.60 1,318,447 12,351,770 8.21% 8.64% 0.00% 2004 0.50% 0.90% 7.95 11.63 1,450,598 12,532,454 11.95% 12.12% 0.00% 2003 0.75% 0.90% 7.09 10.37 1,492,145 11,504,139 29.06% 29.25% 0.00% MFS VIT TOTAL RETURN 2007 0.50% 1.00% 12.04 17.06 2,088,500 30,358,834 3.18% 3.70% 2.49% 2006 0.50% 1.00% 11.61 16.50 2,007,091 28,589,897 10.78% 11.34% 2.32% 2005 0.50% 1.00% 10.72 14.87 1,987,322 25,878,371 1.80% 2.31% 1.95% 2004 0.50% 1.00% 11.85 14.58 1,721,804 22,546,236 10.22% 10.49% 1.61% 2003 0.75% 1.00% 10.73 13.20 1,518,791 18,203,679 15.17% 15.45% 1.60% MFS VIT UTILITIES 2007 0.50% 0.90% 19.48 30.38 1,206,846 28,961,737 26.75% 27.26% 0.90% 2006 0.50% 0.90% 15.31 23.93 1,035,763 19,715,668 30.08% 30.60% 2.00% 2005 0.50% 0.90% 11.97 18.37 1,128,642 16,432,850 15.79% 16.26% 0.59% 2004 0.50% 0.90% 10.32 15.84 834,236 10,778,886 29.04% 29.23% 1.43% 2003 0.75% 0.90% 7.99 12.26 765,495 7,676,654 34.68% 34.88% 2.26% NB AMT MID-CAP GROWTH 2007 0.50% 1.00% 14.06 19.05 1,402,411 23,180,503 21.30% 21.93% 0.00% 2006 0.50% 1.00% 11.56 15.71 1,432,631 19,406,657 13.57% 14.12% 0.00% 2005 0.50% 1.00% 10.15 13.83 1,376,586 16,353,094 12.61% 13.17% 0.00% 2004 0.50% 1.00% 8.99 12.28 1,307,449 13,727,168 15.15% 15.44% 0.00% 2003 0.75% 1.00% 7.79 10.67 1,151,773 10,401,154 26.81% 27.11% 0.00% NB AMT PARTNERS 2007 0.75% 0.90% 15.48 18.31 174,180 2,825,301 8.36% 8.52% 0.64% 2006 0.75% 0.90% 14.27 16.90 182,280 2,723,511 11.24% 11.40% 0.70% 2005 0.75% 0.90% 12.81 15.19 192,816 2,580,726 16.99% 17.16% 1.08% 2004 0.75% 0.90% 10.93 12.99 134,332 1,544,444 17.91% 18.09% 0.01% 2003 0.75% 0.90% 9.26 11.01 153,136 1,491,517 33.88% 34.08% 0.00% NB AMT REGENCY 2007 0.50% 0.90% 13.10 19.18 504,908 8,544,490 2.38% 2.79% 0.45% 2006 0.50% 0.90% 12.75 18.71 609,553 10,221,332 10.17% 10.61% 0.42% 2005 0.50% 0.90% 12.42 16.95 538,226 8,365,230 11.00% 11.44% 0.09% 2004 0.50% 0.90% 13.95 15.25 405,892 5,797,497 21.26% 21.45% 0.02% 2003 0.75% 0.90% 11.48 12.56 312,388 3,680,321 34.63% 34.83% 0.00%
M-35 3. FINANCIAL HIGHLIGHTS (CONTINUED)
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM INVESTMENT COMMENCEMENT FEE FEE UNIT UNIT UNITS TOTAL TOTAL INCOME SUBACCOUNT YEAR DATE(1) RATE(2) RATE(2) VALUE(3) VALUE(3) OUTSTANDING NET ASSETS RETURN(4) RETURN(4) RATIO(5) - -------------------------------------------------------------------------------------------------------------------------------- PIMCO VIT OPCAP GLOBAL EQUITY 2007 0.80% 0.80% $17.76 $17.76 28,967 $ 514,558 6.55% 6.55% 0.86% 2006 0.80% 0.80% 16.67 16.67 35,510 592,015 20.10% 20.10% 0.86% 2005 0.80% 0.80% 13.88 13.88 52,340 726,576 6.18% 6.18% 0.34% 2004 0.80% 0.80% 13.07 13.07 57,126 746,862 11.64% 11.64% 0.52% 2003 0.80% 0.80% 11.71 11.71 57,184 669,695 30.50% 30.50% 0.63% PIMCO VIT OPCAP MANAGED 2007 0.80% 0.80% 13.29 13.29 51,991 691,076 2.23% 2.23% 2.10% 2006 0.80% 0.80% 13.00 13.00 62,324 810,320 8.78% 8.78% 1.71% 2005 0.80% 0.80% 11.95 11.95 66,037 789,317 4.44% 4.44% 1.17% 2004 0.80% 0.80% 11.44 11.44 72,567 830,474 9.88% 9.88% 1.39% 2003 0.80% 0.80% 10.41 10.41 63,899 665,512 20.78% 20.78% 1.78% PUTNAM VT GROWTH & INCOME CLASS IB 2007 0.75% 0.90% 12.68 13.19 188,022 2,424,905 -6.88% -6.74% 1.30% 2006 0.75% 0.90% 13.62 14.14 237,088 3,272,973 14.87% 15.04% 1.51% 2005 0.75% 0.90% 11.86 12.29 227,366 2,728,631 4.29% 4.44% 1.54% 2004 0.75% 0.90% 11.37 11.77 213,202 2,448,475 10.12% 10.28% 1.53% 2003 0.75% 0.90% 10.32 10.67 190,562 1,984,018 26.24% 26.43% 1.22% PUTNAM VT HEALTH SCIENCES CLASS IB 2007 0.75% 0.90% 11.15 12.45 177,160 2,081,535 -1.49% -1.34% 0.79% 2006 0.75% 0.90% 11.32 12.62 181,608 2,167,284 1.87% 2.02% 0.32% 2005 0.75% 0.90% 11.12 12.37 195,975 2,290,195 12.18% 12.35% 0.05% 2004 0.75% 0.90% 9.91 11.01 119,267 1,233,697 6.16% 6.32% 0.16% 2003 0.75% 0.90% 9.33 10.36 106,719 1,028,200 17.33% 17.50% 0.44%
(1) Reflects less than a full year of activity. Funds were first received in this option on the commencement date noted or the option was inactive at the date funds were received. (2) These amounts represent the annualized minimum and maximum contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying funds have been excluded. (3) As the unit value is presented as a range of minimum to maximum values for only those subaccounts which existed for the entire year, some individual contract unit values may not be within the ranges presented as a result of partial year activity. (4) These amounts represent the total return, including changes in value of mutual funds, and reflect deductions for all items included in the fee rate. The total return does not include contract charges deducted directly from policy account values. The total return is not annualized. As the total return is presented as a range of minimum to maximum values for only those subaccounts which existed for the entire year, some individual contract total returns may not be within the ranges presented as a result of partial year activity. (5) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense guarantee charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. Investment income ratios are not annualized. Note: Fee rate, unit value and total return minimum and maximum are the same where there is only one active contract level charge for the subaccount. M-36 4. PURCHASES AND SALES OF INVESTMENTS The aggregate cost of investments purchased and the aggregate proceeds from investments sold were as follows for 2007.
AGGREGATE AGGREGATE COST OF PROCEEDS PURCHASES FROM SALES - ------------------------------------------------------------------------------- AIM V.I. Capital Appreciation $ 1,356,150 $ 2,698,924 AIM V.I. Core Equity 1,783,290 3,210,994 AIM V.I. Diversified Income 166,983 125,932 AIM V.I. International Growth 1,975,292 2,363,400 ABVPSF Global Technology Class A 1,107,504 582,633 ABVPSF Growth and Income Class A 3,938,506 2,833,343 ABVPSF International Value Class A 4,670,544 1,366,922 ABVPSF Large Cap Growth Class A 657,291 556,470 ABVPSF Small/Mid Cap Value Class A 4,700,680 1,981,951 American Century VP Inflation Protection 2,616,076 1,180,306 American Funds Global Growth Class 2 6,924,338 2,140,346 American Funds Global Small Capitalization Class 2 10,933,283 6,436,804 American Funds Growth Class 2 26,470,678 11,668,028 American Funds Growth-Income Class 2 20,710,616 11,556,353 American Funds International Class 2 15,778,427 5,706,024 Delaware VIPT Capital Reserves 230,120 125,443 Delaware VIPT Diversified Income 5,628,203 1,480,221 Delaware VIPT Emerging Markets 10,666,869 6,299,589 Delaware VIPT High Yield 4,596,011 2,737,508 Delaware VIPT REIT 13,224,131 8,201,135 Delaware VIPT Small Cap Value 12,148,032 9,535,754 Delaware VIPT Trend 3,264,597 5,256,630 Delaware VIPT U.S. Growth 359,413 322,074 Delaware VIPT Value 5,984,064 3,650,413 DWS VIP Equity 500 Index 8,689,780 9,827,406 DWS VIP Small Cap Index 3,208,094 2,285,198 Fidelity VIP Asset Manager 250,719 173,994 Fidelity VIP Contrafund Service Class 27,226,023 7,557,491 Fidelity VIP Equity-Income 848,052 1,052,216 Fidelity VIP Equity-Income Service Class 1,898,779 1,138,163 Fidelity VIP Growth Service Class 3,394,557 2,646,351 Fidelity VIP Growth Opportunities Service Class 398,495 684,868 Fidelity VIP High Income Service Class 323,874 215,708 Fidelity VIP Investment Grade Bond 624,153 753,409 Fidelity VIP Mid Cap Service Class 5,099,175 1,310,397 Fidelity VIP Overseas Service Class 2,668,433 965,313 FTVIPT Franklin Income Securities 3,280,394 364,765 FTVIPT Franklin Small-Mid Cap Growth Securities 3,761,751 1,408,799 FTVIPT Mutual Shares Securities 2,605,350 400,078 FTVIPT Templeton Foreign Securities 495,198 713,473 FTVIPT Templeton Foreign Securities Class 2 1,172,945 1,291,045 FTVIPT Templeton Global Asset Allocation 470,839 319,514 FTVIPT Templeton Global Income Securities 2,798,198 480,483 FTVIPT Templeton Growth Securities 2,423,594 1,943,160 FTVIPT Templeton Growth Securities Class 2 681,718 1,883,685 Janus Aspen Series Balanced 1,141,431 1,428,084 Janus Aspen Series Balanced Service Shares 806,964 977,894 Janus Aspen Series Global Technology Service Shares 336,139 343,714 Janus Aspen Series Mid Cap Growth Service Shares 2,033,802 605,783 Janus Aspen Series Worldwide Growth 813,533 1,905,369 Janus Aspen Series Worldwide Growth Service Shares 305,454 690,168 Lincoln VIPT Baron Growth Opportunities 201,520 21,832 Lincoln VIPT Baron Growth Opportunities Service Class 2,652,119 1,872,318 Lincoln VIPT Capital Growth 3,169 163 Lincoln VIPT Cohen & Steers Global Real Estate 2,861,191 758,139 Lincoln VIPT Core 13,886 183,948 Lincoln VIPT Delaware Bond 12,730,285 6,207,937 Lincoln VIPT Delaware Growth and Income 537,652 120,915
M-37 4. PURCHASES AND SALES OF INVESTMENTS (CONTINUED)
AGGREGATE AGGREGATE COST OF PROCEEDS PURCHASES FROM SALES - ------------------------------------------------------------------------------- Lincoln VIPT Delaware Social Awareness $ 910,444 $ 880,334 Lincoln VIPT Delaware Special Opportunities 108,315 2,672 Lincoln VIPT FI Equity-Income 1,759,653 1,072,735 Lincoln VIPT Growth 56,183 128,999 Lincoln VIPT Growth Opportunities 8,261 91,168 Lincoln VIPT Janus Capital Appreciation 1,121,857 1,026,280 Lincoln VIPT Marsico International Growth 975,121 155,575 Lincoln VIPT MFS Value 175,614 4,330 Lincoln VIPT Mid-Cap Growth 225,382 79,850 Lincoln VIPT Mid-Cap Value 913,966 217,809 Lincoln VIPT Mondrian International Value 7,659,194 4,975,412 Lincoln VIPT Money Market 75,488,725 69,098,330 Lincoln VIPT S&P 500 Index 1,678,893 252,548 Lincoln VIPT Small-Cap Index 386,080 89,387 Lincoln VIPT T. Rowe Price Growth Stock 226,727 2,992 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 2,147,865 1,185,234 Lincoln VIPT Templeton Growth 85,111 7,538 Lincoln VIPT UBS Global Asset Allocation 1,181,886 481,762 Lincoln VIPT Value Opportunities 12,076 213 Lincoln VIPT Wilshire 2010 Profile 7,351 420 Lincoln VIPT Wilshire 2020 Profile 12,610 118 Lincoln VIPT Wilshire 2030 Profile 199,612 5,962 Lincoln VIPT Wilshire 2040 Profile 190,214 9,434 Lincoln VIPT Wilshire Aggressive Profile 2,339,021 215,173 Lincoln VIPT Wilshire Conservative Profile 3,349,842 1,521,969 Lincoln VIPT Wilshire Moderate Profile 10,320,282 3,953,908 Lincoln VIPT Wilshire Moderately Aggressive Profile 12,864,686 1,946,459 M Fund Brandes International Equity 1,438,237 593,276 M Fund Business Opportunity Value 488,594 161,926 M Fund Frontier Capital Appreciation 410,024 280,101 M Fund Turner Core Growth 617,024 337,392 MFS VIT Core Equity 210,804 266,074 MFS VIT Emerging Growth 927,341 1,768,269 MFS VIT Total Return 5,137,906 3,092,078 MFS VIT Utilities 9,864,310 4,679,195 NB AMT Mid-Cap Growth 3,265,519 3,853,296 NB AMT Partners 678,462 526,349 NB AMT Regency 2,197,497 3,835,299 PIMCO VIT OPCAP Global Equity 220,755 207,808 PIMCO VIT OPCAP Managed 130,195 206,137 Putnam VT Growth & Income Class IB 701,811 964,202 Putnam VT Health Sciences Class IB 346,283 403,166
5. INVESTMENTS The following is a summary of investments owned at December 31, 2007.
NET FAIR SHARES ASSET VALUE OF COST OF OWNED VALUE SHARES SHARES - --------------------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation 735,368 $29.37 $ 21,597,771 $19,360,547 AIM V.I. Core Equity 826,602 29.11 24,062,382 20,954,233 AIM V.I. Diversified Income 90,714 7.80 707,566 814,555 AIM V.I. International Growth 320,365 33.63 10,773,878 6,381,126 ABVPSF Global Technology Class A 121,142 20.71 2,508,849 2,039,553 ABVPSF Growth and Income Class A 633,039 26.82 16,978,108 14,907,551 ABVPSF International Value Class A 190,927 25.14 4,799,910 4,809,807 ABVPSF Large Cap Growth Class A 83,517 30.61 2,556,462 2,093,496 ABVPSF Small/Mid Cap Value Class A 704,391 17.11 12,052,137 11,691,875 American Century VP Inflation Protection 695,169 10.55 7,334,038 7,144,090
M-38 5. INVESTMENTS (CONTINUED)
NET FAIR SHARES ASSET VALUE OF COST OF OWNED VALUE SHARES SHARES - --------------------------------------------------------------------------------------------------- American Funds Global Growth Class 2 494,827 $25.00 $ 12,370,685 $10,748,788 American Funds Global Small Capitalization Class 2 1,180,816 26.95 31,822,982 23,085,012 American Funds Growth Class 2 1,781,846 66.72 118,884,767 92,645,647 American Funds Growth-Income Class 2 2,140,000 42.26 90,436,412 76,039,318 American Funds International Class 2 2,330,605 24.72 57,612,545 41,722,476 Delaware VIPT Capital Reserves 23,215 9.67 224,489 224,864 Delaware VIPT Diversified Income 1,199,377 10.22 12,257,630 11,459,752 Delaware VIPT Emerging Markets 1,000,042 27.84 27,841,170 18,177,924 Delaware VIPT High Yield 2,420,789 5.95 14,403,694 13,967,597 Delaware VIPT REIT 1,487,361 15.83 23,544,919 26,226,328 Delaware VIPT Small Cap Value 1,380,638 28.65 39,555,289 37,186,003 Delaware VIPT Trend 581,248 38.50 22,378,052 16,843,768 Delaware VIPT U.S. Growth 105,555 8.96 945,772 799,387 Delaware VIPT Value 704,485 21.44 15,104,162 14,009,616 DWS VIP Equity 500 Index 3,904,301 15.53 60,633,798 48,665,980 DWS VIP Small Cap Index 925,960 14.71 13,620,871 12,274,206 Fidelity VIP Asset Manager 52,487 16.57 869,705 809,606 Fidelity VIP Contrafund Service Class 2,215,180 27.80 61,582,014 61,153,740 Fidelity VIP Equity-Income 201,841 23.91 4,826,014 4,837,666 Fidelity VIP Equity-Income Service Class 322,601 23.82 7,684,363 7,666,986 Fidelity VIP Growth Service Class 222,311 44.99 10,001,760 7,736,662 Fidelity VIP Growth Opportunities Service Class 199,522 22.32 4,453,331 3,401,910 Fidelity VIP High Income Service Class 273,382 5.95 1,626,625 1,751,609 Fidelity VIP Investment Grade Bond 198,543 12.76 2,533,413 2,502,821 Fidelity VIP Mid Cap Service Class 208,470 35.98 7,500,757 7,083,484 Fidelity VIP Overseas Service Class 269,522 25.22 6,797,354 5,644,320 FTVIPT Franklin Income Securities 204,483 17.63 3,605,027 3,626,311 FTVIPT Franklin Small-Mid Cap Growth Securities 420,923 23.39 9,845,377 8,516,079 FTVIPT Mutual Shares Securities 139,689 20.42 2,852,452 2,902,952 FTVIPT Templeton Foreign Securities 200,434 20.58 4,124,931 3,170,340 FTVIPT Templeton Foreign Securities Class 2 383,420 20.25 7,764,263 5,366,858 FTVIPT Templeton Global Asset Allocation 59,045 14.75 870,912 1,007,405 FTVIPT Templeton Global Income Securities 233,152 17.00 3,963,583 3,687,181 FTVIPT Templeton Growth Securities 628,002 15.68 9,847,066 8,216,387 FTVIPT Templeton Growth Securities Class 2 240,731 15.44 3,716,886 2,938,472 Janus Aspen Series Balanced 437,819 30.05 13,156,456 10,890,029 Janus Aspen Series Balanced Service Shares 229,933 31.08 7,146,310 5,769,845 Janus Aspen Series Global Technology Service Shares 344,259 5.18 1,783,262 1,400,635 Janus Aspen Series Mid Cap Growth Service Shares 147,342 38.95 5,738,966 4,178,677 Janus Aspen Series Worldwide Growth 410,653 35.33 14,508,366 13,735,972 Janus Aspen Series Worldwide Growth Service Shares 95,645 35.03 3,350,457 2,491,033 Lincoln VIPT Baron Growth Opportunities 5,821 29.99 174,539 179,628 Lincoln VIPT Baron Growth Opportunities Service Class 217,827 29.94 6,522,616 5,478,863 Lincoln VIPT Capital Growth 111 27.51 3,063 3,007 Lincoln VIPT Cohen & Steers Global Real Estate 231,946 8.05 1,867,400 2,091,774 Lincoln VIPT Delaware Bond 4,390,974 12.68 55,668,769 56,168,893 Lincoln VIPT Delaware Growth and Income 29,996 36.86 1,105,567 1,028,961 Lincoln VIPT Delaware Social Awareness 101,034 36.65 3,703,315 3,150,814 Lincoln VIPT Delaware Special Opportunities 2,404 42.05 101,073 105,531 Lincoln VIPT FI Equity-Income 358,610 16.97 6,085,619 5,917,376 Lincoln VIPT Janus Capital Appreciation 291,801 24.17 7,052,823 6,225,470 Lincoln VIPT Marsico International Growth 44,777 18.07 809,215 815,665 Lincoln VIPT MFS Value 6,340 26.42 167,526 171,116 Lincoln VIPT Mid-Cap Growth 10,723 14.13 151,466 149,817 Lincoln VIPT Mid-Cap Value 44,395 14.66 650,789 680,164 Lincoln VIPT Mondrian International Value 965,537 24.16 23,330,275 18,473,330 Lincoln VIPT Money Market 4,711,452 10.00 47,114,522 47,114,522 Lincoln VIPT S&P 500 Index 134,542 10.32 1,388,207 1,423,724 Lincoln VIPT Small-Cap Index 14,982 19.10 286,087 293,793 Lincoln VIPT T. Rowe Price Growth Stock 12,412 18.32 227,325 223,770 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 118,564 13.44 1,592,909 1,466,373 Lincoln VIPT Templeton Growth 2,296 33.23 76,290 77,651
M-39 5. INVESTMENTS (CONTINUED)
NET FAIR SHARES ASSET VALUE OF COST OF OWNED VALUE SHARES SHARES - --------------------------------------------------------------------------------------------------- Lincoln VIPT UBS Global Asset Allocation 183,302 $15.59 $ 2,857,494 $ 2,638,099 Lincoln VIPT Value Opportunities 796 14.66 11,674 11,860 Lincoln VIPT Wilshire 2010 Profile 678 10.61 7,200 6,942 Lincoln VIPT Wilshire 2020 Profile 1,186 10.49 12,442 12,490 Lincoln VIPT Wilshire 2030 Profile 18,316 10.66 195,268 193,647 Lincoln VIPT Wilshire 2040 Profile 17,736 10.50 186,192 181,131 Lincoln VIPT Wilshire Aggressive Profile 248,993 14.28 3,555,869 3,300,566 Lincoln VIPT Wilshire Conservative Profile 165,571 12.01 1,987,842 1,954,583 Lincoln VIPT Wilshire Moderate Profile 1,359,184 12.93 17,568,812 16,215,138 Lincoln VIPT Wilshire Moderately Aggressive Profile 1,422,924 13.39 19,047,259 17,977,480 M Fund Brandes International Equity 152,565 18.45 2,814,829 2,876,107 M Fund Business Opportunity Value 95,505 12.11 1,156,569 1,175,865 M Fund Frontier Capital Appreciation 37,567 24.74 929,406 926,331 M Fund Turner Core Growth 77,690 19.52 1,516,505 1,297,730 MFS VIT Core Equity 54,546 17.18 937,098 721,818 MFS VIT Emerging Growth 531,916 25.01 13,303,220 11,267,436 MFS VIT Total Return 1,400,437 21.68 30,361,476 27,455,114 MFS VIT Utilities 837,933 34.48 28,891,936 19,828,467 NB AMT Mid-Cap Growth 813,270 28.50 23,178,186 15,227,192 NB AMT Partners 136,042 20.77 2,825,585 2,561,548 NB AMT Regency 526,420 16.23 8,543,792 7,434,366 PIMCO VIT OPCAP Global Equity 35,061 14.81 519,250 532,015 PIMCO VIT OPCAP Managed 17,842 38.73 691,016 714,020 Putnam VT Growth & Income Class IB 104,900 23.12 2,425,289 2,460,542 Putnam VT Health Sciences Class IB 155,206 13.41 2,081,318 1,874,269
6. CHANGES IN UNITS OUTSTANDING The change in units outstanding for the year ended December 31, 2007 is as follows:
UNITS UNITS NET INCREASE ISSUED REDEEMED (DECREASE) - ------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation 278,156 (413,796) (135,640) AIM V.I. Core Equity 268,693 (402,872) (134,179) AIM V.I. Diversified Income 11,763 (12,267) (504) AIM V.I. International Growth 126,569 (143,103) (16,534) ABVPSF Global Technology Class A 84,553 (48,807) 35,746 ABVPSF Growth and Income Class A 233,835 (216,718) 17,117 ABVPSF International Value Class A 368,426 (112,936) 255,490 ABVPSF Large Cap Growth Class A 56,938 (48,613) 8,325 ABVPSF Small/Mid Cap Value Class A 264,775 (133,038) 131,737 American Century VP Inflation Protection 236,470 (127,481) 108,989 American Funds Global Growth Class 2 401,420 (129,641) 271,779 American Funds Global Small Capitalization Class 2 451,309 (357,249) 94,060 American Funds Growth Class 2 1,714,765 (1,168,105) 546,660 American Funds Growth-Income Class 2 1,487,179 (995,873) 491,306 American Funds International Class 2 828,153 (403,967) 424,186 Delaware VIPT Capital Reserves 21,319 (12,148) 9,171 Delaware VIPT Diversified Income 489,247 (135,684) 353,563 Delaware VIPT Emerging Markets 353,124 (233,729) 119,395 Delaware VIPT High Yield 292,276 (208,025) 84,251 Delaware VIPT REIT 454,115 (405,100) 49,015 Delaware VIPT Small Cap Value 617,984 (558,995) 58,989 Delaware VIPT Trend 262,121 (389,649) (127,528) Delaware VIPT U.S. Growth 26,577 (22,227) 4,350 Delaware VIPT Value 402,706 (268,155) 134,551 DWS VIP Equity 500 Index 744,837 (875,006) (130,169) DWS VIP Small Cap Index 158,545 (150,687) 7,858 Fidelity VIP Asset Manager 15,301 (14,517) 784 Fidelity VIP Contrafund Service Class 966,761 (624,526) 342,235
M-40 6. CHANGES IN UNITS OUTSTANDING (CONTINUED)
UNITS UNITS NET INCREASE ISSUED REDEEMED (DECREASE) - ------------------------------------------------------------------------------------------ Fidelity VIP Equity-Income 38,805 (77,049) (38,244) Fidelity VIP Equity-Income Service Class 85,600 (81,682) 3,918 Fidelity VIP Growth Service Class 342,972 (319,821) 23,151 Fidelity VIP Growth Opportunities Service Class 54,442 (80,957) (26,515) Fidelity VIP High Income Service Class 21,973 (22,600) (627) Fidelity VIP Investment Grade Bond 43,559 (57,147) (13,588) Fidelity VIP Mid Cap Service Class 344,704 (101,801) 242,903 Fidelity VIP Overseas Service Class 123,894 (57,702) 66,192 FTVIPT Franklin Income Securities 279,674 (32,814) 246,860 FTVIPT Franklin Small-Mid Cap Growth Securities 246,680 (113,595) 133,085 FTVIPT Mutual Shares Securities 215,795 (35,534) 180,261 FTVIPT Templeton Foreign Securities 26,423 (52,711) (26,288) FTVIPT Templeton Foreign Securities Class 2 59,402 (92,917) (33,515) FTVIPT Templeton Global Asset Allocation 8,752 (18,559) (9,807) FTVIPT Templeton Global Income Securities 244,247 (39,918) 204,329 FTVIPT Templeton Growth Securities 136,732 (128,892) 7,840 FTVIPT Templeton Growth Securities Class 2 28,455 (97,882) (69,427) Janus Aspen Series Balanced 93,302 (129,671) (36,369) Janus Aspen Series Balanced Service Shares 57,929 (77,461) (19,532) Janus Aspen Series Global Technology Service Shares 75,234 (75,467) (233) Janus Aspen Series Mid Cap Growth Service Shares 115,708 (38,884) 76,824 Janus Aspen Series Worldwide Growth 126,048 (217,595) (91,547) Janus Aspen Series Worldwide Growth Service Shares 28,985 (56,575) (27,590) Lincoln VIPT Baron Growth Opportunities 15,551 (1,138) 14,413 Lincoln VIPT Baron Growth Opportunities Service Class 153,499 (99,113) 54,386 Lincoln VIPT Capital Growth 300 (16) 284 Lincoln VIPT Cohen & Steers Global Real Estate 306,732 (79,982) 226,750 Lincoln VIPT Core 1,212 (15,297) (14,085) Lincoln VIPT Delaware Bond 1,027,859 (663,116) 364,743 Lincoln VIPT Delaware Growth and Income 43,132 (9,009) 34,123 Lincoln VIPT Delaware Social Awareness 61,994 (59,839) 2,155 Lincoln VIPT Delaware Special Opportunities 11,129 (153) 10,976 Lincoln VIPT FI Equity-Income 84,494 (79,609) 4,885 Lincoln VIPT Growth 3,571 (9,145) (5,574) Lincoln VIPT Growth Opportunities 566 (6,460) (5,894) Lincoln VIPT Janus Capital Appreciation 116,763 (115,766) 997 Lincoln VIPT Marsico International Growth 87,073 (14,828) 72,245 Lincoln VIPT MFS Value 18,466 (189) 18,277 Lincoln VIPT Mid-Cap Growth 21,326 (7,372) 13,954 Lincoln VIPT Mid-Cap Value 98,554 (23,595) 74,959 Lincoln VIPT Mondrian International Value 384,872 (283,853) 101,019 Lincoln VIPT Money Market 8,102,290 (7,672,166) 430,124 Lincoln VIPT S&P 500 Index 138,901 (18,512) 120,389 Lincoln VIPT Small-Cap Index 41,506 (9,947) 31,559 Lincoln VIPT T. Rowe Price Growth Stock 23,231 (336) 22,895 Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 97,092 (28,809) 68,283 Lincoln VIPT Templeton Growth 8,041 (217) 7,824 Lincoln VIPT UBS Global Asset Allocation 78,449 (34,062) 44,387 Lincoln VIPT Value Opportunities 1,249 (5) 1,244 Lincoln VIPT Wilshire 2010 Profile 723 (39) 684 Lincoln VIPT Wilshire 2020 Profile 1,213 (12) 1,201 Lincoln VIPT Wilshire 2030 Profile 19,453 (807) 18,646 Lincoln VIPT Wilshire 2040 Profile 19,142 (1,063) 18,079 Lincoln VIPT Wilshire Aggressive Profile 168,058 (17,245) 150,813 Lincoln VIPT Wilshire Conservative Profile 178,595 (31,070) 147,525 Lincoln VIPT Wilshire Moderate Profile 708,752 (230,643) 478,109 Lincoln VIPT Wilshire Moderately Aggressive Profile 969,695 (156,459) 813,236 M Fund Brandes International Equity 49,340 (23,316) 26,024 M Fund Business Opportunity Value 28,330 (10,519) 17,811 M Fund Frontier Capital Appreciation 18,092 (12,934) 5,158 M Fund Turner Core Growth 27,126 (14,142) 12,984 MFS VIT Core Equity 16,534 (20,514) (3,980)
M-41 6. CHANGES IN UNITS OUTSTANDING (CONTINUED)
UNITS UNITS NET INCREASE ISSUED REDEEMED (DECREASE) - ------------------------------------------------------------------------------------------ MFS VIT Emerging Growth 136,098 (201,051) (64,953) MFS VIT Total Return 349,548 (268,139) 81,409 MFS VIT Utilities 441,412 (270,329) 171,083 NB AMT Mid-Cap Growth 276,610 (306,830) (30,220) NB AMT Partners 28,420 (36,520) (8,100) NB AMT Regency 125,634 (230,279) (104,645) PIMCO VIT OPCAP Global Equity 5,180 (11,723) (6,543) PIMCO VIT OPCAP Managed 7,157 (17,490) (10,333) Putnam VT Growth & Income Class IB 20,722 (69,788) (49,066) Putnam VT Health Sciences Class IB 28,567 (33,015) (4,448)
The change in units outstanding for the year ended December 31, 2006 is as follows:
UNITS UNITS NET INCREASE ISSUED REDEEMED (DECREASE) - ------------------------------------------------------------------------------------------ AIM V.I. Capital Appreciation 2,661,676 (396,739) 2,264,937 AIM V.I. Core Equity 2,799,221 (388,481) 2,410,740 AIM V.I. Diversified Income 11,530 (5,838) 5,692 AIM V.I. International Growth 133,897 (98,101) 35,796 ABVPSF Global Technology Class A 56,036 (40,864) 15,172 ABVPSF Growth and Income Class A 301,468 (175,930) 125,538 ABVPSF International Value Class A 163,749 (30,474) 133,275 ABVPSF Large Cap Growth Class A 68,762 (93,059) (24,297) ABVPSF Small/Mid Cap Value Class A 246,218 (111,210) 135,008 American Century VP Inflation Protection 233,966 (76,980) 156,986 American Funds Global Growth Class 2 265,034 (65,838) 199,196 American Funds Global Small Capitalization Class 2 496,708 (330,236) 166,472 American Funds Growth Class 2 1,725,355 (1,196,279) 529,076 American Funds Growth-Income Class 2 1,301,968 (1,034,690) 267,278 American Funds International Class 2 831,835 (466,016) 365,819 Lincoln VIPT Baron Growth Opportunities Service Class 78,792 (93,696) (14,904) Delaware VIPT Capital Reserves 23,226 (16,578) 6,648 Delaware VIPT Diversified Income 325,057 (86,033) 239,024 Delaware VIPT Emerging Markets 322,183 (294,336) 27,847 Delaware VIPT High Yield 286,236 (134,160) 152,076 Delaware VIPT REIT 400,596 (235,796) 164,800 Delaware VIPT Small Cap Value 544,714 (386,154) 158,560 Delaware VIPT Trend 298,380 (364,986) (66,606) Delaware VIPT U.S. Growth 34,032 (38,107) (4,075) Delaware VIPT Value 444,364 (146,354) 298,010 DWS VIP Equity 500 Index 954,974 (1,481,703) (526,729) DWS VIP Small Cap Index 235,080 (168,112) 66,968 Fidelity VIP Asset Manager 9,126 (11,735) (2,609) Fidelity VIP Contrafund Service Class 1,048,442 (518,313) 530,129 Fidelity VIP Equity-Income 34,251 (102,126) (67,875) Fidelity VIP Equity-Income Service Class 114,797 (97,222) 17,575 Fidelity VIP Growth Service Class 161,134 (169,462) (8,328) Fidelity VIP Growth Opportunities Service Class 65,337 (174,129) (108,792) Fidelity VIP High Income Service Class 30,979 (56,278) (25,299) Fidelity VIP Investment Grade Bond 28,184 (31,592) (3,408) Fidelity VIP Mid Cap Service Class 221,773 (46,086) 175,687 Fidelity VIP Overseas Service Class 150,427 (85,297) 65,130 FTVIPT Franklin Income Securities 86,231 (19,194) 67,037 FTVIPT Franklin Small-Mid Cap Growth Securities 171,459 (112,588) 58,871 FTVIPT Mutual Shares Securities 67,579 (2,142) 65,437 FTVIPT Templeton Foreign Securities 32,359 (47,111) (14,752) FTVIPT Templeton Foreign Securities Class 2 74,611 (151,040) (76,429) FTVIPT Templeton Global Asset Allocation 12,083 (20,832) (8,749) FTVIPT Templeton Global Income Securities 78,211 (16,960) 61,251 FTVIPT Templeton Growth Securities 195,078 (110,098) 84,980 FTVIPT Templeton Growth Securities Class 2 27,788 (38,893) (11,105) Janus Aspen Series Balanced 115,837 (250,606) (134,769)
M-42 6. CHANGES IN UNITS OUTSTANDING (CONTINUED)
UNITS UNITS NET INCREASE ISSUED REDEEMED (DECREASE) - ------------------------------------------------------------------------------------------ Janus Aspen Series Balanced Service Shares 140,264 (214,237) (73,973) Janus Aspen Series Global Technology Service Shares 60,454 (90,771) (30,317) Janus Aspen Series Mid Cap Growth Service Shares 54,279 (76,661) (22,382) Janus Aspen Series Worldwide Growth 173,802 (300,511) (126,709) Janus Aspen Series Worldwide Growth Service Shares 46,291 (57,758) (11,467) Lincoln VIPT T. Rowe Price Structured Mid-Cap Growth 17,336 (10,719) 6,617 Lincoln VIPT Wilshire Aggressive Profile 94,868 (10,240) 84,628 Lincoln VIPT Delaware Bond 1,126,229 (636,638) 489,591 Lincoln VIPT Janus Capital Appreciation 95,506 (139,040) (43,534) Lincoln VIPT Wilshire Conservative Profile 11,091 (800) 10,291 Lincoln VIPT Core 12,995 (682) 12,313 Lincoln VIPT FI Equity-Income 76,107 (65,631) 10,476 Lincoln VIPT UBS Global Asset Allocation 53,501 (24,508) 28,993 Lincoln VIPT Growth 8,642 (4,943) 3,699 Lincoln VIPT Delaware Growth and Income 54,503 (1,605) 52,898 Lincoln VIPT Growth Opportunities 13,716 (8,311) 5,405 Lincoln VIPT Mondrian International Value 461,287 (208,460) 252,827 Lincoln VIPT Wilshire Moderate Profile 458,643 (67,199) 391,444 Lincoln VIPT Wilshire Moderately Aggressive Profile 485,196 (80,075) 405,121 Lincoln VIPT Money Market 6,382,252 (5,967,213) 415,039 Lincoln VIPT Delaware Social Awareness 80,471 (64,218) 16,253 M Fund Brandes International Equity 50,234 (28,486) 21,748 M Fund Business Opportunity Value 26,240 (6,184) 20,056 M Fund Frontier Capital Appreciation 30,269 (3,913) 26,356 M Fund Turner Core Growth 22,704 (15,443) 7,261 MFS VIT Core Equity 12,068 (7,471) 4,597 MFS VIT Emerging Growth 170,526 (321,610) (151,084) MFS VIT Total Return 414,856 (395,087) 19,769 MFS VIT Utilities 334,519 (427,398) (92,879) NB AMT Mid-Cap Growth 377,860 (321,815) 56,045 NB AMT Partners 47,215 (57,751) (10,536) NB AMT Regency 190,265 (118,938) 71,327 PIMCO VIT OPCAP Global Equity 9,461 (26,291) (16,830) PIMCO VIT OPCAP Managed 5,734 (9,447) (3,713) Putnam VT Growth & Income Class IB 25,923 (16,201) 9,722 Putnam VT Health Sciences Class IB 29,145 (43,512) (14,367)
M-43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors of The Lincoln National Life Insurance Company and Contract Owners of Lincoln Life Flexible Premium Variable Life Account M We have audited the accompanying statement of assets and liabilities of Lincoln Life Flexible Premium Variable Life Account M ("Variable Account"), comprised of the subaccounts described in Note 1, as of December 31, 2007, the related statement of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended. These financial statements are the responsibility of the Variable Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Variable Account's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Variable Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of investments owned as of December 31, 2007, by correspondence with the custodian. 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 Lincoln Life Flexible Premium Variable Life Account M at December 31, 2007, 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 U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Fort Wayne, Indiana March 7, 2008 M-44 PART C - OTHER INFORMATION Item 26. EXHIBITS 1) Resolution of the Board of Directors of The Lincoln National Life Insurance Company and related documents authorizing establishment of the Account(2) 2) N/A 3) (a) Selling Agreement between The Lincoln National Life Insurance Company and Lincoln Financial Distributors, Inc.(5), and Amendment dated August 1, 2001(7) (b) Commission Schedule for Variable Life Policies(3) 4) (a) Policy LN696 - (10) (b) Accelerated Benefits Riders - Policy Form ABR 5654(14), ABR(10) (c) Change of Insured Rider - Policy Form LR496(8) (d) Enhanced Surrender Value Rider - Policy Form LR541 - (13) (e) Estate Tax Repeal Rider - Policy Form LR511(9) (f) No-Lapse Enhancement Rider - Policy Form LR696 - (13) (g) Overloan Protection Rider - Policy Form LR540(11) (h) Premium Reserve Rider - Policy Form LR543 - (13) (i) Waiver of Monthly Deduction Benefit Rider - Policy Form LR436 and LR437(2) 5) (a) Application - Form LFF06399(13) 6) (a) Articles of Incorporation of The National Lincoln Life Insurance Company(1) (b) Bylaws of The National Lincoln Life Insurance Company(1) 7) Form of Reinsurance Contracts 8) Fund Participation Agreements, and amendments thereto, between The Lincoln National Life Insurance Company and: (a) AIM Variable Insurance Funds (b) AllianceBernstein Variable Products Series Fund, Inc. (c) American Century Investments Variable Portfolios, Inc. (d) American Funds Insurance Series (e) Delaware VIP Trust (f) DWS Investments VIT Funds (g) Fidelity Variable Insurance Products (h) Franklin Templeton Variable Insurance Products Trust (i) Janus Aspen Series (j) Lincoln Variable Insurance Products Trust (k) M Fund, Inc. (l) MFS Variable Insurance Trust (m) Neuberger Berman Advisers Management Trust (n) Premier VIT (o) Putnam Variable Trust 9) Services Agreement(12), and amendments thereto(4), and additional amendment(11), between The Lincoln National Life Insurance Company (and affiliates) and Delaware Management Holdings, Inc., Delaware Service Company, Inc. 10) Not applicable. 11) Opinion and Consent of Lawrence A. Samplatsky, Esquire 12) Not Applicable. 13) Not Applicable. 14) Consent of Independent Registered Public Accounting Firm 15) Not applicable. 16) Not applicable. 17) Compliance Procedures _________________________ (1) Incorporated by reference to Registration Statement on Form N-4 (File No. 33-27783) filed on December 5, 1996. (2) Incorporated by reference to Registrant's Registration Statement on Form S-6 (File No. 333-42479) filed on December 17, 1997. (3) Incorporated by reference to Registration Statement on Form S-6 (File No. 333-42479) filed on April 28, 1998. (4) Incorporated by reference to Post-Effective Amendment No. 5 on Form N-4 (File No. 333-43373) filed on April 4, 2002. (5) Incorporated by reference to Post-Effective Amendment No. 1 (File No. 333-82663) filed on April 13, 2000. (6) Incorporated by reference to Registration Statement on Form N-6 (File No. 333-11137) filed on December 12, 2003. (7) Incorporated by reference to Registration Statement on Form S-6 (File No. 333-84360) filed on March 15, 2002. (8) Incorporated by reference to Post-Effective Amendment No. 3 on Form S-6 (File No. 333-82663) filed on April 12, 2001. (9) Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form S-6 (File No. 333-54338) filed on September 14, 2001. (10) Incorporated by reference to Registration Statement on Form N-6 (File No. 333-145090) filed on August 3, 2007. (11) Incorporated by reference to Post-Effective Amendment No. 21 on Form N-1A (File No. 2-80741, 811-3211) filed on April 10, 2000. (12) Incorporated by reference to Pre-Effective Amendment No. 2 to Registration Statement on Form N-6 (File No. 333-111137) filed on April 21, 2004. (13) Incorporated by reference to Pre-Effective Amendment No. 1 on Form N-6 (File No. 333-139960) filed on July 31, 2007. Item 27. Directors and Officers of the Depositor
Name Positions and Offices with Depositor - --------------------------- ------------------------------------------------------------- Michael J. Burns*** Senior Vice President Frederick J. Crawford** Senior Vice President, Chief Financial Officer and Director Christine S. Frederick*** Vice President and Chief Compliance Officer Dennis R. Glass** President and Director Mark E. Konen***** Senior Vice President and Director See Yeng Quek**** Senior Vice President, Chief Investment Officer and Director Keith J. Ryan* Vice President and Director Dennis L. Schoff** Senior Vice President and General Counsel Michael S. Smith* Senior Vice President and Chief Risk Officer Rise C. M. Taylor* Vice President and Treasurer Westley V. Thompson*** Senior Vice President and Director C. Suzanne Womack** Secretary and Second Vice President
* Principal business address is 1300 South Clinton Street, Fort Wayne, Indiana 46802-3506 ** Principal business address is Center Square West Tower, 1500 Market Street, Suite 3900, Philadelphia, PA 19102-2112 *** Principal business address is 350 Church Street, Hartford, CT 06103 **** Principal business address is One Commerce Square, 2005 Market Street, 39th Floor, Philadelphia, PA 19103-3682 *****Principal business address is 100 North Greene Street, Greensboro, NC 27401 B-2 Item 28. Persons Controlled by or Under Common Control with the Depositor or the Registrant Organizational Chart of the Lincoln National Corporation Insurance Company Holding Company System Item 29. Indemnification (a) Brief description of indemnification provisions: In general, Article VII of the By-Laws of The Lincoln National Life Insurance Company (Lincoln Life) provides that Lincoln Life will indemnify certain persons against expenses, judgments and certain other specified costs incurred by any such person if he/she is made a party or is threatened to be made a party to a suit or proceeding because he/she was a director, officer, or employee of Lincoln Life, as long as he/she acted in good faith and in a manner he/she reasonably believed to be in the best interests of, or not opposed to the best interests of, Lincoln Life. Certain additional conditions apply to indemnification in criminal proceedings. In particular, separate conditions govern indemnification of directors, officers, and employees of Lincoln Life in connection with suits by, or in the right of, Lincoln Life. Please refer to Article VII of the By-Laws of Lincoln Life (Exhibit No. 6(b) hereto) for the full text of the indemnification provisions. Indemnification is permitted by, and is subject to the requirements of, Indiana law. (b) Undertaking pursuant to Rule 484 of Regulation C under the Securities Act of 1933: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 28(a) above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any such action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 30. Principal Underwriter (a) Lincoln Financial Distributors, Inc. is the principal underwriter for Lincoln National Variable Annuity Fund A (Group); Lincoln National Variable Annuity Fund A (Individual); Lincoln National Variable Annuity Account C; Lincoln Life Flexible Premium Variable Life Account D; Lincoln National Flexible Premium Variable Life Account F; Lincoln Life Flexible Premium Variable Life Account J; Lincoln Life Flexible Premium Variable Life Account K; Lincoln National Variable Annuity Account L; Lincoln Life Variable Annuity Account N; Lincoln Life Variable Annuity Account Q; Lincoln Life Flexible Premium Variable Life Account R; Lincoln Life Flexible Premium Variable Life Account S; Lincoln Life Variable Annuity Account T; Lincoln Life Variable Annuity Account W; Lincoln Life Flexible Premium Variable Life Account Y; and Lincoln National Variable Annuity Account 53. (b) Officers and Directors of Lincoln Financial Distributors, Inc.:
Name Positions and Offices with Underwriter - ------------------------- ------------------------------------------------ Patrick J. Caulfield*** Vice President and Chief Compliance Officer Frederick J. Crawford* Director Daniel P. Hickey*** Vice President Randall J. Freitag* Vice President and Treasurer Dennis R. Glass* Director David M. Kittredge* Senior Vice President Terrence Mullen* President, Chief Executive Officer and Director Linda Woodward** Secretary Keith J. Ryan** Vice President and Chief Financial Officer
* Principal business address is 150 Radnor Chester Road, Radnor, PA 19087 ** Principal business address is 1300 S. Clinton Street, Ft. Wayne, IN 46802 *** Principal business address is 350 Church Street, Hartford, CT 06103 (c) N/A B-3 Item 31. Location of Accounts and Records All accounts, books, and other documents, except accounting records, required to be maintained by Section 31a of the 1940 Act and the Rules promulgated thereunder are maintained by The Lincoln National Life Insurance Company, 1300 S. Clinton Street, Fort Wayne, Indiana 46802. The accounting records are maintained by Delaware Management Company, One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103. Item 32. Management Services Not Applicable. Item 33. Fee Representation Lincoln Life represents that the fees and charges deducted under the policies, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Lincoln Life. B-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, Lincoln Life Flexible Premium Variable Life Account M, has duly caused this Post-Effective Amendment No. 1 to the Registration Statement on Form N-6 (File No. 333-139960; 811-08557; CIK: 0001048607) to be signed on its behalf by the undersigned duly authorized, in the City of Hartford and State of Connecticut on the 1st day of April, 2008. Registrant certifies that this amendment meets all of the requirements for effectiveness pursuant to Rule 485(b) under the Securities Act of 1933. LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M (REGISTRANT) By /s/ Kristen M. Phillips ---------------------------------- Kristen M. Phillips Vice President and Assistant Treasurer The Lincoln National Life Insurance Company THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (DEPOSITOR) By /s/ Kristen M. Phillips ---------------------------------- Kristen M. Phillips Vice President and Assistant Treasurer Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 1 to the Registration Statement on Form N-6 (File No. 333-139960; 811-08557; CIK: 0001048607) has been signed below on April 1, 2008, by the following persons, as officers and directors of the Depositor, in the capacities indicated: SIGNATURE TITLE - --------- ----- /s/ Dennis R. Glass * - ------------------------------- President and Director Dennis R. Glass (Principal Executive Officer) /s/ Frederick J. Crawford * - ------------------------------- Senior Vice President, Chief Financial Officer Frederick J. Crawford and Director (Principal Financial Officer) /s/ Michael J. Burns * - ------------------------------- Senior Vice President Michael J. Burns /s/ Mark E. Konen * - ------------------------------- Senior Vice President and Director Mark E. Konen /s/ See Yeng Quek * - ------------------------------- Senior Vice President, Chief Investment See Yeng Quek Officer and Director /s/ Keith J. Ryan * - ------------------------------- Vice President and Director Keith J. Ryan /s/ Westley V. Thompson * - ------------------------------- Senior Vice President and Director Westley V. Thompson * By /s/ Kristen M. Phillips ------------------------------------------- Kristen M. Phillips Attorney-in-Fact pursuant to a Power of Attorney filed with this Registration Statement POWER OF ATTORNEY We, the undersigned directors and/or officers of The Lincoln National Life Insurance Company, hereby constitute and appoint Kelly D. Clevenger, Christine S. Frederick, Kristen M. Phillips, Robert L. Grubka, Brian A. Kroll, Lawrence A. Samplatsky and Frederick C. Tedeschi, individually, our true and lawful attorneys-in-fact, with full power to each of them to sign for us, in our names and in the capacities indicated below, any and all amendments to Registration Statements; including exhibits, or other documents filed on Forms S-6, N-6, N-3, or N-4 or any successors or amendments to these Forms, filed with the Securities and Exchange Commission, under the Securities Act of 1933, on behalf of the Company in its own name or in the name of one of its Separate Accounts, hereby ratifying and confirming our signatures as they may be signed by any of our attorneys-in-fact to any such amendments to said Registration Statements as follows: VARIABLE LIFE INSURANCE SEPARATE ACCOUNTS: Lincoln Life Flexible Premium Variable Life Account D: 033-00417 Lincoln Life Flexible Premium Variable Life Account F: 033-14692; 333-40745 Lincoln Life Flexible Premium Variable Life Account G: 033-22740 Lincoln Life Flexible Premium Variable Life Account J: 033-06434; 033-76434 Lincoln Life Flexible Premium Variable Life Account K: 033-76432 Lincoln Life Flexible Premium Variable Life Account M: 333-42479; 333-54338; 333-84370; 333-84360; 333-111137; 333-111128; 333-118478; 333-118477; 333-63940; 333-82663; 333-139960; 333-145090; 333-146507 Lincoln Life Flexible Premium Variable Life Account R: 333-33782; 333-90432; 333-115882; 333-125792; 333-125991; 333-43107; 333-145235; 333-145239 Lincoln Life Flexible Premium Variable Life Account S: 333-72875; 333-104719; 333-125790 Lincoln Life Flexible Premium Variable Life Account Y: 333-118482; 333-118481; 333-115883; 333-81882; 333-81884; 333-81890; 333-90438 Lincoln Life Flexible Premium Variable Life Account JF-A: 333-144268; 333-144269; 333-144271; 333-144272; 333-144273; 333-144274; 333-144275 Lincoln Life Flexible Premium Variable Life Account JF-C: 333-144264; 333-144270 VARIABLE ANNUITY SEPARATE ACCOUNTS: Lincoln National Variable Annuity Fund A: 002-26342; 002-25618 Lincoln National Variable Annuity Account C: 033-25990; 333-50817; 333-68842; 333-112927 Lincoln National Variable Annuity Account E: 033-26032 Lincoln National Variable Annuity Account H: 033-27783; 333-18419; 333-35780; 333-35784; 333-61592; 333-63505; 333-135219 Lincoln National Variable Annuity Account L: 333-04999 Lincoln Life Variable Annuity Account N: 333-40937; 333-36316; 333-36304; 333-61554; 333-119165; 333-135039; 333-138190 Lincoln Life Variable Annuity Account Q: 333-43373 Lincoln Life Variable Annuity Account T: 333-32402; 333-73532 Lincoln Life Variable Annuity Account W: 333-52572; 333-52568; 333-64208 Lincoln Life Variable Annuity Account JL-A: 333-141888 Lincoln Life Variable Annuity Account JF-I: 333-144276; 333-144277 Lincoln Life Variable Annuity Account JF-II: 333-144278 The execution of this document by the undersigned hereby revokes any and all Powers of Attorney previously executed by said individual for this specific purpose. SIGNATURE TITLE - --------- ----- /s/ Dennis R. Glass - ------------------------------ President and Director Dennis R. Glass (Principal Executive Officer) /s/ Frederick J. Crawford - ------------------------------ Senior Vice President, Chief Financial Officer Frederick J. Crawford and Director (Principal Financial Officer) /s/ Michael J. Burns - ------------------------------ Senior Vice President Michael J. Burns /s/ Mark E. Konen - ------------------------------ Senior Vice President and Director Mark E. Konen /s/ See Yeng Quek - ------------------------------ Senior Vice President, Chief Investment Officer See Yeng Quek and Director /s/ Keith J. Ryan - ------------------------------ Vice President and Director Keith J. Ryan /s/ Westley V. Thompson - ------------------------------ Senior Vice President and Director Westley V. Thompson Version dated: February 11, 2008
EX-99.B(7) 2 a2183147zex-99_b7.txt EX-99.B(7) REINSURANCE AGREEMENT THIS AUTOMATIC SELF ADMINISTERED YRT REINSURANCE AGREEMENT Effective March 1, 2007 (hereinafter referred to as the "Agreement") is made between THE LINCOLN NATIONAL LIFE INSURANCE COMPANY of Ft. Wayne, Indiana (hereinafter referred to as "the Company") and SAMPLE REINSURANCE COMPANY of Anytown, USA (hereinafter referred to as "the Reinsurer") 1 TABLE OF CONTENTS PREAMBLE ARTICLE 1 1.1 Scope of Coverage ARTICLE 2 2.1 Automatic Reinsurance 2.2 Facultative Reinsurance ARTICLE 3 3.1 Automatic Submissions 3.2 Facultative Submissions ARTICLE 4 4.1 Liability 4.2 Commencement of Automatic Reinsurance Liability 4.3 Commencement of Facultative Reinsurance Liability 4.4 Conditional or Interim Receipt Liability ARTICLE 5 5.1 Premium Accounting 5.2 Non-Payment of Premiums ARTICLE 6 6.1 Right of Offset ARTICLE 7 7.1 Continuations 7.2 Policy Changes 7.3 Reductions 7.4 Lapses 7.5 Reinstatements 7.6 Last Survivor 7.7 Death Benefit Option C - Return of Premium ARTICLE 8 8.1 Retention Limit Changes 8.2 Recapture ARTICLE 9 9.1 Claims Notice 9.2 Claims Payment 9.3 Contested Claims 2 9.4 Extra Contractual Obligations 9.5 Misstatement of Age or Sex ARTICLE 10 10.1 Errors and Omissions 10.2 Dispute Resolution 10.3 Arbitration ARTICLE 11 11.1 Insolvency ARTICLE 12 12.1 DAC Tax 12.2 Taxes and Expenses ARTICLE 13 13.1 Entire Agreement 13.2 Inspection of Records 13.3 Good Faith 13.4 Confidentiality ARTICLE 14 14.1 Duration of Agreement 14.2 Severability 14.3 Construction 14.4 Regulatory Compliance 14.5 Assets in Trust 14.6 Letters of Credit ARTICLE 15 Notification EXECUTION EXHIBITS A Business Covered A-1 Required Forms, Manuals & Issue Rules - Conditional Receipt Amount B Temporary Life Insurance Agreement Form C General Terms (including Reinsurance Rates and Allowances) C-1 Specific Terms D The Company's Retention Limits E The Reinsurer's Automatic Acceptance Limits E-1 Automatic Reduction To Standard (ARTS) F Reinsurance Reports F-1 Policy Exhibit Summary F-2 Valuation Summary F-3 Valuation Reserve Certification 3 F-4 Tax Reserve Certification G Guaranteed Issue Application H Simplified Issue Application PREAMBLE This Agreement is an agreement for indemnity reinsurance solely between the Company and the Reinsurer. The acceptance of risks under this Agreement will create no right or legal relation between the Reinsurer and the insured, owner, or beneficiary of any insurance policy or other contract of the Company. This Agreement will be binding upon the parties hereto and their respective successors and assigns. ARTICLE 1 1.1 SCOPE OF COVERAGE This Agreement applies to all insurance policies and supplementary benefits and riders attached thereto (hereinafter referred to as "Policies") listed in Exhibit A that have been issued directly by the Company in accordance with its new business underwriting rules, premium rates and policy forms as provided to the Reinsurer. This Agreement applies only to the issuance of such business by the Company to lives resident in the countries stated in Exhibit A, if issued in or issued for delivery in such country, and constitutes the transaction of business in a jurisdiction in which the Company is properly licensed. On and after the effective date of this Agreement, the Company will cede, and the Reinsurer will accept risk on the above referenced Policies in accordance with the terms and conditions of this Agreement. The policies accepted by the Reinsurer will be hereinafter referred to as "Reinsured Policies". This Agreement does not cover the following unless specified elsewhere in this Agreement: 1.1.1 Non-contractual conversions, rollovers, exchanges or group conversions; or 1.1.2 Any business issued under a program where full current evidence of insurability consistent with the amount of insurance is not obtained, or where conventional selection criteria are not applied in underwriting the risk; or 1.1.3 Any conversion of a previously issued policy that had been reinsured with another reinsurer. Conversions arising from subsections 1.1.1 and 1.1.3 will be covered under this Agreement provided that the conversions are underwritten as new business. Each policy covered under this Agreement must provide for the maximum normal periods of suicide and contestability protection permitted in the state in which the policy is executed. 4 ARTICLE 2 2.1 AUTOMATIC REINSURANCE The Company will automatically cede the Reinsurer's share of the Policies, supplementary benefits and riders covered under this Agreement to the Reinsurer in accordance with the Automatic Acceptance Limits specified in Exhibit E, provided that: 2.1.1 the Company has retained the amount stipulated in Exhibit D according to the age and mortality rating at the time of underwriting; and 2.1.2 the total of the new reinsurance required and the amount already reinsured on that life under this Agreement and all other life agreements between the Reinsurer and the Company, does not exceed the Automatic Acceptance Limits set out in Exhibit E; and 2.1.3 the amount of insurance does not exceed the Jumbo Limits as defined in Exhibit C-1; and 2.1.4 the application is on a life for which an application has not been submitted by the Company on a facultative basis, (excluding lives submitted for facultative excess of the Company's automatic binding capacity), to any reinsurer within the last 3 years, unless the original reason for submitting facultatively no longer applies. 2.2 FACULTATIVE REINSURANCE If the Company receives an application for a policy covered under this Agreement that does not meet the automatic coverage criteria listed in Article 2.1 above, it may submit the application facultatively to the Reinsurer for its consideration. The reinsurance will also be on a facultative basis if the Company submits an application to the Reinsurer for facultative consideration on a plan or rider that qualifies for automatic reinsurance under this Agreement The relevant terms and conditions of this Agreement will apply to those facultative offers made by the Reinsurer that are accepted by the Company. ARTICLE 3 3.1 AUTOMATIC SUBMISSIONS The Company will submit automatic Policies to the Reinsurer in an electronic TAI format. 5 3.2 FACULTATIVE SUBMISSIONS The Company will apply for reinsurance on a facultative basis by sending to the Reinsurer an Application for Reinsurance. Unless specified elsewhere in the Agreement, accompanying this Application for Reinsurance will be copies of all underwriting evidence that is available for risk assessment including, but not limited to, copies of the application for insurance, medical examiners' reports, attending physicians' statements, inspection reports, and other papers bearing on the insurability of the risk. The Company will also notify the Reinsurer of any outstanding underwriting requirements at the time of the facultative submission. Any subsequent information received by the Company that is pertinent to the risk assessment will be transmitted to the Reinsurer immediately. After consideration of the Application for Reinsurance and related papers, the Reinsurer will promptly inform the Company of its underwriting decision. The Reinsurer's offer will expire at the end of the period stated in Exhibit A, unless otherwise specified by the Reinsurer. If the underwriting decision is acceptable to the Company and the Company's policy is subsequently placed in force in accordance with the issue rules provided to the Reinsurer, the Company will duly notify the Reinsurer of its acceptance in writing. If any risk is submitted to more than one reinsurer for consideration, facultative placement is based on the order of the responses received from the reinsurers, first offer in, taking into consideration the amount and rating requested by the Company. The Company will submit placed facultative policies to the Reinsurer in an electronic TAI format. ARTICLE 4 4.1 LIABILITY Unless specified elsewhere in the Agreement, the Reinsurer's liability for the Reinsured Policies is restricted to its share of the Company's liability as limited by the terms and conditions of the particular policy under which the Company is liable. The Reinsurer's liability to the Company for the reinsurance due shall be based on the net amount at risk at the time of the Insured Individual death. The Reinsurer's liability to the Company for the net amount at risk on a Policy that is reinsured shall be determined based on a ratio of the Reinsurer's liability to the total net amount at risk under the Policy at the time the reinsurance is placed. The Reinsurer shall share in any decrease in the net amount at risk in proportion to its share of the reinsurance on the Policy. The Reinsurer may terminate its liability for any Policies for which reinsurance premium payments are in arrears, according to the terms set out in Article 5.2 of this Agreement. 6 4.2 COMMENCEMENT OF AUTOMATIC REINSURANCE LIABILITY The Reinsurer's liability for any Reinsured Policy accepted automatically will begin simultaneously with the Company's contractual liability for that policy. 4.3 COMMENCEMENT OF FACULTATIVE REINSURANCE LIABILITY The Reinsurer's liability for any Reinsured Policy will begin simultaneously with the Company's contractual liability for that policy once the Reinsurer's facultative offer has been accepted by the Company in writing. 4.4 CONDITIONAL OR INTERIM RECEIPT LIABILITY Temporary Insurance Agreement coverage applicable to automatic reinsurance under this Agreement will be limited to amounts accepted within the company's usual cash-with-application procedures that provide temporary coverage up to the limits shown in Exhibit A-1. However, for facultative reinsurance, the Reinsurer's liability will not commence until the Reinsurer's facultative offer has been accepted by the Company; and then is limited to the company's usual cash-with-application procedures, which provide temporary coverage up to the limits shown in Exhibit A-1. ARTICLE 5 5.1 PREMIUM ACCOUNTING The Company will pay the Reinsurer premiums in accordance with the terms specified in Exhibit C. 5.2 NON-PAYMENT OF PREMIUMS, PREMIUM REFUNDS, AND CLAIM REIMBURSEMENTS The payment of reinsurance premiums to the Reinsurer, premium refunds to the Company, and claim reimbursements to the Company are conditions precedent to the liability of the Reinsurer and the Company for reinsurance covered by this Agreement. In the event that any of these amounts are not paid within 90 days of the Due Date stated in Exhibit F, the party due payment will have the right to terminate the reinsurance under all policies having reinsurance premiums in arrears without penalty. Neither The Company nor the Reinsurer will force termination under the provisions of this Article solely to avoid the recapture requirements of this Agreement or to transfer the Reinsured Policies to another reinsurer. 7 ARTICLE 6 6.1 RIGHT OF OFFSET The Company and the Reinsurer will have the right to offset any balance or balances whether on account of premiums, allowances or claims due from one party to the other, under this Agreement or under any other reinsurance agreement between the Company and the Reinsurer. The right of offset will not be affected or diminished because of the insolvency of either party. ARTICLE 7 7.1 CONTINUATIONS If a Reinsured Policy is converted, exchanged or internally replaced, the Company will promptly notify the Reinsurer. A policy arising from the non-contractual internal replacement of a policy that is five years or more removed from initial underwriting will require full underwriting. Non-contractual internal replacements that are less than five years removed from initial underwriting will require modified underwriting using parameters previously agreed to by the Reinsurer. All changes to the existing modified underwriting parameters must be submitted to and approved by the Reinsurer as provided for in Exhibit A-1. The new policy arising from an underwritten internal replacement that provides for the maximum new suicide and contestable periods permitted in the state in which the policy is executed will be considered new business under the terms of this Agreement. Reinsurance on the new policy will be on a first year YRT basis using the rates specified in Exhibit C-1. A non-underwritten policy arising from the contractual conversion, exchange or replacement of a Policy previously covered under this Agreement will continue to be reinsured with the Reinsurer. A non-underwritten policy arising from the contractual conversion, exchange or replacement of a Policy previously covered under a former Jefferson Pilot Life Insurance Company, Jefferson Pilot Financial Insurance Company or Jefferson Pilot LifeAmerica Insurance Company agreement will continue to be reinsured with the Reinsurer under this Agreement. The amount to be reinsured will be determined on the same basis as used for the original policy but will not exceed the amount reinsured as of the date of conversion unless mutually agreed otherwise. A conversion, exchange, or replacement that is fully underwritten shall be treated as new business. Continuations to risks with Death Benefit Option C (Return of Premium) must be fully underwritten. The above terms will apply unless specified otherwise in Exhibit C-1. 8 7.2 POLICY CHANGES If the plan, the amount of reinsurance, or the premiums of a Reinsured Policy are changed, the Company will promptly inform the Reinsurer. Whenever a Reinsured Policy is changed and the Company's underwriting rules do not require that full evidence be obtained, the reinsurance will remain in effect with the Reinsurer. The suicide, contestability and recapture periods applicable to the original Reinsured Policy will apply to the reissued Reinsured Policy and the duration will be measured from the effective date of the original Reinsured Policy. Whenever a Reinsured Policy is changed and the Company's underwriting rules require that full evidence be obtained, the change will be subject to the Reinsurer's approval, if: 7.2.1 the new amount of the Reinsured Policy would be in excess of the Automatic Acceptance Limit, in effect at the time of the change, as set out in Exhibit E; or 7.2.2 the new amount of the policy and the amount already in force on the same life exceeds the Jumbo Limit stated in Exhibit C-1; or 7.2.3 the Reinsured Policy is submitted for facultative excess of Company's automatic binding capacity. The amount of any non-contractual increase will be subject to the terms stated in Exhibit C and the Limits stated in Exhibit C-1 and Exhibit E. For changes not covered under this Agreement, which affect the terms of any Reinsured Policy, the Company must obtain the Reinsurer's approval before such changes become effective. 7.3 REDUCTIONS Unless specified otherwise in this Agreement, if the amount of insurance of a policy issued by the Company is reduced and: 7.3.1 the amount of reinsurance is on excess basis, then the amount of reinsurance on that life will be reduced effective the same date by the full amount of the reduction under the original policy. If the amount of insurance terminated equals or exceeds the amount of reinsurance, the full amount of reinsurance is terminated; or 7.3.2 the amount of reinsurance is on a quota share basis, then the amount of reinsurance on that life will be reduced effective the same date by the same proportion as the reduction under the original policy. The reduction will first apply to any reinsurance on the policy being reduced and then if applicable in a chronological order according to policy date ("first in, first out") to any reinsurance on the other policies in force on the life. However, the Company will not be required to assume a risk for an amount in excess of its regular retention for the 9 age at issue and the mortality rating of the policy under which reinsurance is being terminated. If the reinsurance for a policy has been placed with more than one reinsurer, the reduction will be applied to all reinsurers pro rata to the amounts originally reinsured with each reinsurer. 7.4 LAPSES When a Reinsured Policy lapses, reinsurance thereon will be terminated effective the same date. Unless specified otherwise in this Agreement, if a policy fully retained by the Company lapses, the terms under the preceding Reductions clause would apply. If a Reinsured Policy lapses and extended term insurance is elected under the terms of the Policy, the reinsurance thereon will continue on the same basis as the original Policy until the expiry of the extended term period. If a Reinsured Policy lapses and reduced paid-up insurance is elected under the terms of the Policy, the amount of reinsurance will be reduced according to the terms under the preceding Reductions clause. If the Company allows the Reinsured Policy to remain in force under its automatic premium loan regulations, the reinsurance will continue unchanged and in force as long as such regulations remain in effect, except as provided for otherwise in this Agreement. The Reinsurer does not participate in policy loans or other forms of indebtedness on policies reinsured under this Agreement. Therefore, policy loans do not affect the amount of reinsurance. 7.5 REINSTATEMENTS If a policy reinsured on an automatic basis is reinstated in accordance with its terms or the rules of the Company the Reinsurer will, upon notification of reinstatement, reinstate the Reinsured Policy automatically. The Reinsurer's approval is required only for the reinstatement of a facultative policy when the Company's regular reinstatement rules indicate that more evidence than a Statement of Good Health is required. 7.6 LAST SURVIVOR With respect to any Last Survivor Policy covered hereunder, the Company's retention shall be equal to the highest amount which could have been retained by the Company as set forth in Exhibit D taking into account amounts issued and retained on either of the lives insured under the Last Survivor Policy. However, at no time will the highest corporate retention shown in Exhibit D be exceeded. The Company may reinsure the policy automatically if both insureds fall within the appropriate age limits and underwriting classes as specified in Exhibit C-1. 10 In the event the Last Survivor Policy permits the insureds to split the Last Survivor Policy into separate policies on the life of each insured under the Last Survivor Policy, the new policies shall be Continuations as Defined in Article 7.1 of this Agreement. Any substandard or flat extras assessed a life under the Last Survivor Policy shall be payable under the appropriate Continuation Policy. The reinsured premiums for the Individual Policies shall be in accordance with the terms specified in Exhibit C. In the event one life is determined to be uninsurable, the provisions of this Article will continue to apply with the following exceptions: a) The Company may reinsure the policy automatically if the insurable life falls within the appropriate age limit and underwriting class as specified in Exhibit C1 and the policy meets the criteria specified in Article 2.1. b) The Company need only apply its standard underwriting rules and practices to the insurable life. c) The reinsurance premium shall be computed on the age and premium rates applicable to the insured risk. 7.7 DEATH BENEFIT OPTION C - RETURN OF PREMIUM For VUL and UL Life type plans with DBO C, specified amount plus return of premium less withdrawals, the net amount at risk equals the difference between the share of the death benefit reinsured and the applicable cash or fund value. These risks will be reinsured on a first-dollar quota-share basis with the Company retaining 50% of the initial specified amount up to the amounts shown in Exhibit D. Future fluctuations in NAR will be shared by the Company and the Reinsurer proportionately as defined by the initial cession. Conversions and exchanges to Death Benefit Option C are not allowed. ARTICLE 8 8.1 RETENTION LIMIT CHANGES If the Company changes its retention limits, it will provide the Reinsurer with written notice of the new retention limits and the effective date. A change to the Company's Retention Limits in Exhibit D will not affect the Reinsured Policies in force at the time of such a change except as specifically provided for elsewhere in this Agreement. Furthermore, such a change will not affect the Automatic Acceptance Limits in Exhibit E unless mutually agreed by the Company and the Reinsurer. 11 8.2 RECAPTURE When the Company increases the dollar retention limit the amount of in force Reinsured Policies may be reduced provided: 8.2.1 the Company gives the Reinsurer written notice of its intention to recapture within 90 days of the effective date of the retention increase; and 8.2.2 the amount eligible for recapture will be the difference between the amount originally retained and the amount the Company would have retained on the same quota share basis as referenced in Exhibit D had the new retention limit schedule been in effect at the time of issue; and 8.2.3 such recaptures are made on the next anniversary of each Reinsured Policy affected unless mutually agreed otherwise by the Company and the Reinsurer and with no recapture being made until the Reinsured Policy has been in force for the period stated in Exhibit C-1. For a conversion or re-entry, the recapture terms of the original policy will apply and the duration for the recapture period will be measured from the effective date of the original policy; and 8.2.4 the Company has maintained from the time the policy was issued, its full retention as set out in Exhibit D for the plan and the insured's classification; and 8.2.5 the Company has applied its increased Retention Limits in a consistent manner to all categories of its Retention Limits set out in Exhibit D unless otherwise agreed to by the Reinsurer. In applying its increased Retention Limits to Reinsured Policies, the age and mortality rating at the time of issue will be used to determine the amount of the Company's increased retention. Recapture as provided herein is optional with the Company, but if any Reinsured Policy is recaptured, all Reinsured Policies eligible for recapture under the provisions of this Article must be recaptured. If there is reinsurance in other companies on risks eligible for recapture, the necessary reduction is to be applied pro rata to the total outstanding reinsurance. The amount of reinsurance eligible for recapture is based on the reinsurance net amount at risk as of the date of recapture. The Company may not revoke its election to recapture for Reinsured Policies becoming eligible at future anniversaries. No recapture of Reinsured Policies will occur if the Company has either obtained or increased stop loss reinsurance coverage as justification for the increase in retention. The Reinsurer will not be liable, after the effective date of recapture, for any Reinsured Policies or portions of such Reinsured Policies eligible for recapture that the Company 12 has overlooked. The Reinsurer will be liable only for a credit of the premiums, received after the recapture date, less any allowance. The terms and conditions for the Company to recapture in force Reinsured Policies due to the insolvency of the Reinsurer are set out in the Insolvency clause in Article 11. If the Company transfers business that is reinsured under this Agreement to a successor company, then the successor company has the option to recapture the reinsurance, in accordance with the recapture criteria outlined in this Article, only if the successor company has or adopts a higher retention limit than that of the Company. ARTICLE 9 9.1 CLAIMS NOTICE The Company shall give the Reinsurer prompt notice of any claim submitted on a policy reinsured under this Agreement. The settlement made by the Company on any such claim, whether made under strict policy conditions or compromised for a lesser amount, shall be binding on the Reinsurer. The Company agrees to act in good faith on all claim settlements made under this Agreement. The Reinsurer's liability for the insurance benefits reinsured under this Agreement will be the same as the Company's liability for such benefits. All reinsurance claim settlements will be subject to the terms and conditions of the particular contract under which the Ceding Company are liable. 9.2 CLAIMS PAYMENT The Company shall furnish the Reinsurer with copies of the proofs of claims on all coverages with face amounts greater than $50,000. "Proofs of claim" consist of death certificate, claimant's statement and proof of payment by the Company, and any other documentation which might reasonably be requested by the Reinsurer. The Company will also provide other documents bearing on such claim or proceeding upon the request of the Reinsurer. Payment in settlement of the reinsurance under a claim approved and paid by the Company for a life reinsured hereunder shall be made by deducting the reinsurance proceeds from the premium due the Reinsurer. The Company does reserve the right, however, to request a cash payment from the Reinsurer on any particular Claim rather than deducting the payment from the premium due. The payment of reinsurance proceeds shall be in one lump sum, regardless of the method of settlement under the Policy. The Reinsurer will pay to the Company its proportionate share of expenses subject to the limitations of Article 9.3. 9.3 CONTESTED CLAIMS The Company will promptly notify the Reinsurer of its intention to contest, compromise or litigate any claim (a "Contested Claim"). The Company will provide the Reinsurer all relevant information and documents, as such become available, pertaining to Contested Claims and will promptly report any developments during the Reinsurer's review. The parties acknowledge that any denial of a claim during the policy contestable period will be a Contested Claim. Upon receipt of notice of a Contested Claim, the Reinsurer will promptly notify the Company of its decision whether or not to 13 accept any such action within 10 business days. If the Reinsurer declines to be a party to the contest, compromise or litigation, the Reinsurer shall pay the Company its share of the reinsured net amount at risk, interest and routine investigative expenses to date and thereby be fully discharged of any further liability and subsequent expenses and will not share in any subsequent reduction or increase in liability. If the Reinsurer accepts participation and the Company's contest, compromise, or litigation results in a reduction or increase in liability, the Reinsurer will share proportionately in any such reduction or increase. Failure by the Reinsurer to respond within 10 business days after notification by the Company of the Contested Claim will bind the Reinsurer to the Company's recommended action to contest, compromise, or litigate the claim. The Reinsurer agrees not to subsequently modify the original decision to participate unless the Company provides the Reinsurer with additional information that is material to the original decision. Both parties agree that subsequent notification of litigation of a contested claim does not in itself constitute a material change. If the Reinsurer accepts the decision to contest, the Reinsurer shall share in the expense of any contest, compromise or litigation of a claim. The Reinsurer's share of any such expenses shall be in the same proportion that the net amount at risk reinsured with the Reinsurer bears to the total net amount at risk of the Company under all policies on the life being contested by the Company. The Reinsurer shall share in the total amount of any reduction in liability in the same proportion. However, the Reinsurer will not have to reimburse the Company for the following expenses: 9.3.1 salaries of employees or other internal expenses of the Company; and 9.3.2 expenses incurred in connection with a dispute or contest arising out of conflicting claims of entitlement to policy proceeds or benefits. The Reinsurer will pay to the Company its proportionate share of the following expenses arising out of the settlement or litigation of a claim: 9.3.3 investigative expenses; 9.3.4 attorneys' fees; 9.3.5 penalties and interest imposed automatically against the Company by statute or arising out of a judgment rendered against the Company in a suit for policy benefits; and 9.3.6 interest paid to the claimant on death benefit proceeds according to the Company's practices. Reimbursements of interest in excess of 9%, unless otherwise dictated by local legislation, will require the Reinsurer's approval. 9.4 EXTRA CONTRACTUAL OBLIGATIONS Extra Contractual Obligations are obligations outside of the contractual obligations and include but are not limited to punitive damages, bad faith damages, compensatory damages, and other damages or statutory penalties which may arise from the willful and/or negligent acts or omissions by the Company. The Reinsurer is not liable for Extra Contractual Obligations unless it concurred in advance and in writing with the 14 actions of the Company which ultimately led to the imposition of the Extra Contractual Obligations. In such situations, the Company and the Reinsurer will share in Extra Contractual Obligations, in equitable proportions, but all factors being equal, the division of any such assessments would be in proportion to the total risk accepted by each party for the plan of insurance involved. Notwithstanding anything stated herein, this Agreement will not apply to any Extra Contractual Obligations incurred by the Company as a result of any fraudulent and/or criminal act by any employee or officer of the Company or an agent representing the Company, acting individually, collectively or in collusion in the presentation, defense, or settlement of any claim. The Reinsurer and the Company both acknowledge that good faith will be used in determining whether or not the Company is reimbursed by the Reinsurer for any Extra Contractual Obligations. 9.5 MISSTATEMENT OF AGE OR SEX In the event of an increase or reduction in the amount of the Company's insurance on any policy reinsured hereunder because of a misstatement of age and/or sex being established after the death of the insured, the Company and the Reinsurer shall share in such increase or reduction in proportion to their respective net amounts at risk under such policy. ARTICLE 10 10.1 ERRORS AND OMISSIONS No delays, errors or omissions on the part of the Company or the Reinsurer shall relieve the other party of liability provided such delays, errors or omissions are rectified as soon as possible after discovery. However, the Reinsurer shall not be liable with respect to any reinsurance which may have been inadvertently included in the premium calculation but which ought to not have been included by reason of the terms and conditions of this Agreement. Such inadvertent premium payments shall be returned. 10.2. DISPUTE RESOLUTION If either the Company or the Reinsurer has given written notification of a dispute to the other party, then within 15 days of such notification both parties must designate an officer of their respective companies to attempt to resolve the dispute. The officers will meet at a mutually agreeable location as soon as possible and as often as necessary, in order to gather and furnish the other with all appropriate and relevant information concerning the dispute. The officers will discuss the problem and will negotiate in good faith without the necessity of any formal arbitration proceedings. During the negotiation process, all reasonable requests made by one officer to the other for information will be honored. The specific format for such discussions will be decided by the designated officers. 15 If these officers are unable to resolve the dispute within 30 days of their first meeting, the dispute will be submitted to formal arbitration, unless the parties agree in writing to extend the negotiation period for an additional 30 days. 10.3 ARBITRATION If the Company and Reinsurer are unable to mutually resolve a dispute or controversy relating to policies covered under this Agreement or the breach thereof, the matter will be referred to arbitration. To initiate arbitration, either the Company or the Reinsurer will notify the other party in writing of its desire to arbitrate, stating the nature of its dispute and the remedy sought. There will be three arbitrators selected who will be officers of Life Insurance Companies or Life Reinsurance Companies excluding officers of the parties to this Agreement, their affiliates or subsidiaries or past employees of any of these entities. The arbitrators, who will regard this Agreement from the standpoint of practical business as well as the law, are empowered to determine the interpretation of the treaty obligation. Each party will appoint one arbitrator and these two arbitrators will select a third arbitrator within 2 weeks of the appointment of the second. If either party refuses or neglects to appoint an arbitrator within 60 days after receipt of the written request for arbitration, the other party may appoint a second arbitrator. Should the two arbitrators not agree on the choice of the third within 30 days after the appointment of the second arbitrator, then each party will name four candidates to serve as the arbitrator. Beginning with the party who did not initiate arbitration, each party will eliminate one candidate from the eight listed until one candidate remains. If this candidate declines to serve as the arbitrator, the candidate last eliminated will be approached to serve. This process will be repeated until a candidate has agreed to serve as the third arbitrator. The place of meeting of the arbitrators will be decided by a majority vote of the arbitrators. The written decision of a majority of the arbitrators will be final and binding on both parties and their respective successors and assigns. The arbitrators will render a decision within 4 months of the appointment of the third arbitrator, unless both parties agree otherwise. In the event no decision is rendered within 4 months, new arbitrators will be selected as above. There will be no appeal from the decision. Either party to the arbitration may petition any court having jurisdiction over the parties to reduce the decision to judgment. Alternatively, if both parties consent, any controversy may be settled by arbitration in accordance with the rules of the American Arbitration Association. Unless the Arbitrators decide otherwise, each party will bear the expense of its own arbitration, including its appointed arbitrator and any outside attorney and witness fees. The parties will jointly and equally bear the expense of the third arbitrator and other costs of the arbitration. It is specifically the intent of both parties that these arbitration provisions will replace and be in lieu of any statutory arbitration provision, if the law so permits. 16 ARTICLE 11 11.1 INSOLVENCY A party to this Agreement will be deemed "insolvent" when it: 11.1.1 applies for or consents to the appointment of a receiver, rehabilitator, conservator, liquidator or statutory successor (hereinafter referred to as the Authorized Representative) of its properties or assets; or 11.1.2 is adjudicated as bankrupt or insolvent; or 11.1.3 files or consents to the filing of a petition in bankruptcy, seeks reorganization or an arrangement with creditors or takes advantage of any bankruptcy, dissolution, liquidation, or similar law or statute; or 11.1.4 becomes the subject of an order to rehabilitate or an order to liquidate as defined by the insurance code of the jurisdiction of the party's domicile. In the event of the insolvency of the Company, all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement will be payable by the Reinsurer directly to the Company or to its Authorized Representative, on the basis of the liability of the Company under the Reinsured Policies without diminution because of the insolvency of the Company. The Reinsurer will be liable only for the amounts reinsured and will not be or become liable for any amounts or reserves to be held by the Company on Policies reinsured under this Agreement. The Authorized Representative will give written notice to the Reinsurer of all pending claims against the Company on any Policies reinsured within a reasonable time after such claims are filed in the insolvency proceedings. While a claim is pending, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceedings where the claim is to be adjudicated, any defense or defenses, which it may deem available to the Company or the Authorized Representative. The expense incurred by the Reinsurer will be chargeable, subject to court approval, against the Company as part of the expense of conservation or liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer. Where two or more reinsurers are involved in the same claim and a majority in interest elects to interpose a defense to such claim, the expense will be apportioned in accordance with the terms of the Agreement as though such expense had been incurred by the Company. In the event of insolvency, the Right of Offset afforded under Article 6.1 will remain in full force and effect to the extent permitted by applicable law. In the event of the insolvency of the Reinsurer, the Company may cancel this Agreement for new business by promptly providing the Reinsurer, its receiver, rehabilitator, conservator, liquidator or statutory successor with written notice of the cancellation, effective on the date on which the Reinsurer's insolvency is established by the authority responsible for such determination. Any requirement for a notification 17 period prior to the cancellation of the Agreement would not apply under such circumstances. In addition, the Company may provide the Reinsurer, its receiver, rehabilitator, conservator, liquidator or statutory successor with written notice of its intent to recapture all reinsurance in force under this Agreement regardless of the duration the reinsurance has been in force or the amount retained by the Company on the Policies reinsured hereunder. The effective date of a recapture due to insolvency would be at the election of the Company and would not be earlier than the date on which the Reinsurer's insolvency is established by the authority responsible for such determination. Upon recapture the Reinsurer will pay the unearned reinsurance premium reserve (if any) to the Company on the risks reinsured under this Agreement. ARTICLE 12 12.1 DAC TAX The Company and the Reinsurer agree to the DAC Tax Election pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations effective December 29, 1992, under Section 848 of the Internal Revenue code of 1986, as amended, whereby: 12.1.1 the party with the net positive consideration for this Agreement for each taxable year will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1); and 12.1.2 both parties agree to exchange information pertaining to the amount of net consideration under this Agreement each year to ensure consistency. To achieve this, the Company shall provide the Reinsurer with a schedule of its calculation of the net considerations for all reinsurance agreements in force between them for a taxable year by no later than May 1 of the succeeding year. The Reinsurer shall advise the Company no later than May 31, otherwise the amounts will be presumed correct and shall be reported by both parties in their respective tax returns for such tax year. If the Reinsurer contests the Company's calculation of net consideration, the parties agree to act in good faith to resolve any differences within thirty (30) days of the date the Reinsurer submits its alternative calculation and report the amounts agreed upon in their respective tax returns for such year. The term "net consideration" will refer to the net consideration as defined in Regulation Section 1.848-2(f). The Company and the Reinsurer will report the amount of net consideration in their respective federal income tax returns for the previous calendar year. The Company and the Reinsurer will also attach a schedule to their respective federal income tax returns, which identifies the Agreement as a reinsurance agreement for which the DAC Tax Election under Regulation Section 1.848.2 (g) (8) has been made. This DAC Tax Election will be effective for all years for which this Agreement remains in effect. 18 The Company and the Reinsurer represent and warrant that they are subject to U.S. taxation under either the provisions of subchapter L of Chapter 1 or the provisions of subpart F of subchapter N of Chapter 1 of the Internal Revenue Code of 1986, as amended. 12.2 TAXES AND EXPENSES Apart from any taxes, allowances, refunds, and expenses specifically referred to elsewhere in this Agreement, no taxes, allowances, or proportion of any expense will be paid by the Reinsurer to the Company in respect of any Reinsured Policy. ARTICLE 13 13.1 ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties with respect to the business reinsured hereunder. There are no understandings between the Company and the Reinsurer with respect to the business reinsured hereunder other than as expressed in this Agreement. Any alteration to this Agreement will be null and void unless made by written amendment, attached to the Agreement and signed by both parties. 13.2 INSPECTION OF RECORDS The Reinsurer, or its duly appointed representatives, will have access to the records of the Company concerning the business reinsured hereunder for the purpose of inspecting, auditing and photocopying those records. Such access will be provided at the office of the Company and will be during reasonable business hours. Provided there is business in force under this Agreement, the Reinsurer's right of access as specified above will survive the term of the Agreement. 13.3 GOOD FAITH All matters with respect to this Agreement require the utmost good faith of both parties. Each party represents and warrants to the other party that it is solvent on a statutory basis in all states in which it does business or is licensed. Each party will promptly notify the other if it is subsequently financially impaired. The Reinsurer and the Ceding Company have entered into this Agreement in reliance upon each other's representations and warranties. The Ceding Company and the Reinsurer each affirms that it has and will continue to disclose all matters material to this Agreement. Material for purposes of this Article will mean information that a prudent actuary would consider as reasonably likely to affect the Reinsurer's terms under this Agreement. Examples of such matters are material changes in policy distribution methods, policy provisions, issue practices, underwriting or claims practices that are intentional and within the control of the Company. 19 The Reinsurer will have the right to accept in writing any material change as applied to a Policy before accepting any liability with respect to these Policies. Any outsourcing by the Ceding Company of material functions concerning the Policies will be deemed material. The Company will secure the Reinsurer's right to audit any outsourcing of any material Ceding Company functions concerning the Policies. 13.4 CONFIDENTIALITY Both the Company and the Reinsurer will hold confidential and not disclose or make competitive use of any shared client and proprietary information unless otherwise agreed to in writing, or unless the information otherwise becomes publicly available or the disclosure of which is required for retrocession purposes or has been mandated by law or is duly required by external auditors. Client information includes medical, financial and other personal information about proposed, current and former policyowners, insureds, applicants, and beneficiaries of policies issued by the Company. Proprietary Information includes but is not limited to underwriting manuals and guidelines, applications and contract forms and premium rates and allowances of the Reinsurer and the Company. In addition, the Company and the Reinsurer will comply with relevant privacy legislation. ARTICLE 14 14.1 DURATION OF AGREEMENT This Agreement is unlimited as to its duration. The Reinsurer or the Company may terminate this Agreement with respect to the reinsurance of new business by giving at least 90 days written notice of termination to the other party. During the 90-day notification period, the Company will continue to cede and the Reinsurer will continue to accept policies covered under the terms of this Agreement. Further, the Reinsurer remains liable for all Reinsured Policies in force at the date of the termination stated in the notice of termination, until their natural expiration, unless the parties mutually decide otherwise or as specified otherwise in this Agreement. The Company shall have the option of terminating this Agreement for new business at anytime, upon delivery of written notice to the Reinsurer of at least 30 days prior to such termination of any of the following events: 14.1.1 the Reinsurer's rating by A.M. Best is reduced from the rating which existed at the time this Agreement became effective to a Best's rating below A- and the Reinsurer's surplus falls below 300% of Authorized Control Level; or 14.1.2 the Reinsurer is placed on a "watch list" by its domiciliary state's insurance regulators due to the Reinsurer's failure to maintain the financial standards required in its domiciliary state; or 20 14.1.3 the regulatory authority of any state in which the Reinsurer is authorized to do business revokes the Reinsurer's right to continue conducting business in that state and the Reinsurer has not met the requirements of Article 14 subsection 14.4, 14.5 or 14.6; or 14.1.4 an order appointing a receiver or trustee for management of the Reinsurer is entered or a proceeding is commenced for rehabilitation, liquidation, supervision, or conservation of the Reinsurer; or 14.1.5 the Reinsurer notifies the Company of a request for increase in premium. However, the right of the Company to recapture the business will not be triggered if the Reinsurer is simply following a rate increase that the Company is giving to the underlying policyholders; or 14.1.6 If, despite its best efforts, the Reinsurer is unable or fails to comply with the terms of Articles 14.4, 14.5 or 14.6 and the Company is unable to receive full statutory accounting credit for reinsurance ceded to the Reinsurer under this Agreement. 14.2 SEVERABILITY If any provision of this Agreement is determined to be invalid or unenforceable, such determination will not affect or impair the validity or the enforceability of the remaining provisions of this Agreement. 14.3 CONSTRUCTION The rights and obligations under this Agreement will be construed and administered in accordance with the laws of the Company's state of domicile stated in Exhibit A. 14.4 REGULATORY COMPLIANCE Each party hereto warrants that it has secured all necessary federal and state licenses and approvals and that it is operating in compliance with federal and state insurance laws and regulations. It is the intention of the Company and the Reinsurer that the Company will receive full statutory reserve credit for the insurance risks ceded to the Reinsurer under this Agreement in all jurisdictions in which the Company is authorized to do business or accredited as a reinsurer. Said reserve credit shall be in an amount no less than the amount calculated as the Treaty Reserve and shall be supported by Collateral. In addition to the requirements of other provisions of this Agreement, the Reinsurer agrees to take any other steps necessary for the Company to receive such statutory accounting treatment. In furtherance thereof, on its balance sheet, the Reinsurer shall hold a reserve at least equal to the minimum US statutory reserve credit specified above. If, despite its best efforts, the Reinsurer is unable or fails to comply with the terms of this Article, it shall immediately notify the Company, and the Company shall have the right to terminate this Agreement and recapture all reinsurance hereunder pursuant to Articles 8 and 14. 21 If the Reinsurer is not authorized, admitted as a reinsurer, approved as a non-admitted reinsurer or the regulatory authority revokes the right of the Reinsurer to continue conducting business in any jurisdiction where the Company is authorized to do business, the Reinsurer shall have 60 days to apply for and provide the Company with letters of credit, assets in trust, or other form of Collateral agreeable to both parties that will allow the Company to take full statutory reserve credit for the insurance risks ceded to the Reinsurer under this Agreement. 14.5 ASSETS IN TRUST 14.5.1 In order for the Company to take full reinsurance credit in any and all jurisdictions where the Company conducts business or is accredited as a reinsurer, the Reinsurer may provide, at its sole expense, one or more trust accounts for the sole use, benefit and security of the Company. The Reinsurer and any such trust account(s) shall comply with all applicable Indiana laws, including I.C. 27-6-10-14 and Indiana Administrative Code title 760, Section 1-56-10 as well as the relevant provisions of other states' laws, including but not limited to those of the State of New York. To the extent that the Reinsurer opts to use one or more trust accounts as Collateral, the following subsections in this Article shall apply to such trust(s). 14.5.2 Prior to depositing assets with the trustee, the Reinsurer shall execute assignments, endorsements in blank, or transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, and take any other steps required in order that the Company, or the trustee upon the direction of the Company, may whenever necessary, negotiate any such assets without consent or signature from the Reinsurer or any other person or entity. 14.5.3 The assets in the trust(s) shall be invested and reinvested by the Reinsurer so as to satisfy its obligation to ensure that the Company receives full statutory accounting credit for reinsurance ceded to the Reinsurer in all jurisdictions in which the Company is authorized to do business or accredited as a reinsurer. All investments shall be limited to those permitted by both I.C. Section 27-6-10-14(c)(2) and Title 11 New York Codes, Rules and Regulations Section 126 and any successors thereto. 14.5.4 If at the end of any calendar quarter, the Treaty Reserve for the Reinsurer's share of the reinsured risks on the Contracts exceeds the fair market value of all Collateral, the Reinsurer shall either deposit cash or securities which meet the requirements of subsection 14.5.3 in an amount equal to the shortfall into the trust(s), or furnish one or more letters of credit consistent with the terms of Article 14.6, so that the total Collateral meets the requirements of Article 14.4. However, if at the end of any calendar quarter the fair market value of all Collateral exceeds the Treaty Reserve required for the Reinsurer's quota share of the risks reinsured, the Reinsurer may request that the Company withdraw from the trust(s) an amount not greater than such excess amount and deliver that amount to the Reinsurer, consistent with applicable legal requirements. In addition, the Reinsurer shall have the discretion to add additional amounts to the trust(s) or to refrain from withdrawing excess funds from the trust(s). All withdrawals of assets from the trust(s) shall be made by the Company. 22 14.5.5 The Reinsurer shall pay all trustee and custodial fees for the trust(s). Assets in the trust(s) shall not be used to pay any such fees. 14.5.6 The Company or its successors in interest may draw against the assets in said trust account(s) at any time, notwithstanding any other provision in this Agreement, and shall utilize the amount drawn for one or more of the following reasons only: (a) To pay the Reinsurer's share or to reimburse the Company for the Reinsurer's share of any premiums returned to the owners of Individual Policies reinsured under this Agreement on account of cancellations of such Policies; (b) To reimburse the Company for the quota share of surrenders and benefits or losses by the Company under the terms and conditions of the Individual Policies reinsured under this Agreement; (c) To fund an account with the Company in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer's liabilities for Contracts ceded under this Agreement (such amount shall include, but not be limited to, amounts for statutory policy reserves, claims and losses incurred, and unearned premiums); (d) To pay any other amounts due under this Agreement. The foregoing limitation on the use of withdrawn funds shall apply to the Company or any successor, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, and shall apply without diminution because of insolvency on the part of the Company or the Reinsurer. 14.5.7 The Company agrees to return promptly to the Reinsurer any amounts drawn on such letters of credit in excess of the actual amounts required for Subparagraphs 14.5.6 (a), (b) and (c), above, or in the case of Subparagraph 14.5.6 (d), above, any amounts that are subsequently determined to be in excess of the amounts due. 14.5.8 The rights and liabilities of the Company and the Reinsurer, as set forth in this Article shall not be diminished in any manner by the insolvency of the other party. 14.6 LETTERS OF CREDIT 14.6.1 The Reinsurer may meet its obligations as described in Article 14.4, by providing to the Company letters of credit made payable to the Company in an amount sufficient to meet such obligation, after taking into account any and all Collateral already contained in one or more trust accounts as described in Article 14.5. The amount of such letters of credit shall be adjusted periodically so that the amount of such letters of credit is at least equal to the amount specified in this subsection as of the last day of each calendar quarter. Any letters of credit entered into pursuant to this 23 subsection shall comply with all applicable laws, including but not limited to the insurance laws of the States of Indiana and New York. 14.6.2 The Reinsurer and the Company agree that any letters of credit provided by the Reinsurer may be drawn upon by the Company at any time, notwithstanding any other provisions in this Agreement, and be utilized and applied by the Company or any successor by operation of law of the Company, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, without diminution because of insolvency on the part of the Company or the Reinsurer, only for the following purposes: (a) To pay the Reinsurer's share or to reimburse the Company for the Reinsurer's share of any premiums returned to the owners of Individual Policies reinsured under this Agreement on account of cancellations of such Policies; (b) To reimburse the Company for the quota share of surrenders and benefits or losses by the Company under the terms and conditions of the Individual Policies reinsured under this Agreement; (c) To fund an account with the Company in an amount at least equal to the deduction, for reinsurance ceded, from the ceding insurer's liabilities for Contracts ceded under this Agreement (such amount shall include, but not be limited to, amounts for statutory policy reserves, claims and losses incurred, and unearned premiums); (d) To pay any other amounts due under this Agreement. The foregoing limitation on the use of withdrawn funds shall apply to the Company or any successor, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, and shall apply without diminution because of insolvency on the part of the Company or the Reinsurer. 14.6.3 The Company agrees to return promptly to the Reinsurer any amounts drawn on such letters of credit in excess of the actual amounts required for subsections 14.6.2 (a), (b) and (c), above, or in the case of subsection 14.6.2 (d), above, any amounts that are subsequently determined to be in excess of the amounts due. 14.6.4 Payment to the Company by the issuing banks of amounts drawn on the letters of credit pursuant to subsections 14.6.2 (a), (b) and (d), above, shall constitute payment by the Reinsurer pursuant to this Agreement and shall discharge the Reinsurer of the obligation which gave rise to the draw, provided however the Reinsurer may later contest whether it had failed to reimburse or pay the Company as required by this Agreement. 24 ARTICLE 15 NOTIFICATIONS 1. Notices shall only be effective if made by either the Company or Reinsurer in writing and shall be sent to the intended recipient at its address or number as set out below: Company: Company Name Mailing address Attn: to be inserted Title: to be inserted Fax: to be inserted Reinsurer: 2. Either the Company or Reinsurer may change its Notice details on giving Notice to the other of the change in accordance with this Article. Such change shall be effective five (5) business days after the Notice has been given, or such later date as may be specified in the Notice. 25 EXECUTION This Agreement has been made in duplicate and hereby executed by both parties. Signed for and on behalf of THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: By: --------------------------------- ------------------------------ Title: Title: --------------------------------- ------------------------------ Date: Date: --------------------------------- ------------------------------ Place: Place: --------------------------------- ------------------------------ Signed for and on behalf of SAMPLE REINSURANCE COMPANY By: By: --------------------------------- ------------------------------ Title: Title: --------------------------------- ------------------------------ Date: Date: --------------------------------- ------------------------------ Place: Place: --------------------------------- ------------------------------ 26 EX-99.B(11) 3 a2183147zex-99_b11.txt EX-99.B(11) Lincoln [LOGO] Financial Group Lincoln Life LAWRENCE A. SAMPLATSKY ASSISTANT VICE PRESIDENT AND SENIOR COUNSEL 350 CHURCH STREET HARTFORD, CT 06103-1109 TELEPHONE: (860) 466-3833 FACSIMILE: (860) 466-1778 Lawrence.Samplatsky@LFG.com April 1, 2008 U. S. Securities and Exchange Commission 100 F Street, N. E. Washington, D.C. 20549-0506 Re: Lincoln Life Flexible Premium Variable Life Account M ("Account") The Lincoln National Life Insurance Company File No. 333-139960; 811-08557; CIK: 0001048607 Post-Effective Amendment No. 1, Form N-6, Rule 485(b) Dear Sir or Madam: As Assistant Vice President and Senior Counsel of The Lincoln National Life Insurance Company ("Company"), I am familiar with the actions of the Board of Directors of the Company establishing the Account and its method of operation and authorizing the filing of a Registration Statement under the Securities Act of 1933 (and amendments thereto) for the securities to be issued by the Account and the Investment Company Act of 1940 for the Account itself. In the course of preparing this opinion, I have reviewed the Certificate of Incorporation and the By-Laws of the Company, the Board actions with respect to the Account, and such other matters as I deemed necessary or appropriate. Based on such review, I am of the opinion that the variable life insurance policies (and interests therein) which are the subject of the Registration Statement under the Securities Act of 1933, as amended, for the Account will, when issued, be legally issued and will represent binding obligations of the Company, the depositor for the Account. I further consent to the use of this opinion as an Exhibit to this Post-Effective Amendment No. 1 to the Registration Statement and to the reference to me under the heading "Experts" in said Registration Statement, as amended. Very truly yours, /s/ Lawrence A. Samplatsky - -------------------------------------- Lawrence A. Samplatsky Assistant Vice President and Senior Counsel EX-99.B(14) 4 a2183147zex-99_b14.txt EX-99.B(14) Exhibit 14 Consent of Independent Registered Public Accounting Firm We consent to the reference to our firm under the caption "Independent Registered Public Accounting Firm" in Post-Effective Amendment No. 1 to the Registration Statement (Form N-6 No. 333-139960) pertaining to Lincoln Life Flexible Premium Variable Life Account M, and to the use therein of our reports dated (a) March 27, 2008, with respect to the consolidated financial statements of The Lincoln National Life Insurance Company and (b) March 7, 2008, with respect to the financial statements of Lincoln Life Flexible Premium Variable Life Account M. /s/ Ernst & Young LLP Fort Wayne, Indiana March 31, 2008 EX-99.B(17) 5 a2183147zex-99_b17.txt EX-99.B(17) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK Administrative Procedures For Flexible Premium Variable Life Insurance March 2008 This document sets forth the information called for under Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 ("1940 Act"). The Rule provides exemptions from sections 22(d), 22(e), and 27(c)(1) of the 1940 Act, and Rule 22c-l thereunder, for issuance, transfer and redemption procedures under the Flexible Premium Variable Life Insurance Policy ("Policy") to the extent necessary to comply with other provisions of Rule 6e-3(T), state insurance law or established administrative procedures of The Lincoln National Life Insurance Company and Lincoln life & Annuity Company of New York (collectively, "Lincoln Life" or the "Company"). To qualify for the exemptions, procedures must be reasonable, fair and not discriminatory and must be disclosed in the registration statement filed by the Separate Account. Lincoln Life believes its procedures meet the requirements of Rule 6e-3(T)(b)(12)(iii), as described below. This document applies to the following Policies issued by Lincoln Life:
ACCOUNT PRODUCT NO. PRODUCT NAME - --------------------------------------------------------------------------- ----------- ------------------------------------------- Lincoln Life Flexible Premium Variable Life Account D (811-04592) 033-00417 Variable Universal Life Leadership Series Lincoln Life Flexible Premium Variable Life Account F (811-05164) 033-14692 American Legacy Life 333-40745 American Legacy Estate Builder Lincoln Life Flexible Premium Variable Life Account G (811-05585) 033-22740 VUL-III Lincoln Life Flexible Premium Variable Life Account J (811-08410) 033-76434 American Legacy Variable Life Lincoln Life Flexible Premium Variable Life Account K (811-08412) 033-76432 Multi Fund Variable Life Lincoln Life Flexible Premium Variable Life Account M (811-08557) 333-82663 VULdb / VULdb ES 333-84360 VULdb-II ES 333-42479 VUL-I / VULcv 333-54338 VULcv-II / VULcvII ES / VUL Flex 333-84370 VULcv-III ES 333-63940 MoneyGuard VUL 333-111137 VULone ES / VULone 2005 ES 333-111128 Momentum VULone / Momentum VULone 2005 333-118478 VULcv-IV ES 333-118477 VULdb-IV ES 333-145090 Momentum VULone 2007 333-139960 VULone 2007 Lincoln Life Flexible Premium Variable Life Account R (811-08579) 333-43107 SVUL / SVUL-I 333-33782 SVUL-II / SVUL-II ES 333-90432 SVUL-III ES 333-115882 SVUL-IV ES 333-125792 SVULone ES 333-125991 Momentum SVULone 333-145235 SVULone 2007 ES 333-145239 Momentum SVULone 2007 Lincoln Life Flexible Premium Variable Life Account S (811-09241) 333-72875 CVUL / CVUL Series III / CVUL Series III ES 333-104719 LCV4 ES 333-125790 LCV5 ES / LCC VUL Lincoln Life Flexible Premium Variable Life Account Y (811-21028) 333-81884 American Legacy VULcv-III 333-81882 American Legacy VULdb-II 333-90438 American Legacy SVUL-III 333-118482 American Legacy VULcv-IV 333-118481 American Legacy VULdb-IV 333-115883 American Legacy SVUL-IV
1 Lincoln Life & Annuity Flexible Premium Variable Life Account M (811-08559) 333-141782 VUL-I / VULcv 333-141788 VULcv-II / VUL Flex ES 333-141789 VULcv-III ES 333-141785 VULdb / VULdb ES 333-141790 VULdb-II ES 333-141779 VULone ES / VULone 2005 ES 333-141767 Momentum VULone / Momentum VULone 2005 333-141771 VULcv-IV ES 333-141775 VULdb-IV ES LLANY Separate Account R for Flexible Premium Variable Life (811-08651) 333-141780 SVUL / SVUL ES 333-141784 SVUL-II ES 333-141786 SVUL-III ES 333-141768 SVUL-IV ES 333-141772 SVULone ES 333-141776 Momentum SVULone LLANY Separate Account S for Flexible Premium Variable Life (811-09257) 333-141777 CVUL Series III ES 333-141773 LCV4 ES 333-141769 LCV5 ES / LCC VUL Lincoln Life & Annuity Flexible Premium Variable Life Account Y (811-21029) 333-141781 American Legacy VULcv-III 333-141783 American Legacy VULdb-II 333-141787 American Legacy SVUL-III 333-141770 American Legacy VULcv-IV 333-141774 American Legacy VULdb-IV 333-141778 American Legacy SVUL-IV
I. PURCHASE AND RELATED TRANSACTIONS a. APPLICATION AND UNDERWRITING STANDARDS Upon receipt of a completed application, Lincoln Life will follow certain insurance underwriting procedures (e.g., evaluation of risks) designed to determine whether the applicant is insurable. This process may involve such verification procedures as medical examinations and may require that further information be provided by the proposed applicant before a determination can be made. A Policy will not be issued until the underwriting procedure has been completed. The Policies will be offered and sold pursuant to established underwriting standards and in accordance with state insurance laws prohibiting unfair discrimination among insureds. Lincoln Life may modify its underwriting requirements, in accordance with Company practice in effect when the policy is issued, for policies issued in connection with group arrangements. The cost of insurance rate utilized in computing the cost of insurance charge will not be the same for each insured. Insurance is based on the principle of pooling and distribution of mortality risks, the assumption that each insured incurs an insurance rate commensurate with his or her mortality risk which is actuarially determined based upon factors such as issue age, gender, rating class, and policy year. For two Policies with the same gender, rating class and attained age, the cost of insurance rate for the Policy with the younger issue age will never exceed, and in some cases will be less than, that for a Policy with an older issue age. Accordingly, while not all insureds will be subject to the same cost of insurance rate, there will be a single "rate" for all insureds in a given actuarial category. Current cost of insurance rates will be determined by Lincoln Life based upon expectations as to future mortality experience. The insurance coverage will begin on the policy date, unless otherwise required by insurance law or concepts such as "conditional receipt". Ordinarily, if the application is approved and money is received, the policy date will be the date the money is received. If a premium is not paid with the application, the policy date is the issue date however, the policy will not be placed in force and coverage will not begin until the initial premium is received. The policyholder may request that the Policy be backdated for the purposes of saving insurance age or conforming to employment related requirements (e.g. common enrollment date). The contestable period starts from the policy effective date or the underwriting approval date, which ever is later. In those instances when Lincoln Life declines to issue a Policy, the full premium paid will be returned with no interest having been credited. Under Lincoln Life's current rules, the minimum Specified Amount at issue is $100,000. Lincoln Life reserves the right to revise its rules from time to time to specify a different minimum Specified Amount at issue. b. INITIAL PREMIUM PROCESSING & PLANNED PREMIUM STANDARDS 2 The initial premium must be paid for coverage to be effective. If the full initial premium is not received, the policy may enter the grace period requiring additional premium to keep the policy in force. For policies issued in a state that requires return of premium payments during the Right to Examine period, any net premium payments received by us within 10 days (or a greater number of days if required by state) of the date the policy was issued will be held in the Money Market Sub-Account. At the end of that period, the value of the Money Market Sub-Account will be allocated among the Sub-Accounts and the Fixed Account, as directed by the policyowner. For policies issued in a state that provides for return of value during the Right to Examine period, any net premium payments received will be allocated directly to the Sub-Accounts and the Fixed Account, as directed by the policyowner. Planned premiums for the Policies will not be the same for all policy owners. At time of application, the registered representative will assist the policyowners in determining a Planned Periodic Premium payment schedule that provides for a level premium payable at a fixed interval for a specified period of time. Payment of premiums in accordance with this schedule is not mandatory and failure to make payments in accordance with the schedule will not in itself cause the Policy to lapse. Instead, policy owners may make additional premium payments in any amount, at any frequency, subject only to the $100 product minimum premium amount (currently being waived), and the maximum premium limitations set forth in the Internal Revenue Code (the "Code"). If at any time a premium is paid which would result in total premiums exceeding the current maximum premium limitation, Lincoln Life will accept only that portion of the premium which will make total premiums equal such maximum. The Policy is intended to qualify as a "contract of life insurance" under the Internal Revenue Code. If at any time the policyowner pays a premium that would exceed the amount allowable for qualification under the Code, Lincoln Life will either refund the excess premium, offer the option to apply for an increase in Death Benefit, or if the excess premium exceeds $250, offer the alternative of instructing us to hold the excess premium in a premium deposit fund and apply it to the Policy later in accordance with the allocation instructions on file. The policyowner will be notified when premiums may be paid again. The policyowner may choose any option by returning an enclosed election form. If the election form is not returned within 60 days, Lincoln Life will refund the excess premium. The Code provides for significant tax consequences if policies are deemed to be modified endowment contracts. Lincoln Life's procedures for monitoring whether a policy may become a modified endowment contract are set forth herein. If at any time during the year Lincoln Life determines the Technical and Miscellaneous Revenue Act (TAMRA) guidelines have been violated and excess premiums have been remitted which would cause the policy to be deemed a modified endowment contract, Lincoln Life will give written notice of this fact to the policyowner. If the policyowner pays a premium that would cause the Policy to be deemed a MEC and does not consent to the MEC status for the Policy, Lincoln Life will either refund the excess premium, offer the option to apply for an increase in Death Benefit, or if the excess exceeds $250, offer the alternative of instructing us to hold the excess premium in a premium deposit fund and apply it to the Policy later in accordance with the allocation instructions on file. The notice will set forth the policyowner's options with respect to the policy. Any of these options would avoid having the policy deemed a modified endowment contract. The policyowner may choose any option by returning an enclosed election form. If the form is not return within 60 days, Lincoln Life will place the excess money into a premium deposit fund and the policy will not become a modified endowment contract. The policy will remain in force so long as the cash value, less any outstanding policy debt, is sufficient to pay certain monthly charges imposed in connection with the Policy. Thus, the amount of a premium, if any, that must be paid to keep the Policy in force depends upon the cash value of the Policy, which in turn depends on such factors as the investment experience and the cost of insurance charge. c. REINSTATEMENT A policy which terminates under the grace period provision of this contract may be reinstated at any time within five (5) years after the date of termination provided: 1. The policy has not been surrendered; 2. The insured has not died since the date of lapse; 3. A written application for reinstatement is submitted; 4. Evidence of insurability is sufficient to prove to the Company's satisfaction that the insured is still able to meet the underwriting standards for the "actuarial category" to which the Policy was originally assigned; 5. Enough premium is paid to keep policy In Force for at least 2 months; and 6. Any accrued loan interest is paid, and any remaining Indebtedness is paid or reinstated. 3 Upon request for reinstatement, Lincoln Life will determine the minimum premium amount needed to reinstate the policy based on the insured's attained age, sex, policy year, rating class, and the Specified Amount of the policy. The Policyowner will be notified of the total amount of premium required to reinstate the policy. The reinstatement of the policy will be effective as of the monthly anniversary day following the date of the approval. Surrender charges, if any, will be reinstated as of the policy year in which the policy lapsed. The Incontestability provision starts anew as of the effective date of reinstatement application for statements contained in the reinstatement application. d. MISSTATEMENT OF AGE OR SEX If Lincoln Life discovers that the age or sex of the insured has been misstated, the benefits available under the policy will be those which the premiums paid would have purchased at the correct Issue Age and sex. e. CHANGE OF PLAN This policy may be exchanged for another policy only if we consent to the exchange and all requirements for the exchange as determined by us are met. f. POLICYOWNER ILLUSTRATIONS The Company utilizes field and Service Center computers in preparing illustrations for Flexible Premium Variable Life Insurance. Registered Representatives licensed with Lincoln Financial Distributors (LFD) or Agents licensed with other broker-dealers who have entered into a selling agreement with LFD will be supplied with access to the Lincoln Sales Platform containing approved illustrations for Flexible Premium Variable Life Insurance. In addition, the Company's field offices and Service Center in Concord, New Hampshire will be supplied such access to the Lincoln Sales Platform and will prepare illustrations at the request of duly registered representatives. II. REDEMPTION PROCEDURES Set out below is a summary of the principal Policy provisions and administrative procedures which might be deemed to constitute, either directly or indirectly, a "redemption" transaction. The summary shows that, because of the insurance nature of the Policies, the procedures involved necessarily differ in certain significant respects from the procedures for mutual funds and contractual plans. Once the policy is beyond the Right to Examine Period and as long as the Policy is in force, the policyowner, with the approval of the irrevocable beneficiary and/or assignee, if any, may request a policy loan, partial surrender/withdrawal or surrender of the Policy by sending a written request to Lincoln Life. At the time the written request is received, it will be reviewed for good order requirements. Requests deemed not in good order will result in returning the request to the policyowner for completion. a. POLICY LOANS A policy loan request may be made for part of the Policy's cash value at any time in which the Policy has cash value, however, Lincoln Life reserves the right to limit the amount of the loan so that total policy indebtedness will not exceed 90% the Cash Value at the end of the Valuation Period during which the loan request is received. The amount of the loan will be withdrawn from the Fixed Account & Sub-Account(s) in the same proportion as the balances invested in such Sub-Accounts bear to the total accumulation value of the Policy, less any policy debt, on the date of the loan, unless otherwise instructed in writing. The proceeds will be placed in the Loan Account where they will accrue interest on a daily basis. The outstanding loan balance may be repaid at any time during the lifetime of the insured. Any policy indebtedness at time of claim will reduce the death benefit. All Policy Loan requests received in Good Order before market close will be processed same day and the check will be mailed within 48 hours, with the exception of requests for a maximum loan when the policy has an existing loan in effect. Due to system constraints, these requests will be processed the next business day with an effective date of the original Good Order receipt and the check will be mailed within 48 hours of the process date. A confirmation statement is automatically generated and mailed to the Owner at the address of record. b. PARTIAL SURRENDER/WITHDRAWAL & SURRENDERS A withdrawal request may be made for part of the Policy's cash value at any time in which the Policy has cash value. The total of all withdrawals may not exceed 90% the policy cash value, less any policy debt at the end of the valuation period 4 during which the request is received. The minimum amount that may be withdrawn is $500. If for any reason the withdrawal request is for an amount less than $500 or would cause the Specified Amount to be reduced to less than $100,000, Lincoln Life will furnish the policyowner with a written explanation of why the request cannot be processed within twenty-four (24) hours. The withdrawal may be allocated among the Sub-Accounts and Fixed Account. If no such allocation is made, the withdrawal will be allocated among the Fixed Account and/or Sub-Account(s) in the same proportion as the balances invested in such Sub-Accounts bear to the total accumulation value of the Policy, less any policy debt, on the date of the withdrawal. All Partial Surrender/Withdrawal requests received in Good Order before market close will be processed same day and the check will be mailed within 48 hours, with the excpetion of requests for a maximum withdrawal. Due to system constraints, these requests will be processed the next business day with an effective date of the original Good Order receipt and the check will be mailed within 48 hours of the process date. A confirmation statement is automatically generated and mailed to the Owner at the address of record. A surrender request may be made at anytime. The policy may be assessed a surrender charge that is deducted from the Policy's Accumulation Value if it is surrendered within its surrender charge period. A Table of Surrender Charges is included in each Policy. The surrender charge in effect at any time is the sum of the surrender charge for the initial Specified Amount plus the surrender charge for any increase(s) in the Specified Amount minus any previously assessed surrender charges. Optional riders may afffect the amount of surrender value avialble. The amount payable upon surrender of the Policy is the cash value at the end of the valuation period during which the request is received, less any policy debt (the "Surrender Value"). Any payments received within Fifteen (15) days of the surrender of the policy will be held until sufficient time to clear banking channels. All Surrender requests received in Good Order before market close will be processed same day and the check will be mailed within 48 hours. A confirmation statement is automatically generated and mailed to the Owner at the address of record. c. CHANGES IN SPECIFIED AMOUNT & DEATH BENEFIT Following the first policy year, the policyowner, with the approval of the irrevocable beneficiary and/or assignee, if any, may request a change in the Specified Amount or Death Benefit subject to the following conditions. 1. Request in change of coverage must be submitted on a supplemental application. 2. Maximum of 1 request per type of change is allowed per policy year. 3. Requests for an increase in Specified Amount are subject to evidence of insurability satisfactory to Lincoln Life; and may not b allowed over certain attained ages. The minimum of specified amount increase is $1,000. A new surrender charge and surrender charge period will be applicable to each increase. 4. Requests for decrease in Specified Amount may be subject to a surrender charge. The charge will be assessed on any decrease in Specified Amount that occurs within the first 10 years of the policy and is not caused by a partial surrender. The charge will be calculated as A) divided by B) and then multiplied by C), where: A) is the sum of all decreases; B) is the initial specified amount; and C) is the then applicable surrender charge from the schedule in the policy. We may limit requests for decreases in Specified Amount to the extent there is insufficient Net Accumulation Value to cover the necessary charges. The minimum decrease in Specified Amount is $1,000 and no decrease may reduce the Specified Amount to less than $100,000. 5. The Death Benefit Option may only be changed to Option 1 and requests are subject to evidence of insurability satisfactory to Lincoln Life. Requested changes to Option II or to Option III are not allowed. Changes from Option II to Option I will increase the Specified Amount by the accumulation value as of the effective date of change. Changes from Option III to Option I will increase the Specified Amount by the accumulated premiums paid less any withdrawals (less the cumulative policy factor if elected) as of the date of the change. The effective date of coverage change will be the Monthly Anniversary following the approval of the request and is subject to deduction of that month's cost of insurance from the policy's accumulated value. A supplement to the Policy Specifications will be endorsed to the policy and sent to the policy owner once the change is completed. Any the request deemed Not in Good Order will be returned within twenty-four (24) hours and Lincoln Life will furnish 5 the policyowner with a written explanation of why the request cannot be processed. d. ACCELERATED BENEFIT RIDER A Policy may include a rider which allows a policyowner to request an advance of a portion of the policy's death benefit. There is a charge for these riders of $250 (limited in certain states), which will be deducted from any benefit paid. Benefits payable under the rider will be considered as a loan against the policy for the amount of the accelerated benefit paid and as such will be charged interest. e. CONTINUATION OF COVERAGE & BENEFIT CLAIMS If the Policy is in force at the Insured's Attained Age 100, the following will occur: - - No further premiums will be accepted; - - No further monthly deductions will be taken; - - All policy values held in the Sub-Accounts will be transferred to the Fixed Account; - - Transfers to the Sub-Accounts will not be allowed; - - Interest will continue to be credited to the Fixed Account; and - - Loan interest will continue to accrue. Provisions may vary in certain states. If a Policy includes a Benefit Selection Option, the policyowner may choose to reduce the Death Benefit provided by the Continuation of Coverage provision in return for potentially greater accumulation value. This option is designed to reduce the charges for the per $1000 of specified amount administrative expense fee deducted from the policy values and thereby reducing the charges for the cost of the death benefit provided giving the policyowner the opportunity to have a larger accumulation value allocated to the Fixed Account and invested in the Sub-Accounts. While the Policy remains In Force, Lincoln Life will usually pay a death benefit to the named beneficiary and assignee, if any, in accordance with the designated death benefit option within seven (7) days after receipt of due proof of death of the insured. The payment check will be mailed to the named beneficiary. Payment of death benefits may, however, be delayed while we obtain additional information if death occurs during the contestable period, is the result of suicide, homicide, occurs in a foreign country and/or Stock Market closing. The amount of the death benefit is determined as of the insured's date of death. The amount of the death benefit is guaranteed to be not less than the current Specified Amount of the Policy (as adjusted by an election of a Benefit Selection Option percentage greater than 0%), however, any outstanding policy debt and any due and payable charges will be deducted from the death benefit amount before the proceeds are paid. These proceeds will be increased by any additional insurance provided by rider. The death benefit may exceed the current Specified Amount of the Policy (as adjusted by an election of a Benefit Selection Option percentage greater than 0%) depending upon the death benefit option in effect, the accumulation value, and the corridor percentage in effect at the date of death. The death benefit under Death Benefit Option I will be the greater of (i) the current Specified Amount (as adjusted by an election of a Benefit Selection Option percentage greater than 0%)or (ii) the Accumulation Value on the death of the Insured multiplied by the corridor percentage. Under Death Benefit Option II, the death benefit equals the greater of (i) the current Specified Amount (as adjusted by an election of a Benefit Selection Option percentage greater than 0%) plus the Accumulation Value on the death of the Insured or (ii) the Accumulation Value on the date of death multiplied by the corridor percentage. Under Death Benefit Option III, the Death Benefit equals the greater of (i) the current Specified Amount plus (as adjusted by an election of a Benefit Selection Option percentage greater than 0%) the total premiums paid less any withdrawals to the date of death or (ii) the Accumulation Value multiplied by the corridor percentage. III. TRANSFERS Following is a summary of the administrative procedures Lincoln Life will utilize in processing transfers among the Sub-Accounts and the Fixed Account. Any transfer of funds results in the purchase and/or cancellation of accumulation units. The purchase and/or cancellation of such units are based on the accumulation unit values of the applicable Sub-Accounts for the valuation period during which the transfer is effective. Transfer and financial requests received in Good Order before 4:00 P.M. Eastern time or prior to market close if earlier, will be processed on and made effective the date of receipt. a. TRANSFERS AMONG SUB-ACCOUNTS AND FIXED ACCOUNT At any time while the policy is in force, other than during the Right to Examine Period, and prior to the Maturity date, Policyowners may transfer funds among the Sub-Accounts and the Fixed Account subject to certain provisions. Transfer 6 requests may be made in writing or electronically via internet or telephone if the appropriate authorization is on file with Lincoln Life. During the first policy year, transfers from the Fixed Account may be made only as provided for in the Dollar Cost Averaging program. The amount of all transfers from the Fixed Account in any other policy year may not exceed the greater of 25% of the Fixed Account value as of the immediately preceding policy anniversary or the total dollar amount transferred from the Fixed Account in the immediately preceding policy year. In addition, Lincoln Life reserves the right to impose the following restrictions on transfers: - - Amount being transferred may not exceed the maximum transfer amount limit then in effect. - - Amount being transferred may not be less than the minimum transfer amount shown in the Policy Specifications ($50) unless the entire value of the Fixed Account or Sub-Account is being transferred. - - Any value remaining in the Fixed Account or Sub-Account following a transfer may not be less than $100. At this time these restrictions are currently being waived. The Policy dfiens the number of transfer requests allowed in any policy year without charge. Thereafter, a $25 transfer fee will be deducted on a pro-rata basis from the Fixed Account and/or Sub-Account(s) from which the transfer is being made. A single transfer request may consist of multiple transactions. If a transfer request is deemed Not in Good Order for any reason, Lincoln Life will notify the policyowner as to why the request cannot be processed. Should the Company further limit the timing, amount or number of transfers at some future date; the policyowner will be notified of such change. b. DOLLAR COST AVERAGING The Dollar Cost Averaging (DCA) feature systematically transfers a specific dollar amount from the Money Market Sub-Account or from the Fixed Account (only available at time of issue) to one or more Sub-Accounts on a monthly or quarterly basis. By making the transfers on a regularly scheduled basis, instead of on a lump sum basis, the policyowner is able to invest in the sub-accounts at various prices and by doing so may reduce exposure to market volatility. This feature may be elected by the policyowner at time of application or anytime while the policy is in force. There is currently no charge for this feature and the transfers made in conjunction with this program do not count against the free transfers available. The minimum value required in the Money Market (or Fixed Account) to establish DCA is $1,000 and the minimum scheduled allocation amount is $50. Dollar Cost Averaging and Automatic Portfolio Rebalancing may not be elected at the same time. Dollar Cost Averaging will terminate automatically upon any of the following: - - The value in the Money Market Sub-Account (or Fixed Account) is depleted; - - After 12 or 24 months (as elected by policyowner); - - Request to terminate feature from authorized party. - - If the policy is surrendered or otherwise terminates. - - DCA will not automatically restart upon receipt of an additional premium payment. The Company has the right to modify the terms and conditions of the Dollar Cost Average privileges at any time with advance notice to policyowners c. AUTOMATIC PORTFOLIO REBALANCING Automatic Portfolio Rebalancing periodically restores the percentage of policy value in the Sub-Accounts to a pre-determined level on a quarterly, semi-annual or annual basis. The Fixed Account is not subject to rebalancing. This feature may be elected by the policyowner at time of application or anytime while the policy is in force. If elected at time of issue, the pre-determined level is the allocation initially selected on the application, until changed by the policyowner. All allocation percentages must be made in whole percents and must total 100%. There is currently no charge for this feature and the transfers made in conjunction with this program do not count against the free transfers available. Automatic Portfolio Rebalancing and Dollar Cost Averaging may not be elected at the same time. 7 Rebalancing will only be terminated upon the request of an authorized party or the termination of the policy. The Company has the right to modify the terms and conditions of the Automatic Portfolio Rebalancing privileges at any time with advance notice to policyowners. d. ALLOCATION CHANGES The initial designation of the allocation of net premium payments among the Sub-Accounts & the Fixed Account is made by the policyowner at time of application. Changes to the net premium allocations can be made at anytime. All allocations of net premiums must be made in whole percentages and must total 100%. IV. REFUNDS a. FREE LOOK PERIOD The Policyowner, with the approval of the irrevocable beneficiary and/or assignee, if any, may cancel the Policy within ten (10) days after its receipt (or a greater number of days if required by the issue state). Upon receipt of the written request to cancel within the Free Look Period and deemed in good order, Lincoln Life will void the policy from the policy date and, depending upon the issue state of the policy, refund to the policyowner all the premium payments or the policy value plus any charges and fees. The registered representative will be required to return any commissions paid in connection with the sale. b. SUICIDE In the event the insured commits suicide, whether sane or insane, within two (2) years of the Date of Issue shown in the policy Specifications, Lincoln Life's liability will be limited to the return of the premiums paid, less any policy Indebtedness and partial surrenders/withdrawals. In the event of suicide within two (2) years of the effective date of any increase in Specified Amount, the Death Benefit Proceeds with respect to such an increase will be limited to a refund of the monthly charges for the cost of such additional insurance and the amount of insurance will be based on the Specified Amount prior to such increase, provided that the increase became effective at least 2 years from the Date of Issue shown in the policy Specifications. c. INCONTESTABILITY Except for nonpayment of premium, the policy is incontestable after it has been In Force during the lifetime of the insured for a period of two (2) years from the Date of Issue shown in the policy Specifications. Further, any increase in the Specified Amount effective after the Date of Issue will be incontestable only after such increase has been In Force during the lifetime of the insured for two (2) years. The basis for contesting an increase in Specified Amount will be limited to the material misrepresentations made in the supplemental application for the increase. If the policy is reinstated, the basis for contestability is limited to a period of 2 years from the date of reinstatement and limited to the material misrepresentations made in the reinstatement application. In the event of contest of the Policy during the first two (2) policy years as to statements made in the original application, the only liability of Lincoln Life will be a refund of premiums paid less any policy debt and partial surrender/withdrawal. In the event of a contest during the two years following an increase in the Specified Amount, the only liability of Lincoln Life for such increase will be a refund of the cost of insurance for such increase. Any increase will be contestable, within the two (2) year period, only with regard to statements concerning the increase. V. BILLING AND COLLECTION PROCEDURES Based on the scheduled billing requested time of application, or changes to the billing received since then, premium reminder notices are system-generated then printed and mailed by Lincoln's Print and Distribution Center. Premiums in response to the reminder notices will be sent directly to a lockbox processing center which deposits the proceeds into the appropriate Lincoln Life bank account based on the scan code on the remittance stub. Unsolicited premiums received at Lincoln Life's service center will be deposited into Lincoln Life's account at a local depository bank. If the policyowner elected to pay the premiums through pre-authorized check, a system generated report is sent to Lincoln Life's bank to withdraw the proceeds from the client's bank account and subsequently deposit them into Lincoln Life's bank account. Premiums for the "List Billing" mode of payment, which allows the employer to deduct premiums from the policyowners' paychecks and remit one payment for a group of policies, are sent directly to a lockbox processing center which deposits the proceeds into a Lincoln Life bank account. 8 Based on the system-generated report, funds will be transferred from Lincoln Life's regular bank account to the Sub-Accounts as directed by the policyowner. If a premium payment is received at the time a policy is in the grace period that is not sufficient to pay the policy current and to an active status, the payment will error during processing and remain in the suspense account. A balance due notification will be sent to the policy owner. The balance due payment is due at Lincoln Life two weeks from the date of the letter. If the balance due is not received, the money received is released from the suspense account and refunded to the customer. VI. INCOMPLETE / NOT IN GOOD ORDER REQUESTS All requests are subject to Good Order requirements. Good Order refers to whether a request can be processed without additional information. The following items are reviewed to determine whether the request meets Good Order requirements. - - Acceptable format for specific request. - - Appropriate signatures, i.e., policy owner, assignee - - Transaction requests meets product requirements, i.e., funds requested are available for product, disbursement request does not exceed product maximum If a request is received and deemed Not in Good Order, Lincoln Life will notify the policyowner and explain why the request was not processed. VII. TELEPHONE/INTERNET REQUESTS At time of application (except in New York state) or anytime the policy is active, the policyowner may authorize himself/herself, their Registered Representative and/or a third party (telephone only) to request certain transactions by telephone or via the internet. Once the appropriate authorization is on file, Lincoln Life will use reasonable procedures such as individual validation during internet login, requiring identifying information from callers, recording telephone instructions and providing written confirmation of transactions in order to confirm that instructions are genuine. VIII. RETURNED/UNPAID CHECKS When an unpaid item is received, a suspense account will be charged for the amount of the check. The payment transaction will be reversed from the policy on the administrative system immediately effective the date of the original payment application and the Agent commissions paid; as a result of the original premium payment will be recovered automatically. A letter will be sent to the Policyowner as notification that the payment was returned by the bank and that payment has been reversed from the policy. The agent of record will receive a copy of this notification. If a replacement check is received at Lincoln Life, it will be applied effective the date of receipt. IX. NOTIFICATIONS Written policyowner notifications will be sent to the policyowner promptly when selected transactions are processed. Transactions which will be documented include, but are not limited to, the following: - - Planned premium payments as well as additional payments and loan repayments - - Fund Transfers, including Dollar Cost Averaging and Automatic Portfolio Rebalancing - - Policy Loans, Partial Surrenders/Withdrawals - - Refunds - - Increases or Decreases in Specified Amount including Death Benefit Option Changes - - Lapse Pending and Lapse - - Returned/Unpaid Checks - - Reinstatements 9 - - Beneficiary/Ownership Changes and Assignment/Release of Assignment - - Address Changes - - Surrenders - - Benefit Claims X. ROLE OF LINCOLN FINANCIAL DISTRIBUTORS Lincoln Financial Distributors, Inc. ("LFD") will be responsible for overseeing the administration of the Flexible Premium Variable Life Insurance Policy under, and to the extent required by, the various state and federal laws and the rules, regulations, and requirements of the Financial Industry Regulatory Authority in accordance with procedures established from time to time by LFD. XI. ROLE OF LINCOLN LIFE POLICY ISSUE AND UNDERWRITING DEPARTMENT After an application has been approved for suitability requirements, the application is processed by the Underwriting Department for selection of the risk. The Policy Issue Department issues, prepares and mails the completed Policy to the registered representative for delivery to the policyowner. XII. ROLE OF LINCOLN LIFE CUSTOMER SERVICE DEPARTMENT The Customer Service Department will process the following, based on review for Good Order and authorization by LFD: - - Planned premium payments, additional payments and loan repayments; - - Billing Changes /Notices & Unpaid Checks; - - Fund Transfers, Allocation Changes, Dollar Cost Averaging and Automatic Portfolio Rebalancing; - - Lapse Pending/Lapse and MEC notices; - - Policy Loans, Partial Surrenders/Withdrawals; - - Refunds; - - Increases / Decreases in Specified Amount, Death Benefit Option Changes and Rate/Class changes and Reinstatements; - - Beneficiary/Ownership Changes and Assignment/Release of Assignment; - - Address Changes; - - Surrenders; - - Handling correspondence and inquiries. 10
EX-99 7 a2182652zex-99_1.txt PARTICIPATION AGREEMENT BY AND AMONG AIM VARIABLE INSURANCE FUNDS, INC. A I M DISTRIBUTORS, INC., AND THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, ON BEHALF OF ITSELF AND ITS SEPARATE ACCOUNTS TABLE OF CONTENTS
DESCRIPTION PAGE - ----------- ---- Section 1. Available Funds ....................................................2 1.1 Availability . ............................................................2 1.2 Addition, Deletion or Modification of Funds ...............................2 1.3 No Sales to the General Public ............................................2 Section 2. Processing Transactions ............................................2 2.1 Timely Pricing and Orders ..............................................2 2.2 Timely Payments ........................................................3 2.3 Applicable Price .......................................................3 2.4 Dividends and Distributions ............................................4 2.5 Book Entry .............................................................4 Section 3. Costs and Expenses .................................................4. 3.1 General ...................................................................4 3.2 Parties To Cooperate ......................................................4 Section 4. Legal Compliance ...................................................4 4.1 Tax Laws ...............................................................4 4.2 Insurance and Certain Other Laws .......................................7 4.3 Securities Laws ........................................................7 4.4 Notice of Certain Proceedings and Other Circumstances ..................8 4.5 LIFE COMPANY To Provide Documents; Information About AVIF ............. 9 4.6 AVIF To Provide Documents; Information About LIFE COMPANY .............10 Section 5. Mixed and Shared Funding ..........................................11 5.1 General ...............................................................11 5.2 Disinterested Directors ...............................................12 5.3 Monitoring for Material Irreconcilable Conflicts ......................12 5.4 Conflict Remedies .....................................................13 5.5 Notice to LIFE COMPANY ................................................14 5.6 Information Requested by Board of Directors ...........................14 5.7 Compliance with SEC Rules .............................................14 5.8 Other Requirements ....................................................14 Section 6. Termination .......................................................15 6.1 Events of Termination .................................................15 6.2 Notice Requirement for Termination ....................................16 6.3 Funds To Remain Available .............................................16
i
DESCRIPTION PAGE - ----------- ---- 6.4 Survival of Warranties and Indemnifications ..............................16 6.5 Continuance of Agreement for Certain Purposes ............................16 Section 7. Parties To Cooperate Respecting Termination .......................17 Section 8. Assignment ........................................................17 Section 9. Notices ...........................................................17 Section 10. Voting Procedures ................................................18 Section 11. Foreign Tax Credits ..............................................18 Section 12. Indemnification ..................................................18 12.1 Of AVIF and AIM by LIFE COMPANY .........................................18 12.2 Of LIFE COMPANY by AVIF and AIM .........................................20 12.3 Effect of Notice ........................................................23 12.4 Successors ..............................................................23 Section 13. Applicable Law ...................................................23 Section 14. Execution in Counterparts ........................................23 Section 15. Severability .....................................................23 Section 16. Rights Cumulative ................................................24 Section 17. Headings .........................................................24 Section 18. Confidentiality ..................................................24 Section 19. Trademarks and Fund Names ........................................25 Section 20. Parties to Cooperate .............................................26
ii PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of the __ day of __________, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), The Lincoln National Life Insurance Company, an Indiana life insurance company ("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as the parties hereto may amend from time to time (each, an "Account," and collectively, the "Accounts"); and the principal underwriter of the Accounts and the Contracts (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, AVIF currently consists of thirteen separate series ("Series"), shares ("Shares") of each of which are registered under the Securities Act of 1933, as amended (the " 1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance policies; and WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity contracts and variable life insurance contracts ("Contracts" or Policies") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts, if required by applicable law, will be registered under the 1933 Act; and WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Policies will be registered as securities under the 1933 Act (or exempt therefrom); and 1 WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Policies; and WHEREAS, LIFE COMPANY is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 (" 1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows: SECTION 1. AVAILABLE FUNDS 1.1 AVAILABILITY. AVIF will make Shares of each Fund available to LIFE COMPANY for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of Directors of AVIF may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Directors acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund. 1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS. The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Policies, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund or Fund resulting from a deletion or modification. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof. 1.3 NO SALES TO THE GENERAL PUBLIC. AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public. SECTION 2. PROCESSING TRANSACTIONS 2.1 TIMELY PRICING AND ORDERS. (a) AVIF or its designated agent will use its best efforts to provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central Time on each Business Day. 2 As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading and (ii) AVIF calculates the Fund's net asset value. (b) LIFE COMPANY will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. LIFE COMPANY will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; PROVIDED, however, that AVIF shall provide additional time to LIFE COMPANY in the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to LIFE COMPANY. (c) With respect to payment of the purchase price by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below. (d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), LIFE COMPANY shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. 2.2 TIMELY PAYMENTS. LIFE COMPANY will wire payment for net purchases to a custodial account designated by AVIF by 1:00 p.m. Central Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time on the same day as the Order is placed, to the extent practicable, but in any event within five (5) calendar days after the date the order is placed in order to enable LIFE COMPANY to pay redemption proceeds within the time specified in Section 22(e) of the 1940 Act or such shorter period of time as may be required by law. 2.3 APPLICABLE PRICE. (a) Share purchase payments and redemption orders that result from purchase payments, premium payments, surrenders and other transactions under Policies (collectively, "Policy transactions") and that LIFE COMPANY receives prior to the close of regular trading on the New York Stock Exchange on a Business Day will be executed at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the orders. For purposes of this Section 23(a), LIFE COMPANY shall be the designated agent of AVIF for receipt of orders relating to Policy transactions on each Business Day and receipt by such designated agent shall constitute receipt by AVIF; PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central Time on the next following Business Day or such later time as computed in accordance with Section 2.1 (b) hereof. 3 (b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable. 2.4 DIVIDENDS AND DISTRIBUTIONS. AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to LIFE COMPANY of any income dividends or capital gain distributions payable on the Shares of any Fund. LIFE COMPANY hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. LIFE COMPANY reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. 2.5 BOOK ENTRY. Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account. SECTION 3. COSTS AND EXPENSES 3.1 GENERAL. Except as otherwise specifically provided in Schedule C, attached hereto and made a part hereof, each Party will bear all expenses incident to its performance under this Agreement. 3.2 PARTIES TO COOPERATE. Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts. SECTION 4. LEGAL COMPLIANCE 4.1 TAX LAWS. (a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future. 4 (b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4. 1 (b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code. (c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure: (i) LIFE COMPANY shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant); (ii) LIFE COMPANY shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure; (iii) LIFE COMPANY shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent; (iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; PROVIDED, however, that LIFE COMPANY will retain control of the conduct of such conferences discussions, proceedings, contests or appeals; (v) any written materials to be submitted by LIFE COMPANY to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by LIFE COMPANY to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by LIFE 5 COMPANY to any such person without the express written consent of AVIF which shall not be unreasonably withheld; (vi) LIFE COMPANY shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors to review the relevant books and records of LIFE COMPANY) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure; (vii) LIFE COMPANY shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, PROVIDED that LIFE COMPANY shall not be required, after exhausting all administrative penalties, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and PROVIDED FURTHER that the costs of any such appeal shall be borne equally by the Parties hereto; and (viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if LIFE COMPANY fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability. Should AVIF or any of its affiliates refuse to give its written consent to any compromise or settlement of any claim or liability hereunder, LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the name of LIFE COMPANY in, and to control the conduct of, such conferences, discussions, proceedings, contests or appeals and all administrative or judicial appeals thereof, and in that event AVIF or its affiliates shall bear the fees and expenses associated with the conduct of the proceedings that it is so authorized to control; PROVIDED, that in no event shall LIFE COMPANY have any liability resulting from AVIF's refusal to accept the proposed settlement or compromise with respect to any failure caused by AVIF. As used in this Agreement, the term "affiliates" shall have the same meaning as "affiliated person" as defined in Section 2(a)(3) of the 1940 Act. (d) LEE COMPANY represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance policies under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future. 6 (e) LIFE COMPANY represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. LIFE COMPANY will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. 4.2 INSURANCE AND CERTAIN OTHER LAWS. (a) AVIF will use its best. efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by LIFE COMPANY, including, the furnishing of information not otherwise available to LIFE COMPANY which is required by state insurance law to enable LIFE COMPANY to obtain the authority needed to issue the Contracts in any applicable state. (b) LIFE COMPANY represents and warrants that (i) it is an insurance company duly organized, validly existing under the laws of the State of Indiana and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under Indiana Insurance Law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations. (c) AVIF represents and warrants that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement. (d) AIM represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power, authority and right to execute, deliver and perform its duties and comply with its obligations under this agreement. 4.3 SECURITIES LAWS. (a) LIFE COMPANY represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Indiana law, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required; (v) each Account's 1933 Act registration statement relating to the Contracts (to the extent required), together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend any registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time to the 7 extent required in order to effect the continuous offering of its Policies or as may otherwise be required by applicable law, and (vii) each Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIFs 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF. (d) AVIF currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule l2b-1 to finance distribution expenses. (e) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(I) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. 4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. (a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings against AVIF, AIM or the investment adviser to AVIF for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Policies issued or to be issued by LIFE COMPANY. AVIF will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop 8 order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. (b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to each Account's registration statement under the 1933 Act relating to the Policies or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of each Account's interests pursuant to the Policies, or (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. LIFE COMPANY will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. 4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF (a) LIFE COMPANY will provide to AVIF or its designated agent at least one (1) complete copy of all SEC registration statements, Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to each Account or the Contracts and to one (1) or more Funds, within twenty (20) calendar days of the filing of such document with the SEC or other regulatory authorities. (b) LIFE COMPANY will provide to AVIF or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which AVIF or any of its affiliates is named, at least ten (10) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if AVIF or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. AVIF hereby designates AIM as the entity to receive such sales literature, until such time as AVIF appoints another designated agent by giving notice to LIFE COMPANY in the manner required by Section 9 hereof. (c) Neither LIFE COMPANY nor any of its affiliates, will give any information or make any representations or statements on behalf of or concerning AVIF or its affiliates in connection with the sale of the Policies other than (i) the information or representations contained in the registration statement, including the AVIF Prospectus contained therein, relating to Shares, as such registration statement and AVIF Prospectus may be amended from time to time; or (ii) in reports or proxy materials for AVIF; or (iii) in published reports for AVIF that are in the public domain and approved by AVIF for distribution; or (iv) in sales literature or other promotional material approved by AVIF, except with the express written permission of AVIF or AIM. (d) LIFE COMPANY shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers 9 or agents selling the Policies (I.E., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials. (e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (E.G., on-line networks such as the Internet or other electronic messages), sales literature (I.E., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act. 4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY. (a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to one (1) or more Funds, within twenty (20) calendar days of the filing of such document with the SEC or other regulatory authorities. (b) AVIF will provide to LIFE COMPANY camera ready copies of all AVIF prospectuses relating to the Funds and printed copies, in an amount specified by LIFE COMPANY, of AVIF statements of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants. (c) AVIF will provide to LIFE COMPANY or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which LIFE COMPANY, or any of its respective affiliates is named, or that refers to the Policies, at least ten (10) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if LIFE COMPANY or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. LIFE COMPANY shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof. (d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning LIFE COMPANY, each Account, or the Contracts other than (i) the information or representations contained- in the registration statement, 10 including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by LIFE COMPANY for distribution; or (iii) in sales literature or other promotional material approved by LIFE COMPANY or its affiliates, except with the express written permission of LIFE COMPANY. (e) AIM shall adopt and implement procedures reasonably designed to ensure that information concerning LIFE COMPANY, and its respective affiliates that is intended for use only by brokers or agents selling the Policies (I.E., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither LIFE COMPANY, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials. (f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (E.G., on-line networks such as the Internet or other electronic messages), sales literature (I.E., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act. SECTION 5. MIXED AND SHARED FUNDING 5.1 GENERAL. The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance policies, separate accounts of insurance companies unaffiliated with LIFE COMPANY, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to such an exemptive order granted to AVER AVIF hereby notifies LIFE COMPANY that AVIF has implemented Mixed and Shared Funding and it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding. 11 5.2 DISINTERESTED DIRECTORS. AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board;(b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the SEC may prescribe by order upon application. 5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS. AVIF agrees that its Board of Directors will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation: (a) an action by any state insurance or other regulatory authority; (b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies; (f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or (g) a decision by a Participating Plan to disregard the voting instructions of Plan participants. Consistent with the SECs requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the Board of Directors in carrying out its responsibilities by providing the Board of Directors, upon their request, with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants. LIFE 12 COMPANY's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants. 5.4 CONFLICT REMEDIES. (a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Directors), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to: (i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including, but not limited to, another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (E.G., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and (ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company. (b) If the material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to LIFE COMPANY that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. (c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to LIFE COMPANY conflicts with the majority of other state regulators, then LIFE COMPANY will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board of Directors informs LIFE COMPANY that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal. (d) LIFE COMPANY agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants. 13 (e) For purposes hereof, a majority of the Disinterested Directors will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. LIFE COMPANY will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict. 5.5 NOTICE TO LIFE COMPANY. AVIF will promptly make known in writing to LIFE COMPANY the Board of Directors' determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict. 5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS. LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board of Directors or other appropriate records, and such minutes or other records will be made available to the SEC upon request. 5.7 COMPLIANCE WITH SEC RULES. If, at any time during which AVIF is serving as an investment medium for variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable. 5.8 OTHER REQUIREMENTS. AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4. 1 (b), 4. 1 (d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement. 14 SECTION 6. TERMINATION 6.1 EVENTS OF TERMINATION. Subject to Section 6.4 below, this Agreement will terminate as to a Fund: (a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief (i.e., a substitution order) from the SEC, unless otherwise agreed to in writing by the parties; or (b) at the option of AVIF upon institution of formal proceedings against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding LIFE COMPANY's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or (c) at the option of LIFE COMPANY upon institution of formal proceedings against AVIF, AIM or the Fund's investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIFs obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on LIFE C OMPANY, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or (d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Policies issued or to be issued by LIFE COMPANY; or (e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or (f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or (g) at the option of LIFE COMPANY if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so comply; or (h) at the option of AVIF if the Policies issued by LIFE COMPANY cease to qualify as annuity contracts or life insurance policies under the Code (other than by reason of the Fund's 15 noncompliance with Section 8 17(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where such registration is required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or (i) upon another Party's material breach of any provision of this Agreement. 6.2 NOTICE REQUIREMENT FOR TERMINATION. No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore: (a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; (b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the, effective date of termination unless a shorter time is agreed to by the Parties hereto; and (c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required. 6.3 FUNDS TO REMAIN AVAILABLE. Notwithstanding any termination of this Agreement, AVIF will, at the option of LIFE COMPANY, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Policies in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Policies"). Specifically, without limitation, the owners of the Existing Policies will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Policies. The parties agree that this Section 6.3 will not apply to any terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement. 6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS. All warranties and indemnifications will survive the termination of this Agreement. 6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES. If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the 16 "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that LIFE COMPANY may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i). SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6. 1 (a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Policies in such Fund. SECTION 8. ASSIGNMENT This Agreement may not be assigned by any Party, except with the written consent of each other Party. SECTION 9. NOTICES Notices and communications required or permitted by Section 9 hereof will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing: AIM VARIABLE INSURANCE FUNDS, INC. A I M DISTRIBUTORS, INC. 11 Greenway Plaza, Suite 100 Houston, Texas 77046 Facsimile: (713) 993-9185 Attn: Nancy L. Martin, Esq. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 S. Clinton Street Fort Wayne, IN 46802 Facsimile: (219) 455-1773 Attn: Kelly D. Clevenger Vice President 17 SECTION 10. VOTING PROCEDURES Subject to the cost allocation procedures set forth in Section 3 hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to Participants to whom pass-through voting privileges are required to be extended and will solicit voting instructions from Participants. LIFE COMPANY will vote Shares in accordance with timely instructions received from Participants. LIFE COMPANY will vote Shares that are (a) not attributable to Participants to whom pass-through voting privileges are extended, or (b) attributable to Participants, but for which no timely instructions have been received, in the same proportion as Shares for which said instructions have been received from Participants, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass through voting privileges for Participants. Neither LIFE COMPANY nor any of its affiliates will in any way recommend action in connection with or oppose or interfere with the solicitation of proxies for the Shares held for such Participants. Notwithstanding the foregoing, LIFE COMPANY reserves the right to vote shares held in any Account in its own right, to the extent permitted by law. LIFE COMPANY shall be responsible for assuring that each of its Accounts holding Shares calculates voting privileges in a manner consistent with that of other Participating Insurance Companies or in the manner required by the Mixed and Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY of any changes of interpretations or amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular, AVIF either will provide for annual meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or will comply with Section 16(c) of the 1940 Act (although AVIF is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF will act in accordance with the SEC's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors and with whatever rules the SEC may promulgate with respect thereto. SECTION 11. FOREIGN TAX CREDITS AVIF agrees to consult in advance with LIFE COMPANY concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders. SECTION 12. INDEMNIFICATION 12.1 OF AVIF AND AIM BY LIFE COMPANY. (a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, LIFE COMPANY agrees to indemnify and hold harmless AVIF, AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified 18 Parties may become subject under any statute, regulation, at common law or otherwise; PROVIDED, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY by or on behalf of AVIF for use in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the, foregoing); or (ii) arise out of or as a result of any other statements or representations (other than statements or representations contained-in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of LIFE COMPANY or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY or its respective affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member", as that term is defined in paragraph (q) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their affiliates by or on behalf of LIFE COMPANY or its affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or (iv) arise as a result of any failure by LIFE COMPANY to perform the obligations, provide the services and furnish the materials required of it under 19 the terms of this Agreement, or any material breach of any representation and/or warranty made by LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY; or (v) arise as a result of failure by the Policies issued by LIFE COMPANY to qualify as annuity contracts or life insurance policies under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code. (b) LIFE COMPANY shall not be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF or AIM. (c) LIFE COMPANY shall not be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified LIFE COMPANY in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY of any such action shall not relieve LIFE COMPANY from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12. 1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, LIFE COMPANY shall be entitled to participate, at its own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume the defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY and shall bear the fees and expenses of any additional counsel retained by it, and LIFE COMPANY will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation. 12.2 OF LIFE COMPANY BY AVIF AND AIM. (a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY, its affiliates, and each person, if any, who controls LIFE COMPANY or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; PROVIDED, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions: 20 (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF or its affiliates by or on behalf of LIFE COMPANY or its affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or (ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of AVIF, AIM or their affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM or their affiliates or persons under its control (including, without limitation, their employees and "persons associated with a member" as that term is defined in Section (q) of Article I of the NASD By-Laws), in connection with the sale or distribution of AVIF Shares; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY or its affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or (iv) arise as a result of any failure by AVIF to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF. 21 (b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that LIFE COMPANY reasonably deems necessary or appropriate as a result of the noncompliance. (c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY, each Account or Participants. (d) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF and/or AIM in w riting within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify AVIF or AIM of any such action shall not relieve AVIF or AIM from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.2. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, AVIF and/or AIM will be entitled to participate, at its own expense, in the defense of such action and also shall be entitled to assume the defense thereof (which shall include, without limitation, the conduct of any ruling request and closing agreement or other settlement proceeding with the IRS), with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from AVIF and/or AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and AIM shall bear the fees and expenses of any additional counsel retained by it, and AVIF and AIM will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation. (e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, LIFE COMPANY or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any 22 representation, warranty, and/or covenant made by LIFE COMPANY hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or any Participating Insurance Company to maintain its variable annuity contracts or life insurance policies (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance policies under applicable provisions of the Code. 12.3 EFFECT OF NOTICE. Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12. 1 (c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise. 12.4 SUCCESSORS. A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12. SECTION 13. APPLICABLE LAW This Agreement will be construed and the provisions hereof interpreted under and in accordance with Maryland law, without regard for that state's principles of conflict of laws. SECTION 14. EXECUTION IN COUNTERPARTS This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument. SECTION 15. SEVERABILITY If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby. 23 SECTION 16. RIGHTS CUMULATIVE The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws. SECTION 17. HEADINGS The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement. SECTION 18. CONFIDENTIALITY AVIF acknowledges that the identities of the customers of LIFE COMPANY or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for purposes of this Section 18), information maintained regarding those customers, and all computer programs and procedures or other information developed by the LIFE COMPANY Protected Parties or any of their employees or agents in connection with LEE COMPANY's performance of its duties under this Agreement are the valuable property of the LEE COMPANY Protected Parties. AVIF agrees that if it comes into possession of any list or compilation of the identities of or other information about the LIFE COMPANY Protected Parties' customers, or any other information or property of the LIFE COMPANY Protected Parties, other than such information as may be independently developed or compiled by AVIF from information supplied to it by the LIFE COMPANY Protected Parties' customers who also maintain accounts directly with AVIF, AVIF w ill hold such information or property in confidence and refrain from using, disclosing or distributing any of such information or other property except: (a) with LIFE COMPANY's prior written consent; or (b) as required by law or judicial process. LIFE COMPANY acknowledges that the identities of the customers of AVIF or any of its affiliates (collectively, the "AVIF Protected Parties" for purposes of this Section 18), information maintained regarding those customers, and all computer programs and procedures or other information developed by the AVIF Protected Parties or any of their employees or agents in connection with AVIF's performance of its duties under this Agreement are the valuable property of the AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of any list or compilation of the identities of or other information about the AVIF Protected Parties' customers or any other information or property of the AVIF Protected Parties, other than such information as may be independently developed or compiled by LIFE COMPANY from information supplied to it by the AVIF Protected Parties' customers who also maintain accounts directly with LIFE COMPANY, LIFE COMPANY will hold such information or property in confidence and refrain from using, disclosing or distributing any of such information or other property except: (a) with AVIF's prior written consent; or (b) as required by law or judicial process. Each party acknowledges that any breach of the agreements in this Section 18 would result in- immediate and irreparable harm to the other parties for which there would be no adequate remedy at law and agree that in the event of such a breach, the other parties will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate. 24 SECTION 19. TRADEMARKS AND FUND NAMES (a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, owns all right, title and interest in and to the name, trademark and service mark "AIM" and such other trade names, trademarks and service marks as may be set forth on Schedule B, as amended from time to time by written notice from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed marks") and is authorized to use and to license other persons to use such marks. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE COMPANY's performance of the services contemplated under this Agreement, subject to the terms and conditions set forth in this Section 19. (b) The grant of license to LIFE COMPANY and its affiliates ( the "licensee") shall terminate automatically upon termination of this Agreement. Upon automatic termination, the licensee shall cease to use the licensor's licensed marks, except that LIFE COMPANY shall have the right to continue to service any outstanding Contracts bearing any of the AIM licensed marks. Upon AIM's elective termination of this license, LIFE COMPANY and its affiliates shall immediately cease to issue any new annuity or life insurance Policies bearing any of the AIM licensed marks and shall likewise cease any activity which suggests that it has any right under any of the AIM licensed marks or that it has any association with AIM, except that LIFE COMPANY shall have the right to continue to service outstanding Contracts bearing any of the AIM licensed marks. (c) The licensee shall obtain the prior written approval of the licensor for the public release by such licensee of any materials bearing the licensor's licensed marks. The licensor's approvals shall not be unreasonably withheld. (d) During the term of this grant of license, a licensor may request that a licensee submit samples of any materials bearing any of the licensor's licensed marks which were previously approved by the licensor but, due to changed circumstances, the licensor may wish to reconsider. If, on reconsideration, or on initial review, respectively, any such samples fail to meet with the written approval of the licensor, then the licensee shall immediately cease distributing such disapproved materials. The licensor's approval shall not be unreasonably withheld, and the licensor, when requesting reconsideration of a prior approval, shall assume the reasonable expenses of withdrawing and replacing such disapproved materials. The licensee shall obtain the prior written approval of the licensor for the use of any new materials developed to replace the disapproved materials, in the manner set forth above. (e) The licensee hereunder: (i) acknowledges and stipulates that, to the best of the knowledge of the licensee, the licensor's licensed marks are valid and enforceable trademarks and/or service marks and that such licensee does not own the licensor's licensed marks and claims no rights therein other than as a licensee under this Agreement; (ii) agrees never to contend otherwise in legal proceedings or in other circumstances; and (iii) acknowledges and agrees that the use of the licensor's licensed marks pursuant to this grant of license shall inure to the benefit of the licensor. 25 SECTION 20. PARTIES TO COOPERATE Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD, the IRS and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 26 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham -------------------------------- -------------------------------- Nancy L. Martin Name: Robert H. Graham Assistant Secretary Title: President A I M DISTRIBUTORS, INC. Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo -------------------------------- -------------------------------- Nancy L. Martin Name: Michael J. Cemo Assistant Secretary Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, on behalf of itself and its separate accounts and as principal underwriter for its separate accounts Attest: /s/ Steven Kluever By: /s/ Kelly D. Clevenger -------------------------------- -------------------------------- Name: Steven Kluever Name: Kelly D. Clevenger Title: Assistant Vice President Title: Vice President 27 SCHEDULE A FUNDS AVAILABLE UNDER THE POLICIES AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Capital Appreciation Fund AIM V.I. Diversified Income Fund AIM V.I. Growth Fund AIM V.I. Value Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Flexible Premium Variable Life Account R POLICIES FUNDED BY THE SEPARATE ACCOUNTS The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy LN605LL/LN6l5LL/LN6l7LL and state variations thereof The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LL and state variations thereof 28 SCHEDULE B AIM VARIABLE INSURANCE FUNDS, INC. AIM ______________________________ Fund AIM and Design AIM 29 SCHEDULE C EXPENSE ALLOCATIONS
DESCRIPTION LIFE COMPANY AIM/AVIF REGISTRATION Prepare and file Account registration Fund registration statements registration statements(1) statements Payment of fees Account fees Fund fees PROSPECTUSES Typesetting Account Prospectuses Fund Prospectuses Account Prospectuses, and Fund Prospectuses distributed Printing Fund Prospectuses (but not for to existing Participants(2) existing PARTICIPANTS) SAIS Typesetting Account SAIs Fund SAIs Printing Account SAIs Fund SAIs SUPPLEMENTS (TO PROSPECTUSES OR SAIs Typesetting and Printing Account Supplements, and Fund Supplements to existing Fund Supplements (but not for ParticipantS(2) existing Participants)
(1) Includes all filings and costs necessary to keep registrations current and effective; including, without limitation, filing Forms N-SAR and Rule 24F-2 Notices as required by law. (2) With respect to any AVIF material printed in combination with any non-AVIF materials, total costs of typesetting and printing shall be prorated as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the ratio of the number of pages of the combined prospectus, report, or other document, for each Fund listed on Schedule A hereto to the total number of pages in such combined prospectus, report, or other document; and (b) the ratio of the number of Participants who invest in all Funds of AVIF to the total number of Participants. 30
DESCRIPTION LIFE COMPANY AIM/AVIF FINANCIAL REPORTS Typesetting Account Reports Fund Reports to existing Participants(2) Printing Account Reports, and Fund Reports (not to existing Participants) MAILING AND DISTRIBUTION To Contract owners Account and Fund Prospectuses, SAIs, Supplements and Reports To Offerees Account and Fund Prospectuses, SAIs, Supplements and Reports PROXIES Typesetting, printing and Account and Fund Proxies Fund Proxies where the mailing of proxy where the matters submitted matters submitted are solely solicitation materials and are solely Account-related Fund-related voting instruction solicitation materials and Account Proxies even where tabulation of proxies to the matters submitted are Participants solely Fund-related OTHER (SALES-RELATED) Contract owner Account-related items and\ communication Fund-related items Distribution Policies Administration Account (Policies)
(2) With respect to any AVIF material printed in combination with any non-AVIF materials, total costs of typesetting and printing shall be prorated as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the ratio of the number of pages of the combined prospectus, report, or other document, for each Fund listed on Schedule A hereto to the total number of pages in such combined prospectus, report, or other document; and (b) the ratio of the number of Participants who invest in all Funds of AVIF to the total number of Participants. 31 AMENDMENT NO. 3 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS ALL OF THE FUNDS AIM V.I. Capital Appreciation Fund Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: AIM V.I. Diversified Income Fund Account N Flexible Premium Variable Annuity Contracts AIM V.I. Growth Fund AN425LL AIM V.I. International Equity Fund Lincoln Life Flexible Premium and state variations thereof AIM V.I. Value Fund Variable Life Account M - The Lincoln National Life Insurance Company: Lincoln Life Flexible Premium Flexible Premium Variable Life Insurance Variable Life Account R Policy LN605LULN615LULN617LULN680 and state variations thereof - The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LL and state variations thereof
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: 10-14-99 ---------- AIM VARIABLE INSURANCE FUNDS, INC. Attest: By: Name: Nancy L.Martin Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) SAAGR\PAA51AV1.doc 100699(1)hg 1 of 2 A I M DISTRIBUTORS, INC. Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo --------------------- --------------------- Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President (SEAL) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Steven M. Kluever By: /s/ Kelly D. Clevenger ------------------------- ------------------------ Name: Steven M. Kluever Name: Kelly D. Clevenger Title: Assistant Vice President Title: Vice President (SEAL) SAAGR\PAA51AV1, doc 100699(1)hg 2 of 2 AMENDMENT NO. 1 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16,1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS ALL OF THE FUNDS AIM V.I. Capital Appreciation Fund Lincoln Life Variable Annuity The Lincoln National Life Insurance Company: AIM V.I. Diversified Income Fund Account N Flexible Premium Variable Annuity Contracts AIM V.I. Growth Fund AN425LL AIM V.I. International Equity Fund Lincoln Life Flexible Premium and state variations thereof AIM V.I. Value Fund Variable Life Account M The Lincoln National Life Insurance Company: Lincoln Life Flexible Premium Flexible Premium Variable Life Insurance Variable Life Account R Policy LN605LULN615LULN617LL and state variations thereof The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LL and state variations thereof
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: Attest: Name: Nancy L. Martin Title: Assistant Secretary (SEAL) PAA28AVI.AGR 111098 (2) rr AIM VARIABLE INSURANCE FUNDS, INC. 'By: - Name.- Robert H. Graham Title: President 1 of 2 A I M DISTRIBUTORS, IN Attest: /s/ Nancy L. Martin ------------------------- Name: Nancy L. Martin Title: Assistant Secretary (SEAL) Attest: /s/ Steven M. Kluever ------------------------- Name: Steven M. Kluever Title: Assistant Vice President (SEAL) PAA28AVI.AGR 111098 (2) rr C. By: /s/ Michael J. Cemo ------------------------- Name: Michael J. Cemo Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ------------------------- Name: Kelly D. Clevenger Title: Vice President 2 of 2 Exhibit A
Funds Available to Name of Separate Accounts the Separate Accounts Utilizing Some or All of the Funds Policy/Contract Name(s) Policy/Contract Numbers(s) - --------------------- ---------------------------------- ----------------------- -------------------------- No Change No Change No Change New Contract Numbers: Under the 2nd bullet, please add: LN 660 Under the 3rd bullet, please add: LN 650
AMENDMENT NO. 4 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
- -------------------------------------- --------------------------------- ---------------------------------------------------------- FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS ALL OF THE FUNDS - -------------------------------------- --------------------------------- ---------------------------------------------------------- AIM V.I. Capital Appreciation Fund Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: AIM V.I. Diversified Income Fund Account N Flexible Premium Variable Annuity Contracts AIM V.I. Growth Fund AN425LL AIM V.I. International Equity Fund Lincoln Life Flexible Premium and state variations thereof AIM V.I. Value Fund Variable Life Account M - The Lincoln National Life Insurance Company: Lincoln Life Flexible Premium Flexible Premium Variable Life Insurance Variable Life Account R Policy LN605LL/LN615LL/LN617LL/LN660/ LN680 and state variations thereof - The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LL/LN655 and state variations thereof - -------------------------------------- --------------------------------- ----------------------------------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: May 1, 2000 ----------- AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ Nancy L. Martin By: ------------------- ---------------------- Name: Nancy L. Martin Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) 1 of 2 A I M DISTRIBUTORS, INC. Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo ------------------- ------------------- Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President (SEAL) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Denis G. Schwartz By: /s/ Steven M. Kluever --------------------- --------------------- Name: Denis G. Schwartz Name: Steven M. Kluever Title: 2nd Vice President Title: Second Vice President (SEAL) 2 of 2 AMENDMENT NO. 5 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company and Lincoln Financial Advisors Corporation, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE POLICIES UTILIZING SOME OR THE SEPARATE ACCOUNTS ALL OF THE FUNDS AIM V.I. Capital Appreciation Fund Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: AIM V.I. Diversified Income Fund Account N Flexible Premium Variable Annuity Contracts AIM V.I. Growth Fund AN425LL, 30295, 30296 and state variations AIM V.I. International Equity Fund thereof AIM V.I. Value Fund Lincoln Life Flexible Premium - The Lincoln National Life Insurance Company: Variable Life Account M Flexible Premium Variable Life Insurance Policy LN605LULN615LULN617LULN660/ LN680 and state variations thereof Lincoln Life Flexible Premium - The Lincoln National Life Insurance Company: Variable Life Account R Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LULN655 and state variations thereof - -------------------------------------- --------------------------------- ----------------------------------------------------------
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: July 15, 2000 AIM VARIABLE INSURANCE FUNDS Attest: /s/ Michelle Grace By: /s/ Robert H. Graham ------------------ -------------------- Name: Michelle Grace Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) S:\AGR\20=PAA81 avif.doc 062300 (1) j1d 1 of 2 A I M DISTRIBUTORS, INC. Attest: /s/ P. Michelle Grace By: /s/ Michael J. Cerno --------------------- --------------------- Name: P. Michelle Grace Name: Michael J. Cerno Title: Assistant Secretary Title: President (SEAL) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Denis G. Schwartz By: /s/ Steven M. Kluever --------------------- --------------------- Name: Denis G. Schwartz Name: Steven M. Kluever Title: 2nd Vice President Title: 2nd Vice President (SEAL) S:\AGR\w000\PAA8aavif.doc 02300 (1) jl 2 of 2 AMENDMENT NO. 6 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
SEPARATE ACCOUNTS FUNDS AVAILABLE UNDER UTILIZING SOME OR POLICIES/CONTRACTS FUNDED BY THE THE POLICIES ALL OF THE FUNDS SEPARATE ACCOUNTS ------------ ---------------- ----------------- (SERIES I SHARES) Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: Account N Flexible Premium Variable Annuity Contracts AIM V.I. Capital Appreciation Fund AN425LL, 30295, 30296 and state variations thereof AIM V.I. Diversified Income Fund AIM V.I. Growth Fund - The Lincoln National Life Insurance Company: AIM V.I. International Equity Fund Lincoln Life Flexible Premium Flexible Premium Variable Life Insurance Policy AIM V.I. Value Fund Variable Life Account M LN605LL/LN615LL/LN617LL/ LN660/LN680 and state AIM V.I. Government Securities variations thereof - The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On Lincoln Life Flexible Premium the Lives of Two Insureds LN650LL/LN655 and state Variable Life Account R variations thereof - The Lincoln National Life Insurance Company: Lincoln National Variable Annuity MultiFund Individual Variable Annuity Contract Account C 30070-B and state variations thereof (SERIES II SHARES) Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: Account N ChoicePlus II Variable Annuity Contracts 30070-B AIM V.I. Growth Fund and state variations thereof AIM V.I. International Equity Fund AIM V.I. Value Fund Lincoln Life Variable Annuity - The Lincoln National Life Insurance Company: AIM V.I. Government Securities Account W Wells Fargo New Directions Variable Annuity Contracts 30070-B and state variations thereof Lincoln National Life Insurance Separate Account 13 - The Lincoln National Life Insurance Company Director Product 19476 and state variations thereof Lincoln National Life Insurance - The Lincoln National Life Insurance Company Separate Account 15 Director Product 19476 and state variations thereof - The Lincoln National Life Insurance Company Lincoln National Life Insurance Director Product 19476 and state variations thereof Separate Account 16
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: July 15, 2001 AIM VARIABLE INSURANCE FUNDS Attest: /s/ Nancy L. Martin By: /s/ Carol F. Relihan --------------------------- ---------------------------------------- Name: Name: Carol F. Relihan Title: Title: Sr. Vice President (SEAL) A I M DISTRIBUTORS, INC. Attest: /s/ Nancy L. Martin By: /s/ Michael Cemo --------------------------- ---------------------------------------- Name: Name: Michael Cemo Title: Title: President (SEAL) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Denis Schwartz By: /s/ Steven M. Kluever --------------------------- ---------------------------------------- Name: Name: Steven M. Kluever Title: Title: 2nd Vice President (SEAL) FORM OF AMENDMENT NO. 7 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Section 2.1.e is hereby added as follows: (e) In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the Company for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make contractowners whole and reasonable administrative costs necessary to correct the error. Section 9. Notices is hereby amended to replace The Lincoln National Life Insurance Company information with the following: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 S. Clinton Street Fort Wayne, IN 46802 Facsimile: (260) 455-1773 Attn: Funds Management Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS THE POLICIES UTILIZING SOME OR FUNDED BY THE ALL OF THE FUNDS SEPARATE ACCOUNTS - ------------------------------------------ ------------------------------- ------------------------------------------------- (SERIES I SHARES) Lincoln Life Variable The Lincoln National Life Insurance Company: AIM V.I. Capital Appreciation Fund Annuity Account N Flexible Premium Variable Annuity Contracts AIM V.I. Diversified Income Fund AN425LL, 30295, 30296 and state variations AIM V.I. Growth Fund thereof AIM V.I. International Equity Fund AIM V.I. Premier Equity Fund Lincoln Life Flexible The Lincoln National Life Insurance Company: AIM V.I. Government Securities Premium Variable Life Flexible Premium Variable Life Insurance Policy Account M N605LL/LN615LL/ LN660/LN665/LN670/LN680/LN690 and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Flexible Premium Variable Life Insurance Account R Policy On the Lives of Two Insureds LN650LL/LN655/LN656 and state variations thereof Lincoln National Variable The Lincoln National Life Insurance Company: Annuity Account C MultiFund Individual Variable Annuity Contract 30070-B and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Corporate Owned Variable Life Insurance Account S Policy LN925/926, LN935 and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Lincoln Corporate Variable Private Solutions Account Z LN930 Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 13 thereof Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 15 thereof Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 16 thereof (SERIES II SHARES) Lincoln Life Variable The Lincoln National Life Insurance Company: Annuity Account N ChoicePlus II Variable Annuity Contracts AIM V.I. Growth Fund 30070-B and state variations thereof AIM V.I. International Equity Fund AIM V.I. Premier Equity Fund The Lincoln National Life Insurance Company: AIM V.I. Government Securities ChoicePlus Assurance Variable Annuity Contracts 30070-B and state variations thereof Lincoln Life Variable The Lincoln National Life Insurance Company: Annuity Account W Wells Fargo New Directions Variable Annuity Contracts 30070-B and state variations thereof
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: May 1, 2003 AIM VARIABLE INSURANCE FUNDS Attest: By: ----------------------- ------------------------------------- Name: Name: Title: Title: A I M DISTRIBUTORS, INC. Attest: By: ----------------------- ------------------------------------- Name: Name: Title: Title: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: By: ----------------------- ------------------------------------- Name: Name: Rise C. M. Taylor Title: Title: Vice President AMENDMENT NO. 7 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware Corporation and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Section 2.1.e is hereby added as follows: (e) In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the Company for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make contractowners whole and reasonable administrative costs necessary to correct the error. Section 9. Notices is hereby amended to replace The Lincoln National Life Insurance Company information with the following: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 S. Clinton Street Fort Wayne, IN 46802 Facsimile: (260) 455-1773 Attn: Funds Management Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDS AVAILABLE UNDER UTILIZING SOME OR FUNDED BY THE THE POLICIES ALL OF THE FUNDS SEPARATE ACCOUNTS - -------------------------------------------------------------------------------------------------------------------------- (SERIES I SHARES) Lincoln Life Variable The Lincoln National Life Insurance Company: AIM V.I. Capital Appreciation Fund Annuity Account N Flexible Premium Variable Annuity Contracts AIM V.I. Diversified Income Fund AN425LL, 30295, 30296 and state variations AIM V.I. Growth Fund thereof AIM V.I. International Equity Fund AIM V.I. Premier Equity Fund AIM V.I. Government Securities Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Flexible Premium Variable Life Insurance Policy Account M N605LL/LN615LL/LN660/LN665/LN670/LN680/LN690 and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Flexible Premium Variable Life Insurance Account R Policy On the Lives of Two Insureds LN650LL/LN655/LN656 and state variations thereof Lincoln National Variable The Lincoln National Life Insurance Company: Annuity Account C MultiFund Individual Variable Annuity Contract 30070-B and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Corporate Owned Variable Life Insurance Account S Policy LN925/926, LN935 and state variations thereof Lincoln Life Flexible The Lincoln National Life Insurance Company: Premium Variable Life Lincoln Corporate Variable Private Solutions Account Z LN930 Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 13 thereof Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 15 thereof Lincoln National Life The Lincoln National Life Insurance Company Insurance Separate Director Product 19476 and state variations Account 16 thereof
(SERIES II SHARES) Lincoln Life Variable The Lincoln National Life Insurance Company: Annuity Account N ChoicePlus II Variable Annuity Contracts AIM V.I. Growth Fund 30070-B and state variations thereof AIM V.I. International Equity Fund AIM V.I. Premier Equity Fund The Lincoln National Life Insurance Company: AIM V.I. Government Securities ChoicePlus Assurance Variable Annuity Contracts 30070-B and state variations thereof Lincoln Life Variable The Lincoln National Life Insurance Company: Annuity Account W Wells Fargo New Directions Variable Annuity Contracts 30070-B and state variations thereof
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf of its duly authorized officer on the date specified below. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: May 1, 2003 AIM VARIABLE INSURANCE FUNDS Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham ------------------------------- --------------------------- Name: Jim Coppedge Name: Robert H. Graham Title: Assistant Secretary Title: President A I M DISTRIBUTORS, INC. Attest: /s/ Jim Coppedge By: /s/ Gene Needles ------------------------------- Name: Jim Coppedge Name: Gene Needles Title: Assistant Secretary Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Annie P. Russell By: /s/ Rise C.M. Taylor Name: Annie P. Russell Name: Rise C. M. Taylor Title: Executive Administrative Assistant Title: Vice President
AMENDMENT NO. 8 PARTICIPATION AGREEMENT ----------------------- The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Section 2.3 of the Agreement is hereby deleted in its entirety and replaced with the following: 2.3 APPLICABLE PRICE (a) Share purchase payments and redemption orders that result from purchase payments, premium payments, surrenders and other transactions under Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives prior to the close of regular trading on the New York Stock Exchange (or such other time set by the Board for purposes of determining the current net asset value of a Fund in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be executed at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the orders. For purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of AVIF for receipt of orders relating to Contract transactions, , in accordance with Section 22(c) and Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such designated agent shall constitute receipt by AVIF; PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central Time on the next following Business Day or such later time as computed in accordance with Section 2.1(b) hereof. In connection with this Section 2.3(a), LIFE COMPANY represents and warrants that it will not submit any order for Shares or engage in any practice, nor will it allow or suffer any person acting on its behalf to submit any order for Shares or engage in any practice, that would violate or cause a violation of applicable law or regulation including, without limitation Section 22 of the 1940 Act and the rules thereunder. (b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable. (c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY agree to cooperate with the Fund and AIM to prevent any person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board or AIM determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in 1 contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law. Section 6.3 of the Agreement is hereby deleted in its entirety and replaced with the following: 6.3 FUNDS TO REMAIN AVAILABLE Notwithstanding any termination of this Agreement by LIFE COMPANY, AVIF will, at the option of LIFE COMPANY, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless AIM or the Board determines that doing so would not serve the best interests of the shareholders of the affected Funds or would be inconsistent with applicable law or regulation. Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 6.3 will not apply to any (i) terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement or (ii) any rejected purchase and/or redemption order as described in Section 2.3(c) hereof. Section 22 is hereby added to the Agreement: SECTION 22. FORCE MAJEURE Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist. 2 Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Aggressive Growth Fund AIM V.I. Mid Cap Core Equity Fund AIM V.I. Balanced Fund AIM V.I. Money Market Fund AIM V.I. Basic Value Fund AIM V.I. Premier Equity Fund AIM V.I. Blue Chip Fund AIM V.I. Real Estate Fund(2) AIM V.I. Capital Appreciation Fund AIM V.I. Small Cap Equity Fund AIM V.I. Capital Development Fund INVESCO VIF - Core Equity Fund AIM V.I. Core Equity Fund INVESCO VIF - Dynamics Fund AIM V.I. Dent Demographic Trends Fund INVESCO VIF - Financial Services Fund AIM V.I. Diversified Income Fund INVESCO VIF - Health Sciences Fund AIM V.I. Government Securities Fund INVESCO VIF - Leisure Fund AIM V.I. Growth Fund(1) INVESCO VIF - Small Company Growth Fund AIM V.I. High Yield Fund(1) INVESCO VIF - Technology Fund(1) AIM V.I. International Growth Fund INVESCO VIF - Total Return Fund AIM V.I. Large Cap Growth Fund INVESCO VIF - Utilities Fund(1)
(1) Effective April 30, 2004, AIM V.I. Growth Fund acquired the assets of INVESCO VIF - Growth Fund; AIM V.I. High Yield Fund acquired the assets of INVESCO VIF - High Yield Fund; INVESCO VIF - Utilities Fund acquired the assets of AIM V.I. Global Utilities Fund; and INVESCO VIF - Technology Fund acquired the assets of AIM V.I. New Technology Fund and INVESCO VIF - Telecommunications Fund. (2) Formerly, INVESCO VIF - Real Estate Opportunities Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS - - Lincoln Life Variable Annuity Account N - - Lincoln Life Flexible Premium Variable Life Account M - - Lincoln Life Flexible Premium Variable Life Account R - - Lincoln National Variable Annuity Account C - - Lincoln Life Variable Annuity Account W - - Lincoln National Life Insurance Separate Account 13 - - Lincoln National Life Insurance Separate Account 15 - - Lincoln National Life Insurance Separate Account 16 3 CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS - - The Lincoln National Life Insurance Company: Flexible Premium Variable Annuity Contracts AN425LL, 30295, 30296 and state variations thereof - - The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy LN605LL/LN615LL/LN617LL/LN660/LN680 and state variations thereof - - The Lincoln National Life Insurance Company: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650LL/LN655 and state variations thereof - - The Lincoln National Life Insurance Company: MultiFund Individual Variable Annuity Contract 30070-B and state variations thereof - - The Lincoln National Life Insurance Company: ChoicePlus II Variable Annuity Contracts 30070-B and state variations thereof - - The Lincoln National Life Insurance Company: ChoicePlus Assurance Variable Annuity Contracts 30070-B and state variations thereof - - The Lincoln National Life Insurance Company: Wells Fargo New Directions Variable Annuity Contracts 30070-B and state variations thereof - - The Lincoln National Life Insurance Company: Director Product 19476 and state variations thereof - - The Lincoln National Life Insurance Company: Director Product 19476 and state variations thereof - - The Lincoln National Life Insurance Company: Director Product 19476 and state variations thereof 4 All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective date: April 30, 2004 AIM VARIABLE INSURANCE FUNDS Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham ---------------------------- -------------------------------- Name: Jim A. Coppedge Name: Robert H. Graham Title: Assistant Secretary Title: President A I M DISTRIBUTORS, INC. Attest: /s/ Jim Coppedge By: /s/ Gene L. Needles ---------------------------- -------------------------------- Name: Jim A. Coppedge Name: Gene L. Needles Title: Assistant Secretary Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Annie P. Russell By: /s/ Rise C. M. Taylor ---------------------------- -------------------------------- Name: Annie P. Russell Name: Rise C. M. Taylor Title: Executive Admin Asst. Title: Vice President AMENDMENT NO. 9 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS SERIES I AND II SHARES AIM V.I. Basic Balanced Fund AIM V.I. Government Securities Fund AIM V.I. Basic Value Fund AIM V.I. High Yield Fund AIM V.I. Blue Chip Fund(1) AIM V.I. International Core Equity Fund AIM V.I. Capital Appreciation Fund AIM V.I. International Growth Fund AIM V.I. Capital Development Fund AIM V.I. Large Cap Growth Fund AIM V.I. Core Equity Fund AIM V.I. Leisure Fund AIM V.I. Demographic Trends Fund AIM V.I. Mid Cap Core Equity Fund AIM V.I. Diversified Dividend Fund AIM V.I. Money Market Fund AIM V.I. Diversified Income Fund AIM V.I. Real Estate Fund(2) AIM V.I. Dynamics Fund AIM V.I. Small Cap Equity Fund AIM V.I. Financial Services Fund AIM V.I. Small Company Growth Fund(3) AIM V.I. Global Equity Fund AIM V.I. Technology Fund AIM V.I. Global Health Care Fund AIM V.I. Utilities Fund
(1) Effective June 12, 2006, AIM V.I. Blue Chip Fund will merge into AIM V.I. Large Cap Growth Fund. (2) Effective July 3, 2006, AIM V.I. Real Estate Fund will be renamed AIM V.I. Global Real Estate Fund. (3) Effective July 3, 2006, AIM V.I. Small Company Growth Fund will be renamed AIM V.I. Small Cap Growth Fund. SEPARATE ACCOUNTS UTILIZING THE FUNDS - - Lincoln National Variable Annuity Account C - - Lincoln Life Flexible Premium Variable Life Account M - - Lincoln Life Flexible Premium Variable Life Account R - - Lincoln Life Variable Annuity Account N - - Lincoln Life Variable Annuity Account W - - Lincoln Life Variable Annuity Account Z - - Lincoln National Life Insurance Separate Account 13 - - Lincoln National Life Insurance Separate Account 15 - - Lincoln National Life Insurance Separate Account 16 CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS ChoicePlus MultiFund(R) 5 ChoicePlus Access Wells Fargo New Directions Core ChoicePlus Bonus Wells Fargo New Directions Access ChoicePlus II Wells Fargo New Directions Access 4 ChoicePlus II Access Director ChoicePlus II Bonus Lincoln VUL I ChoicePlus II Advance Lincoln VULDB ChoicePlus Assurance (B Share) Lincoln VULCV ChoicePlus Assurance (C Share) Lincoln SVUL ChoicePlus Assurance (L Share) Lincoln SVUL I ChoicePlus Assurance (Bonus) Lincoln SVUL II Lincoln Corporate Private Solution All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective date: May 1, 2006 AIM VARIABLE INSURANCE FUNDS Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham ----------------- --------------------- Name: Jim Coppedge Name: Robert H. Graham Title: Assistant Secretary Title: President A I M DISTRIBUTORS, INC. Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles ---------------------- -------------------- Name: P. Michelle Grace Name: Gene L. Needles Title: Assistant Secretary Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Attest: /s/ Kevin J. Adamson By: /s/ Kelly D. Clevenger --------------------- ----------------------- Name: Kevin J. Adamson Name: Kelly D. Clevenger Title: 2nd Vice President Title: Vice President May 10, 2007 VIA FEDERAL EXPRESS - ------------------- AIM Variable Insurance Funds A I M Distributors, Inc. 11 Greenway Plaza, Suite 100 Houston, TX 77046 Attn: Nancy L. Martin, Esq. Re: Notice of Change of Principal Underwriter To our valued business partner: AIM Variable Insurance Funds, A I M Distributors, Inc. and The Lincoln National Life Insurance Company ("Lincoln") are parties to a Participation Agreement dated June 16, 1998. Effective May 1, 2007, Lincoln Financial Distributors, Inc., a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member in good standing of the National Association of Securities Dealers, Inc., assumed the role of principal underwriter with respect to the Accounts listed in Schedule A of the Agreement. Lincoln requests that you provide acknowledgement of this letter by signing below and returning one executed original letter to Mary Jo Ardington, 1300 S. Clinton Street, Fort Wayne, IN 46802. Thank you for your prompt attention to this matter. If you have any questions, please feel free to contact Mary Jo Ardington at 260-455-3917. Sincerely, /s/ Kelly D. Clevenger Kelly D. Clevenger Vice President ACKNOWLEDGED and AGREED: ACKNOWLEDGED AND AGREED: AIM Variable Insurance Funds A I M Distributors, Inc. By: /s/ Donna F. Anderson By: /s/ Gene L. Needles ----------------------------- ----------------------------- Name: Donna F. Anderson Name: Gene L. Needles Title: Assistant Vice President Title: President Date: 5/30/2007 Date: 5/22/07
EX-99 8 a2182653zex-99_1.txt PARTICIPATION AGREEMENT AMONG THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, ALLIANCE CAPITAL MANAGEMENT L.P. AND ALLIANCE FUND DISTRIBUTORS, INC. DATED AS OF FEBRUARY 15, 2000 PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of the 15th day of February, 2000 ("Agreement"), by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer") (on behalf of itself and its "Separate Account," defined below). Insurer is also the principal underwriter with respect to the Contracts referred to below; Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and Alliance Fund Distributors, Inc., a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS Insurer, the Distributor, and Alliance Variable Products Series Fund, Inc. (the "Fund") desire that Class B shares of the Fund's Portfolios listed in Schedule A, as may be amended from time to time (the "Portfolios"; reference herein to the "Fund" includes reference to each Portfolio to the extent the context requires) be made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B, as may be amended from time to time; and WHEREAS the Contracts provide for the allocation of net amounts received by Insurer to separate series (the "Subaccounts"; reference herein to the "Separate Account" includes reference to each Subaccount to the extent the context requires) of the Separate Account for investment in Class B shares of corresponding Portfolios of the Fund that are made available through the Separate Account to act as underlying investment media, 1 NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Fund and Distributor will make Class B shares of the Portfolios available to Insurer for this purpose at net asset value and with no sales charges, all subject to the following provisions: SECTION 1. ADDITIONAL PORTFOLIOS The Fund has and may, from time to time, add additional Portfolios, which will become subject to this Agreement, if, upon the written consent of each of the Parties hereto, they are made available as investment media for the Contracts. SECTION 2. PROCESSING TRANSACTIONS 2.1 TIMELY PRICING AND ORDERS. The Adviser or its designated agent will provide closing net asset value, dividend and capital gain information for each Portfolio to Insurer at the close of trading on each day (a "Business Day") on which the New York Stock Exchange is open for regular trading. The Fund or its designated agent will use its best efforts to provide this information by 6:00 p.m., New York time, using a mutually agreed upon format. Insurer will use these data to calculate unit values, which in turn will be used to process transactions that receive that same Business Day's Separate Account Subaccount's unit values. Such Separate Account processing will be done the same evening, and corresponding orders with respect to Fund shares will be placed the morning of the following Business Day. Insurer will use its best efforts to place such orders with the Fund by 10:30 a.m., New York time. 2 2.2 TIMELY PAYMENTS. Insurer will transmit orders for purchases and redemptions of Fund shares to Distributor, and will wire payment for net purchases to a custodial account designated by the Fund on the day the order for Fund shares is placed, to the extent practicable. Payment for shares purchased shall be made in federal funds transmitted by wire by 2:00 p.m. New York time as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. If payment is received by the Fund after 2:00 p.m. New York time on such Business Day, Insurer shall, upon the Fund's request, promptly reimburse the Fund for any charges, costs, fees, interest or other expenses incurred in connection with any advances, borrowing, or overdrafts. The Fund will confirm receipt of each purchase (using a mutually agreed upon format) by 1:00 p.m. New York time on the Business Day the trade is placed. Payment for net redemptions will be wired by the Fund to an account designated by Insurer on the same day as the order is placed, to the extent practicable. The Fund agrees to redeem, upon Insurer's request, any full or fractional shares of the designated Portfolio held by Insurer. Payment for shares redeemed shall be made in federal funds transmitted by wire by 2:00 p.m. New York time as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. If payment is received by Insurer after 2:00 p.m. New York time on such Business Day, the Fund shall, upon the Insurer's request, promptly reimburse Insurer for any charges, costs, fees, interest or other expenses incurred in connection with any advances, borrowing, or overdrafts. The Fund will confirm receipt of each redemption (using a mutually agreed upon format) by 1:00 p.m. New York time on the Business Day the trade is placed. In any event payment will be made within six calendar days after the date the order is placed in order 3 to enable Insurer to pay redemption proceeds within the time specified in Section 22(e) of the Investment Company Act of 1940, as amended (the "1940 Act"). 2.3 APPLICABLE PRICE. The Parties agree that Portfolio share purchase and redemption orders resulting from Contract owner purchase payments, surrenders, partial withdrawals, routine withdrawals of charges, or other transactions under Contracts will be executed at the net asset values as determined as of the close of regular trading on the New York Stock Exchange on the Business Day that Insurer receives such orders and processes such transactions, which, Insurer agrees shall occur not earlier than the Business Day prior to Distributor's receipt of the corresponding orders for purchases and redemptions of Portfolio shares. For the purposes of this section, Insurer shall be deemed to be the agent of the Fund for receipt of such orders from holders or applicants of contracts, and receipt by Insurer shall constitute receipt by the Fund. All other purchases and redemptions of Portfolio shares by Insurer, will be effected at the net asset values next computed after receipt by Distributor of the order therefor, and such orders will be irrevocable. Insurer hereby elects to reinvest all dividends and capital gains distributions in additional shares of the corresponding Portfolio at the record-date net asset values until Insurer otherwise notifies the Fund in writing, it being agreed by the Parties that the record date and the payment date with respect to any dividend or distribution will be the same Business Day. 4 SECTION 3. COSTS AND EXPENSES 3.1 GENERAL. Except as otherwise specifically provided herein, each Party will bear all expenses incident to its performance under this Agreement. 3.2 REGISTRATION. The Fund will bear the cost of its registering as a management investment company under the 1940 Act and registering its shares under the Securities Act of 1933, as amended (the "1933 Act"), and keeping such registrations current and effective; including, without limitation, the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Fund and its shares and payment of all applicable registration or filing fees with respect to any of the foregoing. Insurer will bear the cost of registering the Separate Account as a unit investment trust under the 1940 Act (unless exempt therefrom) and registering units of interest under the Contracts under the 1933 Act (unless exempt therefrom) and keeping such registrations current and effective; including, without limitation, the preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Separate Account and its units of interest (unless exempt therefrom) and payment of all applicable registration or filing fees with respect to any of the foregoing. 3.3 OTHER (NON-SALES-RELATED) EXPENSES. The Fund will bear the costs of preparing, filing with the SEC and setting for printing the Fund's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "Fund Prospectus"), periodic reports to shareholders, Fund proxy material and other shareholder communications and any related requests for voting instructions from Participants (as defined below). Insurer will bear the costs of preparing, filing with the SEC and setting for printing, 5 the Separate Account's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "Separate Account Prospectus"), any periodic reports to owners, annuitants or participants under the Contracts (collectively, "Participants"), and other Participant communications. The Fund and Insurer each will bear the costs of printing in quantity and delivering to existing Participants the documents as to which it bears the cost of preparation as set forth above in this Section 3.3, it being understood that reasonable cost allocations will be made in cases where any such Fund and Insurer documents are printed or mailed on a combined or coordinated basis. If REQUESTED by Insurer, the Fund will provide annual Prospectus text to Insurer on diskette (or by other means as may be mutually agreed upon) for printing and binding with the Separate Account Prospectus. 3.4 OTHER SALES-RELATED EXPENSES. Expenses of distributing the Portfolio's shares and the Contracts will be paid by Insurer and other parties, as they shall determine by separate agreement. 3.5 PARTIES TO COOPERATE. The Adviser, Insurer and Distributor each agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver combined or coordinated prospectuses or other materials of the Fund and Separate Account. SECTION 4. LEGAL COMPLIANCE 4.1 TAX LAWS. (a) The Adviser will use its best efforts to qualify and to maintain qualification of each Portfolio as a regulated investment company ("RIC") under Subchapter M of the Internal 6 Revenue Code of 1986, as amended (the "Code"), and the Adviser or Distributor will notify Insurer immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or that it might not so qualify in the future. (b) Insurer represents that it believes, in good faith, that the Contracts will be treated as annuity contracts or life insurance policies under applicable provisions of the Code and that it will make every effort to maintain such treatment. Insurer will notify the Fund and Distributor immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future. (c) The Adviser and the Distributor represent and warrant that the Fund currently qualifies as a Regulated Investment Company under Subchapter M of the Code and will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that they will notify the company immediately upon having a reasonable basis for believing that the Fund has ceased to so qualify or that it might not so qualify in the future. The Adviser and the Distributor represent and warrant that the Fund will comply with Section 817(h) of the Code, and all regulations issued thereunder. In the event of a breach of this Section the Adviser and the Distributor will: a) immediately notify the Insurer of such breach; and (b) take the steps necessary to adequately diversify each portfolio so as to achieve such compliance within the period allowed by regulation. (d) Insurer represents that it believes, in good faith, that the Separate Account is a "segregated asset account" and that interests in the Separate Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817(h) of the Code and the regulations thereunder. Insurer will make every effort to continue to meet 7 such definitional requirements, and it will notify the Fund and Distributor immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. (e) The Adviser will manage the Fund as a RIC in compliance with Subchapter M of the Code and will use its best efforts to manage to be in compliance with Section 817(h) of the Code and regulations thereunder. The Fund has adopted and will maintain procedures for ensuring that the Fund is managed in compliance with Subchapter M and Section 817(h) and regulations thereunder. (f) Should the Distributor or Adviser become aware of a failure of Fund, or any of its Portfolios, to be in compliance with Subchapter M of the Code or Section 817(h) of the Code and regulations thereunder, they represent and agree that they will immediately notify Insurer of such in writing. (g) The Distributor agrees that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Portfolio will be sold to the general public. 4.2 INSURANCE AND CERTAIN OTHER LAWS. (a) The Adviser will use its best efforts to cause the Fund to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by Insurer. If it cannot comply, it will so notify Insurer in writing. (b) Insurer represents and warrants that (i) it is an insurance company duly organized and validly existing under the laws of the State of Indiana and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this 8 Agreement, (ii) it has legally and validly established and maintains the Separate Account as a segregated asset account under Indiana Law and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations. (c) Distributor represents and warrants that it is a business corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has full corporate power, authority and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement. (d) Distributor represents and warrants that the Fund is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement. (e) Adviser represents and warrants that it is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement. 4.3 SECURITIES LAWS. (a) Insurer represents and warrants that (i) interests in the Separate Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act and the Contracts will be duly authorized for issuance and sold in compliance with applicable state law, (ii) the Separate Account is and will remain registered under the 1940 Act to the extent required by the 1940 Act (unless exempt therefrom), (iii) the Separate Account does and will comply in all material 9 respects with the requirements of the 1940 Act and the rules thereunder (unless exempt therefrom), (iv) the Separate Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will, at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder (unless exempt therefrom), and (v) the Separate Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder (unless exempt therefrom). (b) The Adviser and Distributor represent and warrant that (i) Fund shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Maryland law, (ii) the Fund is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will amend the registration statement for its shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its shares, (iv) the Fund does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) the Fund's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) the Fund Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (c) The Fund will register and qualify its shares for sale in accordance with the laws of any state or other jurisdiction only if and to the extent reasonably deemed advisable by the Fund, Insurer or any other life insurance company utilizing the Fund. 10 (d) Distributor and Insurer each represents and warrants that it is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended, and is a member in good standing of the National Association of Securities Dealers Inc. (the "NASD"). 4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. (a) Distributor or the Fund shall immediately notify Insurer of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to the Fund's registration statement under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Fund Prospectus, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of the Fund's shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Fund shares in any state or jurisdiction, including, without limitation, any circumstances in which (x) the Fund's shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law or (y) such law precludes the use of such shares as an underlying investment medium of the Contracts issued or to be issued by Insurer. Distributor and the Fund will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. (b) Insurer shall immediately notify the Fund of (i) the issuance by any court or regulatory body of any stop order, cease and desist order or similar order with respect to the Separate Account's registration statement under the 1933 Act relating to the Contracts or the Separate Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Separate Account Prospectus, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of the Separate Account interests pursuant to the Contracts, or 11 (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. Insurer will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. 4.5 INSURER TO PROVIDE DOCUMENTS. Upon reasonable request, Insurer will provide the Fund and the Distributor one complete copy of SEC registration statements, Separate Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and amendments to any of the above, that relate to the Separate Account or the Contracts, and their investment in the Fund, within 20 days of the filing of such document with the SEC or other regulatory authorities. 4.6 FUND TO PROVIDE DOCUMENTS. Upon reasonable request, the Fund will provide to Insurer one complete copy of SEC registration statements, Fund Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares, within 20 days of the filing of such document with the SEC or other regulatory authorities. 12 SECTION 5. MIXED AND SHARED FUNDING 5.1 General. The Fund has obtained an order exempting it from certain provisions of the 1940 Act and rules thereunder so that the Fund is available for investment by certain other entities, including, without limitation, separate accounts funding variable life insurance policies and separate accounts of insurance companies unaffiliated with Insurer ("Mixed and Shared Funding Order"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. 5.2 DISINTERESTED DIRECTORS. The Fund agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") are not interested persons of Adviser or Distributor within the meaning of Section 2(a)(19) of the 1940 Act. 5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS. The Fund agrees that its Board of Directors will monitor for the existence of any material irreconcilable conflict between the interests of the participants in all separate accounts of life insurance companies utilizing the Fund, including the Separate Account. Insurer agrees to inform the Board of Directors of the Fund of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation: (a) an action by any state insurance or other regulatory authority; 13 (b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract participants or by participants of different life insurance companies utilizing the Fund; or (f) a decision by a life insurance company utilizing the Fund to disregard the voting instructions of participants. Insurer will assist the Board of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably requested and necessary for the Board of Directors to consider any issue raised, including information as to a decision by Insurer to disregard voting instructions of Participants. 5.4 CONFLICT REMEDIES. (a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists, Insurer and the other life insurance companies utilizing the Fund will, at their own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Directors), take 14 whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to: (i) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected participants and, as appropriate, segregating the assets of any particular group (e.g., annuity contract owners or participants, life insurance contract owners or all contract owners and participants of one or more life insurance companies utilizing the Fund) that votes in favor of such segregation, or offering to the affected contract owners or participants the option of making such a change; and (ii) establishing a new registered investment company of the type defined as a "Management Company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a Management Company. (b) If the material irreconcilable conflict arises because of Insurer's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, Insurer may be required, at the Fund's election, to withdraw the Separate Account's investment in the Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six months after the Fund gives notice to Insurer that this provision is being implemented, and until such withdrawal Distributor and the Fund shall continue to accept and implement orders by Insurer for the purchase and redemption of shares of the Fund or upon receipt of a substitution order granted by the SEC, whichever is later. 15 (c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to Insurer conflicts with the majority of other state regulators, then Insurer will withdraw the Separate Account's investment in the Fund within six months after the Fund's Board of Directors informs Insurer that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal Distributor and Fund shall continue to accept and implement orders by Insurer for the purchase and redemption of shares of the Fund or upon receipt of a substitution order granted by the SEC, whichever is later. (d) Insurer agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants. (e) For purposes hereof, a majority of the Disinterested Directors will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will the Insurer, Fund or Distributor be required to establish a new funding medium for any Contracts. Insurer will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict. 5.5 NOTICE TO INSURER. The Fund will promptly make known in writing to Insurer the Board of Directors' determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict. 16 5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS. Insurer and the Fund will at least annually submit to the Board of Directors of the Fund such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors may fully carry out the obligations imposed upon it by the provisions hereof, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors actions with regard to determining the existence of a conflict, notifying life insurance companies utilizing the Fund of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board of Directors or other appropriate records, and such minutes or other records will be made available to the SEC upon request. 5.7 COMPLIANCE WITH SEC RULES. If, at any time during which the Fund is serving an investment medium for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to mixed and shared funding, the Parties agree that they will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable. SECTION 6. TERMINATION 6.1 EVENTS OF TERMINATION. Subject to Section 6.4 below, this Agreement will terminate as to a Portfolio: 17 (a) at the option of Insurer or Distributor upon at least six months advance written notice to the other Parties, or (b) at the option of the Fund upon (i) at least sixty days advance written notice to the other parties, and (ii) approval by a majority vote of the shares of the affected Portfolio in the corresponding Subaccount of the Separate Account (pursuant to the procedures set forth in Section 11 of this Agreement for voting Trust shares in accordance with Participant instructions). (c) at the option of the Fund upon institution of formal proceedings against Insurer or Contracts Distributor by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding Insurer's obligations under this Agreement or related to the sale of the Contracts, the operation of the Separate Account, or the purchase of the Fund shares, if, in each case, the Fund reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Portfolio to be terminated; or (d) at the option of Insurer upon institution of formal proceedings against the Fund, Adviser, or Distributor by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding the Fund's, Adviser's or Distributor's obligations under this Agreement or related to the operation or management of the Fund or the purchase of Fund shares, if, in each case, Insurer reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on Insurer, Contracts Distributor or the Subaccount corresponding to the Portfolio to be terminated; or 18 (e) at the option of any Party in the event that (i) the Portfolio's shares are not registered and, in all material respects, issued and sold in accordance with any applicable state and federal law or (ii) such law precludes the use of such shares as an underlying investment medium of the Contracts issued or to be issued by Insurer; or (f) upon termination of the corresponding Subaccount's investment in the Portfolio pursuant to Section 5 hereof; or (g) at the option of Insurer if the Portfolio ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions; or (h) at the option of Insurer if the Portfolio fails to comply with Section 817(h) of the Code or with successor or similar provisions; or (i) at the option of Insurer if Insurer reasonably believes that any change in a Fund's investment adviser or investment practices will materially increase the risks incurred by Insurer. 6.2 FUNDS TO REMAIN AVAILABLE. Except (i) as necessary to implement Participant-initiated transactions, (ii) as required by state insurance laws or regulations, (iii) as required pursuant to Section 5 of this Agreement, (iv) with respect to any Portfolio as to which this Agreement has terminated, or (v) pursuant to an SEC approved Substitution Order, Insurer shall not (x) redeem Fund shares attributable to the Contracts, or (y) prevent Participants from allocating payments to or transferring amounts from a Portfolio that was otherwise available under the Contracts, until, in either case, 90 calendar days after Insurer shall have notified the Fund or Distributor of its intention to do so. 19 6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS. All warranties and indemnifications will survive the termination of this Agreement. 6.4 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES. Notwithstanding any termination of this Agreement, the Distributor shall continue to make available shares of the Portfolios pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (the "Existing Contracts"), except as otherwise provided under Section 5 of this Agreement. Specifically, and without limitation, the Distributor shall facilitate the sale and purchase of shares of the Portfolios as necessary in order to process premium payments, surrenders and other withdrawals, and transfers or reallocations of values under Existing Contracts. SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION The other Parties hereto agree to cooperate with and give reasonable assistance to Insurer in taking all necessary and appropriate steps for the purpose of ensuring that the Separate Account owns no shares of a Portfolio after the Final Termination Date with respect thereto except as specified under Section 6.4 of this Agreement. SECTION 8. ASSIGNMENT This Agreement may not be assigned by any Party, except with the written consent of each other Party. 20 SECTION 9. CLASS B DISTRIBUTION PAYMENTS From time to time during the term of this Agreement the Distributor may make payments to Insurer pursuant to a distribution plan adopted by the Fund with respect to the Class B shares of the Portfolios pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan) in consideration of the Insurer's furnishing distribution services relating to the Class B shares of the Portfolios and providing administrative, accounting and other services, including personal service and/or the maintenance of Participant accounts, with respect to such shares. The Distributor has no obligation to make any such payments, and the Insurer waives any such payment, until the Distributor receives monies therefor from the Fund. Any such payments made pursuant to this Section 9 shall be subject to the following terms and conditions: (a) Any such payments shall be in such amounts as the Distributor may from time to time advise the Insurer in writing but in any event not in excess of the amounts permitted by the Rule 12b-1 Plan. Such payments may include a service fee in the amount of .25 of 1% per annum of the average daily net assets of the Fund attributable to the Class B shares of a Portfolio held by clients of the Insurer. Any such service fee shall be paid solely for personal service and/or the maintenance of Participant accounts. (b) The provisions of this Section 9 relate to a plan adopted by the Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Section 9 shall provide the Fund's Board of Directors, and the Directors shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. (c) The provisions of this Section 9 shall remain in effect for not more than a year and thereafter for successive annual periods only so long as such continuance is specifically approved 21 at least annually in conformity with Rule 12b-1 and the 1940 Act. The provisions of this Section 9 shall automatically terminate in the event of the assignment (as defined by the 1940 Act) of this Agreement, in the event the Rule 12b-1 Plan terminates or is not continued or in the event this Agreement terminates or ceases to remain in effect. In addition, the provisions of this Section 9 may be terminated at any time, without penalty, by either the Distributor or the Insurer with respect to any Portfolio on not more than 60 days' nor less than 30 days' written notice delivered or mailed by registered mail, postage prepaid, to the other party. SECTION 10. NOTICES Notices and communications required or permitted by Section 2 hereof will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing: The Lincoln National Life Insurance Company 1300 South Clinton Fort Wayne, Indiana 46802 Attn.: Steven M. Kluever Alliance Fund Distributors, Inc. 1345 Avenue of the Americas New York NY 10105 Attn.: Edmund P. Bergan FAX: (212) 969-2290 22 Alliance Capital Management L.P. 1345 Avenue of the Americas New York NY 10105 Attn: Edmund P. Bergan FAX: (212) 969-2290 SECTION 11. VOTING PROCEDURES Subject to the cost allocation procedures set forth in Section 3 hereof, Insurer will distribute all proxy material furnished by the Fund to Participants (unless exempt therefrom) and will vote Fund shares in accordance with instructions received from Participants. Unless exempt therefrom, and for each Separate Account, Insurer will vote Fund shares that are (a) not attributable to Participants or (b) attributable to Participants, but for which no instructions have been received, in the same proportion as Fund shares for which said instructions have been received from Participants. Insurer agrees that it will disregard Participant voting instructions only to the extent it would be permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940 Act if the Contracts were variable life insurance policies subject to that rule. Other participating life insurance companies utilizing the Fund will be responsible for calculating voting privileges in a manner consistent with that of Insurer, as prescribed by this Section 11. SECTION 12. FOREIGN TAX CREDITS The Adviser agrees to consult in advance with Insurer concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to the Fund's shareholders. 23 SECTION 13. INDEMNIFICATION 13.1 OF FUND, DISTRIBUTOR AND ADVISER BY INSURER. (a) Except to the extent provided in Sections 13.1(b) and 13.1(c), below, Insurer agrees to indemnify and hold harmless the Fund, Distributor and Adviser, each of their directors and officers, and each person, if any, who controls the Fund, Distributor or Adviser within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 13. 1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Insurer) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions are related to the sale, acquisition, or holding of the Fund's shares and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Separate Account's 1933 Act registration statement, the Separate Account Prospectus, the Contracts or, to the extent prepared by Insurer, sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Insurer by or on behalf of the Fund, Distributor or Adviser for use in the Separate Account's 1933 Act registration 24 statement, the Separate Account Prospectus, the Contracts, or sales literature or advertising (or any amendment or supplement to any of the foregoing); or (ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in the Fund's 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Insurer or the negligent, illegal or fraudulent conduct of Insurer or persons under their control (including, without limitation, their employees and "Associated Persons," as that term is defined in paragraph (m) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Fund shares; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund's 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to the Fund, Adviser or Distributor by or on behalf of Insurer for use in the Fund's 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund, or any amendment or supplement to any of the foregoing; or 25 (iv) arise as a result of any failure by Insurer to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Insurer in the Agreement. (b) Insurer shall not be liable under this Section 13.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties under this Agreement or to Distributor or to the Fund. (c) Insurer shall not be liable under this Section 13.1 with respect to any action against an Indemnified Party unless the Fund, Distributor or Adviser shall have notified Insurer in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify Insurer of any such action shall not relieve Insurer from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 13. 1. In case any such action is brought against an Indemnified Party, Insurer shall be entitled to participate, at its own expense, in the defense of such action. Insurer also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from Insurer to such Indemnified Party of Insurer's election to assume the defense thereof, the Indemnified Party will cooperate fully with Insurer and shall bear the 26 fees and expenses of any additional counsel retained by it, and Insurer will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation. 13.2 INDEMNIFICATION OF INSURER BY ADVISER AND DISTRIBUTOR (a) Except to the extent provided in Sections 13.2(d) and 13.2(e), below, Adviser and Distributor agree to indemnify and hold harmless Insurer, each of their directors and officers, and each person, if any, who controls Insurer within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 13.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Adviser) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions are related to the sale, acquisition, or holding of the Fund's shares and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund's 1933 Act registration statement, Fund Prospectus, sales literature or advertising of the Fund or, to the extent not prepared by Insurer, sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission 27 or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Distributor, Adviser or the Fund by or on behalf of Insurer for use in the Fund's 1933 Act registration statement, Fund Prospectus, or in sales literature or advertising (or any amendment or supplement to any of the foregoing); or (ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in the Separate Account's 1933 Act registration statement, Separate Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Distributor, Adviser, or the Fund) or the negligent, illegal or fraudulent conduct of the Fund, Distributor, Adviser or persons under their control (including, without limitation, their employees and Associated Persons), in connection with the sale or distribution of the Contracts or Fund shares; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Separate Account's 1933 Act registration statement, Separate Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to Insurer by or on behalf of the Fund, Distributor or Adviser for use in the Separate Account's 1933 Act 28 registration statement, Separate Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or (iv) arise as a result of any failure by the Fund, Adviser or Distributor to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Fund, Adviser, or Distributor in the Agreement. (b) Except to the extent provided in Sections 13.2(d) and 13.2(e) hereof, Adviser and Distributor agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, except as set forth in Section 13.2(c) below, the written consent of Adviser) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Portfolio to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder and (ii) Section 817(h) of the Code and regulations thereunder (except to the extent that such failure is caused by Insurer), including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Contract owners or Participants asserting liability against Insurer pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the Internal Revenue Service, and the cost of any substitution by Insurer of shares of another investment company or portfolio for those of 29 any adversely affected Portfolio as a funding medium for the Separate Account that Insurer deems necessary or appropriate as a result of the noncompliance. (c) The written consent of Adviser and Distributor referred to in Section 13.2(b) above shall not be required with respect to amounts paid in connection with any ruling and closing agreement or other settlement with the Internal Revenue Service. (d) Adviser and Distributor shall not be liable under this Section 13.2 with respect to any losses, claims; damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties under this Agreement or to Insurer or the Separate Account. (e) Adviser and Distributor shall not be liable under this Section 13.2 with respect to any action against an Indemnified Party unless Insurer shall have notified Adviser and Distributor in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify Adviser or Distributor of any such action shall not relieve Adviser or Distributor from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 13.2. In case any such action is brought against an Indemnified Party, Adviser and Distributor will be entitled to participate, at its own expense, in the defense of such action. Adviser and Distributor also shall be entitled to assume the defense thereof (which shall include, without limitation, the conduct of any ruling request and closing agreement or other settlement proceeding with the Internal Revenue Service), with counsel approved by the Indemnified 30 Party named in the action, which approval shall not be unreasonably withheld. After notice from Adviser or Distributor to such Indemnified Party of their election to assume the defense thereof, the Indemnified Party will cooperate fully with Adviser and Distributor and shall bear the fees and expenses of any additional counsel retained by it, and Adviser and Distributor will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation. 13.3 EFFECT OF NOTICE. Any notice given by the indemnifying Party to an Indemnified Party referred to in Section 13.1(c) or 13.2(e) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise. SECTION 13. APPLICABLE LAW This Agreement will be construed and the provisions hereof interpreted under and in accordance with New York law, without regard for that state's principles of conflict of laws. SECTION 14. EXECUTION IN COUNTERPARTS This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument. 31 SECTION 15. SEVERABILITY If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby. SECTION 16. RIGHTS CUMULATIVE The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws. SECTION 17. RESTRICTIONS ON SALES OF FUND SHARES Insurer agrees that the Fund will be permitted (subject to the other terms of this Agreement) to make its shares available to separate accounts of other life insurance companies. SECTION 18. HEADINGS The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement. 32 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever Name: Steven M. Kluever Title: Second Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: Name: Title: President & Chief Operating Officer ALLIANCE FUND DISTRIBUTORS, INC. By: Name: Title: Managing Director 33 SCHEDULE A Portfolios of the Fund made available under this Agreement: Premier Growth Portfolio Growth and Income Portfolio Growth Portfolio Technology Portfolio 34 SCHEDULE B Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Delaware-Lincoln ChoicePlus Variable Annuity 35 3910 AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of July 15, 2000 ("Agreement"), by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and Alliance Fund Distributors, Inc., a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS Insurer, the Distributor, and the Adviser have entered into a Participation Agreement, dated as of February 15, 2000, whereby Class B shares of the Premier Growth Portfolio, the Growth and Income Portfolio, the Growth Portfolio, and the Technology Portfolio (the "Portfolios") of Alliance Variable Products Series Fund, Inc. (the "Fund"), as listed in Schedule A of the Participation Agreement, as may be amended from time to time, are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B of the Participation Agreement, as may be amended from time to time; and WHEREAS, the Parties now desire to amend the Participation Agreement to make shares of the Portfolios of the Fund available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected in the attached Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Name: Steven M. Kluever Title: Second Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: Name: Edmund P. Bergan, Jr. Title: Vice President and Assistant General Counsel ALLIANCE FUND DISTRIBUTORS, INC. By: Name: Richard A. Winge Title: Managing Director and Sr. Vice President AMENDMENT TO SCHEDULE B AS OF JULY 15, 2000 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Lincoln ChoicePlus Variable Annuity Individual MultiFund Group MultiFund Group Variable Annuity (GVA) I, II, III Lincoln ChoicePlus Access Lincoln ChoicePlus Bonus AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of July 15, 2001 ("Agreement"), by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and Alliance Fund Distributors, Inc., a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS the Insurer, the Contracts Distributor, the Distributor, and the Adviser have entered into a Participation Agreement, dated as of February 15, 2000, whereby Class B shares of certain portfolios (the "Portfolios") of Alliance Variable Products Series Fund, Inc. (the "Fund"), as listed in Schedule A of the Participation Agreement, as may be amended from time to time, are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B of the Participation Agreement, as may be amended from time to time to be offered through Contracts Distributor; and WHEREAS, the Parties now desire to amend the Participation Agreement to make shares of the Small Cap Value Portfolio of the Fund, as indicated in Schedule A ("Amended Schedule A") available to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer; and WHEREAS, the Parties now desire to amend the Participation Agreement to make shares of the Portfolios of the Fund available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer to be offered through Contracts Distributor listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected in the attached Amendment to Schedule A and Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever Name: Steven M. Kluever Title: Second Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: Name: Title: Presidnet & Chief Operating Officer ALLIANCE FUND DISTRIBUTORS, INC. By: /s/ Richard Winge Name: Richard Winge Title: Managing Director AMENDMENT TO SCHEDULE A AS OF JULY 15, 2001 Portfolios of the Fund made available under this Agreement: Premier Growth Portfolio Growth and Income Portfolio Growth Portfolio Technology Portfolio AllianceBernstein Small Cap Value Portfolio AMENDMENT TO SCHEDULE B AS OF JULY 15, 2001 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Lincoln Choice Plus Variable Annuity Lincoln Choice Plus Access Lincoln Choice Plus Bonus Lincoln Choice Plus II Lincoln Choice Plus II Access Lincoln Choice Plus II Bonus Lincoln Choice Plus II Advance Individual MultiFund Group MultiFund Group Variable Annuity (GVA) I, II, & III LVUL(cv) LVUL(db) LVUL(cv2) Money Guard LSVUL II LCVUL LCVUL III Wells Fargo New Directions Core Wells Fargo New Directions Access Wells Fargo New Directions Access 4 Lincoln Life Director(TM) AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of May 1, 2003 ("Agreement"), by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investment Research and Management, Inc. (formerly Alliance Fund Distributors, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS the Insurer, the Distributor, and the Adviser have entered into a Participation Agreement, dated as of February 15, 2000, whereby Class B shares of certain portfolios (the "Portfolios") of AllianceBernstein Variable Products Series Fund, Inc. (formerly Alliance Variable Products Series Fund, Inc.) (the "Fund"), as listed in Schedule A of the Participation Agreement, as may be amended from time to time, are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B of the Participation Agreement, as may be amended from time to time; and WHEREAS, the Parties now desire to amend the Participation Agreement to make shares of the Portfolios of the Fund available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected in the attached Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C. M. Taylor Name: Rise C. M. Taylor Title: Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: /s/ Edmund P. Bergan, Jr. Name: Edmund P. Bergan, Jr. Title: Vice President and Assistant General Counsel ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. By: /s/ Richard A. Winge Name: Richard A. Winge Title: Senior Vice President and Managing Director AMENDMENT TO SCHEDULE B AS OF MAY 1, 2003 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Lincoln Choice Plus Variable Annuity Lincoln Choice Plus Access Lincoln Choice Plus Bonus Lincoln Choice Plus II Lincoln Choice Plus II Access Lincoln Choice Plus II Bonus Lincoln Choice Plus II Advance Lincoln Choice Plus Assurance (B Share) Lincoln Choice Plus Assurance (C Share) Lincoln Choice Plus Assurance (L Share) Lincoln Choice Plus Assurance (Bonus) Individual MultiFund Group MultiFund Group Variable Annuity (GVA) I, II, & III LVUL(CV) LVUL(DB) LVUL(CV2) LVUL(DBII) LVUL(CVIII) Money Guard LSVUL II LSVUL III LCVUL LCVUL III Lincoln Corporate Variable 4 Lincoln Corporate Variable Private Solutions Wells Fargo New Directions Core Wells Fargo New Directions Access Wells Fargo New Directions Access 4 SEI Variable Annuity SEI Select Variable Annuity Lincoln Life Director(TM) AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of July 1, 2004 ("Agreement"), is hereby amended as of July 1, 2005, by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investment Research and Management, Inc. (formerly Alliance Fund Distributors, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS the Insurer, the Distributor, and the Adviser have entered into a Participation Agreement, dated as of February 15, 2000, whereby shares of certain portfolios (the "Portfolios") of AllianceBernstein Variable Products Series Fund, Inc. (formerly Alliance Variable Products Series Fund, Inc.) (the "Fund"), as listed in Schedule A of the Participation Agreement, as may be amended from time to time, are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B of the Participation Agreement, as may be amended from time to time ; and WHEREAS, the Parties now desire to amend the Participation Agreement as follows: 1. The following is added under Section 4. Legal and Compliance: SECTION 4.7 MARKET TIMING The Company has adopted its own Market Timing policies and procedures and will apply these policies and procedures consistently to all contractowners. The Company will also investigate any patterns of trading behavior identified by the Fund. As permitted by law, the Company agrees to cooperate fully with the Distributor for the purpose of preventing market timing, and will upon request furnish the Distributor such information as Distributor may consider necessary or desirable to review the possible existence and extent of market timing by any contractowner. Once Market Timing has been identified within a contract under the Company's Market Timing Procedures or if the Distributor so determines based on its review of the information furnished by the Company, will impose restrictions on the contractowner's ability to make future transfers. 2. Class A shares of the Portfolios of the Fund, as listed in Schedule A ("Amendment to Schedule A") of the Participation Agreement, were made available as of July 15, 2001, to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer, and are governed by the terms and conditions of the Participation Agreement (with the exception of Section 9); and 3. Shares of the Portfolios of the Fund are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected herein and in the attached Amendment to Schedule A and Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor -------------------- Name: Rise C. M. Taylor Title: Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: /s/ Marc O. Mayer ----------------- Name: Marc O. Mayer Title: Executive Vice President ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. By: /s/ Stephen Scanlon ------------------- Name: Stephen Scanlon Title: Senior Vice President AMENDMENT TO SCHEDULE A AS OF JULY 1, 2004 Portfolios of the Fund made available under this Agreement: CLASS A SHARES Premier Growth Portfolio Growth and Income Portfolio Growth Portfolio Technology Portfolio AllianceBernstein Small Cap Value Portfolio CLASS B SHARES Premier Growth Portfolio Growth and Income Portfolio Growth Portfolio Technology Portfolio AllianceBernstein Small Cap Value Portfolio AMENDMENT TO SCHEDULE B AS OF JULY 1, 2004 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: Lincoln Choice Plus Variable Annuity Lincoln Choice Plus Access Lincoln Choice Plus Bonus Lincoln Choice Plus II Lincoln Choice Plus II Access Lincoln Choice Plus II Bonus Lincoln Choice Plus II Advance Lincoln Choice Plus Assurance (B Share) Lincoln Choice Plus Assurance (C Share) Lincoln Choice Plus Assurance (L Share) Lincoln Choice Plus Assurance (Bonus) Individual Multi-Fund(R) 1-4 Individual Multi-Fund(R) Select Group Multi-Fund(R) Group Variable Annuity (GVA) I, II, & III VUL(ONE) Momentum VUL(ONE) VUL(CV) VUL(CV) II VUL(CV) III VUL(CV) IV VUL(DB) VUL(DB) II VUL(DB) IV Money Guard SVUL II SVUL III SVUL IV CVUL CVUL III Lincoln Corporate Variable 4 Lincoln Corporate Variable Private Solutions Wells Fargo New Directions Core Wells Fargo New Directions Access Wells Fargo New Directions Access 4 SEI Variable Annuity SEI Select Variable Annuity Lincoln Life Director (TM) AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, effective as of May 1, 2005 ("Agreement"), is hereby amended and restated as of July 1, 2005, by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investment Research and Management, Inc. (formerly Alliance Fund Distributors, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS the Insurer, the Distributor, and the Adviser have entered into a Participation Agreement, dated as of February 15, 2000, whereby shares of certain portfolios (the "Portfolios") of AllianceBernstein Variable Products Series Fund, Inc. (formerly Alliance Variable Products Series Fund, Inc.) (the "Fund"), as listed in Schedule A of the Participation Agreement, as may be amended from time to time, are made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B of the Participation Agreement, as may be amended from time to time ; and WHEREAS, the Parties now desire to amend the Participation Agreement as follows: 1. The following is added under Section 4. Legal and Compliance: SECTION 4.7 MARKET TIMING The Company has adopted its own Market Timing policies and procedures and will apply these policies and procedures consistently to all contractowners. The Company will also investigate any patterns of trading behavior identified by the Fund. As permitted by law, the Company agrees to cooperate fully with the Distributor for the purpose of preventing market timing, and will upon request furnish the Distributor such information as Distributor may consider necessary or desirable to review the possible existence and extent of market timing by any contractowner. Once Market Timing has been identified within a contract under the Company's Market Timing Procedures, or if the Distributor so determines based on its review of the information provided by the Company, we will impose restrictions on the contractowner's ability to make future transfers. 2. To change the names of certain portfolios, as indicated in Schedule A ("Amendment to Schedule A") that serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer; and 3. To make shares of the Portfolios of the Fund available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected herein and in the attached Amendment to Schedule A and Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor -------------------- Name: Rise C. M. Taylor Title: Vice President ALLIANCE CAPITAL MANAGEMENT L.P. By: Alliance Capital Management Corporation, its General Partner By: /s/ Marc O. Mayer ----------------- Name: Marc O. Mayer Title: Executive Vice President ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT, INC. By: /s/ Stephen Scanlon ------------------- Name: Stephen Scanlon Title: Senior Vice President AMENDMENT TO SCHEDULE A AS OF MAY 1, 2005 Portfolios of the Fund made available under this Agreement: CLASS A SHARES Large Cap Growth Portfolio Growth and Income Portfolio Growth Portfolio Global Technology Portfolio Small/Mid Cap Value Portfolio CLASS B SHARES Large Cap Growth Portfolio Growth and Income Portfolio Growth Portfolio Global Technology Portfolio Small/Mid Cap Value Portfolio AMENDMENT TO SCHEDULE B AS OF MAY 1, 2005 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: ChoicePlus Variable Annuity ChoicePlus Access ChoicePlus Bonus ChoicePlus II ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (L Share) ChoicePlus Assurance (Bonus) ChoicePlus Momentum Income Option Individual Multi-Fund(R) 1-4 Individual Multi-Fund(R) Select Group Multi-Fund(R) Group Variable Annuity (GVA) I, II, & III VULONE VULONE 2005 Momentum VULONE Momentum VULONE 2005 VUL(CV) VUL(CV) II VULFlex VUL(CV) III VUL(CV) IV VUL(DB) VUL(DB) II VUL(DB) IV Money Guard SVUL II SVUL III SVUL IV CVUL III Lincoln Corporate Variable 4 Lincoln Corporate Variable Private Solutions Wells Fargo New Directions Core Wells Fargo New Directions Access Wells Fargo New Directions Access 4 SEI Variable Annuity SEI Select Variable Annuity Director (TM) AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, effective as of May 1, 2005 ("Agreement") as amended and restated as of July 1, 2005, is hereby amended and restated as of April 1, 2006, by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), AllianceBernstein L.P. (formerly Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investments, Inc. (formerly AllianceBernstein Investment Research and Management, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS, the Parties now desire to amend the Participation Agreement as follows: 1. To make shares of the Portfolios of the Fund available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected herein and in the attached Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor -------------------- Name: Rise C. M. Taylor Title: Vice President ALLIANCE BERNSTEIN L.P. By: /s/ Marc. O. Mayer Name: Marc O. Mayer Title: Executive Vice President ALLIANCE BERNSTEIN L.P. By: (see above) Name: Title: ALLIANCEBERNSTEIN INVESTMENTS, INC. By: /s/ Steve Scanlon Name: Steve Scanlon Title: Managing Director AMENDMENT TO SCHEDULE B AS OF APRIL 1, 2006 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: ChoicePlus Variable Annuity VUL(CV) II ChoicePlus Access VULFlex ChoicePlus Bonus VUL(CV) III ChoicePlus II VUL(CV) IV ChoicePlus II Access VUL(DB) ChoicePlus II Bonus VUL(DB) II ChoicePlus II Advance VUL(DB) IV ChoicePlus Assurance (B Share) Money Guard ChoicePlus Assurance (C Share) SVUL II ChoicePlus Assurance (L Share) SVUL III ChoicePlus Assurance (Bonus) SVUL IV ChoicePlus Momentum Income Option CVUL III Individual Multi-Fund(R) 1-4 Lincoln Corporate Variable 4 Individual Multi-Fund(R) Select Lincoln Corporate Variable Private Solutions Group Multi-Fund(R) Wells Fargo New Directions Core Group Variable Annuity (GVA) I, II, & III Wells Fargo New Directions Access VULONE Wells Fargo New Directions Access 4 VULONE 2005 SEI Variable Annuity Momentum VULONE SEI Select Variable Annuity Momentum VULONE 2005 Director(TM) VUL(CV) Lincoln American Legacy Retirement Group Annuity
AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, effective as of May 1, 2005 ("Agreement") as amended and restated as of July 1, 2005, is hereby amended and restated as of May 1, 2006, by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), AllianceBernstein L.P. (formerly Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investments, Inc. (formerly AllianceBernstein Investment Research and Management, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS, the Parties now desire to amend the Participation Agreement as follows: 1. To make shares of the Portfolios of the Fund listed in Schedule A available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedules A and B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected herein and in the attached Amendment to Schedules A and B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President ALLIANCE BERNSTEIN L.P. By: /s/ Marc O. Mayer Name: Marc O. Mayer Title: Executive VP ALLIANCE BERNSTEIN L.P. By: /s/ Adam Spilka Name: Adam Spilka Title: Secretary ALLIANCEBERNSTEIN INVESTMENTS, INC. By: /s/ Steven Scanlon Name: Steven Scanlon Title: Managing Director AMENDMENT TO SCHEDULE A AS OF MAY 1, 2006 Portfolios of the Fund made available under this Agreement: CLASS A SHARES Large Cap Growth Portfolio Growth and Income Portfolio Growth Portfolio Global Technology Portfolio Small/Mid Cap Value Portfolio International Value Portfolio CLASS B SHARES Large Cap Growth Portfolio Growth and Income Portfolio Growth Portfolio Global Technology Portfolio Small/Mid Cap Value Portfolio International Value Portfolio AMENDMENT TO SCHEDULE B AS OF MAY 1, 2006 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: ChoicePlus Variable Annuity VUL(CV) II ChoicePlus Access VULFlex ChoicePlus Bonus VUL(CV) III ChoicePlus II VUL(CV) IV ChoicePlus II Access VUL(DB) ChoicePlus II Bonus VUL(DB) II ChoicePlus II Advance VUL(DB) IV ChoicePlus Assurance (B Share) Money Guard ChoicePlus Assurance (C Share) SVUL II ChoicePlus Assurance (L Share) SVUL III ChoicePlus Assurance (Bonus) SVUL IV ChoicePlus Momentum Income Option SVULONE Individual Multi-Fund(R) 1-4 CVUL III Individual Multi-Fund(R) Select Lincoln Corporate Variable 4 Individual Multi-Fund(R) 5 Lincoln Corporate Variable 5 Group Multi-Fund(R) Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, & III Wells Fargo New Directions Core VULONE Wells Fargo New Directions Access VULONE 2005 Wells Fargo New Directions Access 4 Momentum VULONE SEI Variable Annuity Momentum VULONE 2005 SEI Select Variable Annuity Momentum SVULONE Director(TM) VUL(CV) Lincoln American Legacy Retirement Group Annuity
AMENDMENT TO PARTICIPATION AGREEMENT THIS AGREEMENT, effective as of May 1, 2005 ("Agreement") as amended and restated as of July 1, 2005 and May 2, 2006, is hereby amended and restated as of October 1, 2006, by and among The Lincoln National Life Insurance Company, an Indiana life insurance company ("Insurer"), AllianceBernstein L.P. (formerly Alliance Capital Management L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the Fund referred to below; and AllianceBernstein Investments, Inc. (formerly AllianceBernstein Investment Research and Management, Inc.), a Delaware corporation ("Distributor"), the Fund's principal underwriter (collectively, the "Parties"), WITNESSETH THAT: WHEREAS, the Parties now desire to amend the Participation Agreement as follows: 1. To make shares of the Portfolios of the Fund made available by Distributor to serve as underlying investment media for variable annuity contracts and variable life insurance policies issued by Insurer listed in Schedule B ("Amendment to Schedule B"). NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereby amend the Participation Agreement as reflected herein and in the attached Amendment to Schedule B. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ---------------------- Name: Kelly D. Clevenger Title: Vice President ALLIANCE BERNSTEIN L.P. By: /s/ Marc Mayer -------------- Name: Marc Mayer Title: Executive Vice President ALLIANCE BERNSTEIN L.P. By: /s/ Adam Spilka --------------- Name: Adam Spilka Title: Secretary ALLIANCEBERNSTEIN INVESTMENTS, INC. By: /s/ Stephen Scanlon ------------------- Name: Stephen Scanlon Title: Managing Director AMENDMENT TO SCHEDULE B AS OF OCTOBER 1, 2006 Insurer Contracts to which the Portfolios of the Fund are made available under this Agreement: ChoicePlus Variable Annuity VUL(CV) ChoicePlus Access VUL(CV) II ChoicePlus Bonus VULFlex ChoicePlus II VUL(CV) III ChoicePlus II Access VUL(CV) IV ChoicePlus II Bonus VUL(DB) ChoicePlus II Advance VUL(DB) II ChoicePlus Assurance (B Share) VUL(DB) IV ChoicePlus Assurance (C Share) Money Guard ChoicePlus Assurance (L Share) SVUL II ChoicePlus Assurance (Bonus) SVUL III ChoicePlus Assurance (A Share) SVUL IV ChoicePlus Design SVULONE ChoicePlus Momentum Income Option CVUL III Individual Multi-Fund(R) 1-4 Lincoln Corporate Variable 4 Individual Multi-Fund(R) Select Lincoln Corporate Variable 5 Individual Multi-Fund(R) 5 Lincoln Corporate Variable Private Solutions Group Multi-Fund(R) Wells Fargo New Directions Core Group Variable Annuity (GVA) I, II, & III Wells Fargo New Directions Access VULONE Wells Fargo New Directions Access 4 VULONE 2005 SEI Variable Annuity Momentum VULONE SEI Select Variable Annuity Momentum VULONE 2005 Director(TM) Momentum SVULONE Lincoln American Legacy Retirement Group Annuity
EX-99 9 a2182658zex-99_1.txt 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: /s/ William M. Lyons By: /s/ Reed P. Miller William M. Lyons Name: Reed P. Miller Executive Vice PRESIDENT Title: Vice President 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 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. By: /s/ William M. Lyons William M. Lyons Executive Vice President AMERICAN CENTURY INVESTMENT SERVICES, INC. By: /s/ William M. Lyons 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
AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of July 15, 2001, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and AMERICAN CENTURY INVESTMENT MANAGEMENT, INC ("ACIM"). 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 and amended February 1, 1999 (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, the parties desire to amend the Agreement in order to add additional Contracts available under the Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. ADDITION OF CONTRACTS AVAILABLE UNDER THE AGREEMENT. Schedule A is hereby deleted in its entirety and is replaced with a new Schedule A, attached hereto. 2. 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. 3. 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. 4. 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. 2 as of the date first above written. LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY MANAGEMENT, INC. By: /s/ Steven M. Kluever By: /s/ David C. Tucker ----------------------------------- ----------------------------------- Name: Steven M. Kluever Name: David C. Tucker ------------------------------ --------------------------------- Title: Second Vice President Title: SR. Vice President ----------------------------- -------------------------------- AS AMENDED EFFECTIVE JULY 15, 2001 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 CVUL Variable Life CVUL Series III Variable Life AMENDMENT NO. 4 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 4 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of May 1, 2003, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and AMERICAN CENTURY INVESTMENT SERVICES, INC ("ACIM"). 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, as amended February 1, 1999, July 15, 2001 and January 6, 2003 (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, the parties desire to amend the Agreement in order to add additional Contracts available under the Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. ADDITION OF CONTRACTS AND FUNDS AVAILABLE UNDER THE AGREEMENT. Schedules A and B are hereby deleted in their entirety and are replaced with new Schedules A and B, attached hereto. 2. 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. 3. 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. 4. 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. 4 as of the date first above written. LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY SERVICES, INC. By: /s/ Rise C. M. Taylor By: /s/ William M. Lyons -------------------------------- -------------------------------- Name: Rise C. M. Taylor Name: William M. Lyons Title: Vice President ------------------------------ Title: PRESIDENT ----------------------------- 2 AS AMENDED EFFECTIVE MAY 1, 2003 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity e-Annuity Variable Annuity CVUL Variable Life CVUL Series III Variable Life Lincoln Corporate Variable 4 Lincoln Corporate Private Solution 3 AS AMENDED EFFECTIVE MAY 1, 2003 SCHEDULE B SEPARATE ACCOUNTS OF THE LINCOLN NATIONAL LIFE INSURANCE COMPANY INVESTING IN CERTAIN FUNDS
SEPARATE ACCOUNT NAME AMERICAN CENTURY CLASS I 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 Flexible Premium Variable Life Account S VP International; VP Income and Growth Lincoln Life Flexible Premium Variable Life Account Z VP International; VP Income and Growth
4 AMENDMENT NO. 5 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 5 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of May 1, 2004, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company"), AMERICAN CENTURY INVESTMENT MANAGEMENT, INC ("ACIM") and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("ACIS"). Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement (defined below). RECITALS WHEREAS, the Company and ACIM are parties to that certain Fund Participation Agreement dated September 26, 1996, as amended February 1, 1999, July 15, 2001, January 6, 2003 and May 1, 2003 (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; and WHEREAS, as of March 13, 2000, American Century Investment Services, Inc. ("ACIS") became the sole distributor for the Funds and ACIM wishes to assign to ACIS all its rights and obligations under the Agreement; WHEREAS, the parties desire to amend the Agreement to add new products, a new separate account and new funds to be made available through the separate account to the Agreement; and WHEREAS, the parties have agreed to revise the reimbursement terms as set forth herein in connection with the offering of specific Funds; NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. ASSIGNMENT BY ACIM. On March 13, 2000, ACIS became the sole distributor of the Funds. ACIM hereby assigns all its rights and obligations under the Agreement to ACIS and ACIS hereby accepts such assignment. The Company hereby consents to such assignment. After the date of this Amendment, all references to "ACIM" in the Agreement shall be deemed to refer to ACIS. 2. SCHEDULE A AND SCHEDULE B. Schedules A and B are hereby deleted and replaced in their entirety with Schedules A and B attached hereto. 3. COMPENSATION AND EXPENSES. Sections 6(b) and (c) are hereby deleted in their entirety and the following sections are substituted in lieu thereof: "(b) ACIS 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 1 performance of all other obligations under this Agreement by the Company, Distributor will pay the Company its prorata share of a fee (the "Administrative Services Fee") as set forth on the attached SCHEDULE C of the average aggregate amount invested by the Company in Class I and Class II shares of the Funds under this Agreement. For purposes of this Section 6(b), the average aggregate investment amount of Company's investment shall include assets of Lincoln Life & Annuity Company of New York and UNUM Life Insurance Company of America and First UNUM Life Insurance Company acquired by Company. The payments received by the Company do not constitute payment in any manner for investment advisory services. "(c) In consideration of performance of the Distribution Services specified on SCHEDULE D by the Company, Distributor will pay the Company a fee (the "Distribution Fee") of 25 basis points (0.25%) of the average aggregate amount invested by the Company in Class II of the VP Inflation Protection Fund under this Agreement." 4. TERMINATION. In connection with the expansion of Funds available under the Agreement, Section 14 is hereby amended by deleting Section 14(f) in its entirety and replacing it with the following language: "(f) upon assignment by either party hereto: The following language is hereby added as Section 14(m): "(m) by a vote of a majority of independent directors of the Funds." 5. Section 20 is hereby deleted in its entirety and the following Section 20 is substituted in lieu thereof: "20. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned and will be terminated automatically upon any attempted assignment. This Agreement shall be binding upon and inure to the benefit of both parties hereto." 6. 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. 7. 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. 8. 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. 2 IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 5 as of the date first above written. LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY MANAGEMENT, INC. By: /s/ Rise C.M. Taylor By: /s/ William M. Lyons --------------------------- -------------------------- Name: Rise C.M. Taylor Name: William M. Lyons Title: Vice President Title: President AMERICAN CENTURY INVESTMENT SERVICES, INC. By: /s/ William M. Lyons --------------------------- Name: William M. Lyons Title: President 3 AS AMENDED EFFECTIVE MAY 1, 2004 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity eAnnuity Variable Annuity CVUL Variable Life CVUL Series III Variable Life Lincoln Corporate Variable 4 Lincoln Corporate Private Solution MultiFund(R) 5 Director ChoicePlus ChoicePlus Access ChoicePlus Bonus ChoicePlus II ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (Bonus) ChoicePlus Assurance (L Share) ChoicePlus Momentum Income Option Lincoln VUL(CV) Lincoln VUL(CV) II Lincoln VUL(CV) II Elite Lincoln VUL(CV) III Lincoln VUL(CV) IV Lincoln VUL(CV) IV M Lincoln VUL(DB) Lincoln VUL(DB) Elite Lincoln VUL(DB) II Lincoln VUL(DB) IV Lincoln VUL(DB) IV M Lincoln SVUL Lincoln SVUL II Lincoln SVUL II Elite Lincoln SVUL III 4 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 Fund, VP Capital Appreciation Fund (Class I) Lincoln National Variable Annuity Account C VP International Fund (Class I); VP Inflation Protection Fund (Classes I & II) Lincoln Life Variable Annuity Account N VP Inflation Protection Fund (Classes I & II) Lincoln Life Flexible Premium Variable Life VP International Fund, VP Income and Growth Account S Fund (Class I) Lincoln Life Flexible Premium Variable Life VP International Fund, VP Income and Growth Account Z Fund (Class I) Lincoln National Life Insurance Company VP Inflation Protection Fund (Classes I & II) Separate Account 92 Lincoln Life Flexible Premium Variable VP Inflation Protection Fund (Classes I & II) Life Account M Lincoln Life Flexible Premium Variable VP Inflation Protection Fund (Classes I & II) Life Account R
5 SCHEDULE C FUNDS AVAILABLE AND ADMINISTRATIVE SERVICES FEES CLASS I OF: VP Balanced Fund VP Capital Appreciation Fund VP International Fund VP Income & Growth Fund Fees: 20 basis points on first $50M in total assets(1) 25 basis points on total assets in excess of $50M CLASSES I & II OF: VP Inflation Protection Fund Fees: 20 basis points on first $30M in assets(2) of Classes I & II of this Fund 25 basis points on combined assets of Classes I & II of this Fund in excess of $30M - ---------- (1) The total asset level shall include only those Funds that meet the requirements for reimbursement in accordance with the schedule as set forth above. The total asset level shall be determined by aggregating the assets invested in the Funds by the Company with all assets (except VP Class II Fund assets) invested in the American Century family of funds by the following affiliates of the Company: Lincoln Life & Annuity Company of New York UNUM Life Insurance Company of America First UNUM Life Insurance Company (2) The total asset level shall include only Classes I & II of the VP Inflation Protection Fund in accordance with the schedule as set forth above. The total asset level shall be determined by aggregating the assets invested in Classes I & II of the VP Inflation Protection Fund by the Company and Lincoln Life & Annuity Company of New York. 6 SCHEDULE D DISTRIBUTION SERVICES Pursuant to the Agreement to which this is attached, the Company shall perform distribution services for Advisor Class shares of the Funds, including, but not limited to, the following: 1. Receive and answer correspondence from prospective shareholders, including distributing prospectuses, statements of additional information, and shareholder reports. 2. Provide facilities to answer questions from prospective investors about Fund shares. 3. Assist investors in completing application forms and selecting dividend and other account options. 4. Provide other reasonable assistance in connection with the distribution of Fund shares. 7 AMENDMENT NO. 6 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 6 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of July 1, 2004, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company"), AMERICAN CENTURY INVESTMENT MANAGEMENT, INC ("ACIM") and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("ACIS"). Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement (defined below). RECITALS WHEREAS, the Company and ACIM are parties to that certain Fund Participation Agreement dated September 26, 1996, as amended February 1, 1999, July 15, 2001, January 6, 2003, May 1, 2003 and May 1, 2004 (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; and WHEREAS, the parties desire to amend the Agreement to revise the list of separate accounts for which Funds are made available under the Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. SCHEDULE A. Schedule A is hereby deleted in its entirety and is replaced by Schedule A, attached hereto. 2. 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. 3. 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. 4. 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. 6 as of the date first above written. LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY SERVICES, INC. By: /s/ Rise C. M. Tayor By: /s/ William M. Lyons --------------------------- --------------------------- Name: Rise C.M. Taylor Name: William M. Lyons Title: Vice President Title: President 2 AS AMENDED EFFECTIVE OCTOBER 1, 2004 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity eAnnuity Variable Annuity CVUL Variable Life CVUL Series III Variable Life Lincoln Corporate Variable 4 Lincoln Corporate Private Solution MultiFund(R) 5 Director ChoicePlus ChoicePlus Access ChoicePlus Bonus ChoicePlus II ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (Bonus) ChoicePlus Assurance (L Share) ChoicePlus Momentum Income Option Lincoln VUL(CV) Lincoln VUL(CV) II Lincoln VUL(CV) II Elite Lincoln VUL(CV) III Lincoln VUL(CV) IV Lincoln VUL(DB) Lincoln VUL(DB) Elite Lincoln VUL(DB) II Lincoln VUL(DB) IV Lincoln VUL(ONE) Lincoln Momentum VUL(ONE) Lincoln SVUL Lincoln SVUL II Lincoln SVUL II Elite Lincoln SVUL III Lincoln SVUL IV 3 AMENDMENT NO. 7 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 7 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of May 1, 2006, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("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, as amended February 1, 1999, July 15, 2001, January 6, 2003, May 1, 2003, May 1, 2004 and July 1, 2004 (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; and WHEREAS, the parties desire to amend the Agreement to revise the list of variable annuity contracts and variable life policies supported by the separate accounts listed in the Agreement; and WHEREAS, the parties desire to amend the Agreement to revise the list of separate accounts for which Funds are made available under the Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. SCHEDULES A AND B. Schedules A and B are hereby deleted in their entirety and are replaced by Schedules A and B, attached hereto. 2. 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. 3. 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. 4. 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. 7 as of the date first above written. THE LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY SERVICES, INC. By: /s/ Kelly D. Clevenger By: /s/ David Larrabee --------------------------------- ------------------------------------ Name: Kelly D. Clevenger Name: David Larrabee Title: Vice President Title: Senior Vice President 2 AS AMENDED EFFECTIVE MAY 1, 2006 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity eAnnuity Variable Annuity CVUL Variable Life CVUL Series III Variable Life Lincoln Corporate Variable 4 Lincoln Corporate Variable 5 Lincoln Corporate Variable Private Solution MultiFund(R) 5 Director ChoicePlus ChoicePlus Access ChoicePlus Bonus ChoicePlus II ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (Bonus) ChoicePlus Assurance (L Share) ChoicePlus Momentum Income Option Lincoln VUL(CV) Lincoln VUL(CV) II Lincoln VUL(CV) II Elite Lincoln VUL(CV) III Lincoln VUL(CV) IV Lincoln VUL(DB) Lincoln VUL(DB) Elite Lincoln VUL(DB) II Lincoln VUL(DB) IV Lincoln VUL(ONE) Lincoln Momentum VULONE Lincoln Momentum SVULONELincoln SVUL Lincoln SVUL II Lincoln SVUL II Elite Lincoln SVUL III Lincoln SVUL IV Lincoln SVULone 3 AS AMENDED EFFECTIVE MAY 1, 2006 SCHEDULE B SEPARATE ACCOUNTS OF THE 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 Fund, VP Capital Appreciation Fund (Class I) Lincoln National Variable Annuity Account C VP International Fund (Class I); VP Inflation Protection Fund (Classes I & II) Lincoln Life Variable Annuity Account N VP Inflation Protection Fund (Classes I & II) Lincoln Life Flexible Premium Variable Life VP International Fund, VP Income and Growth Account S Fund (Class I); VP Inflation Protection Fund (Class II) Lincoln Life Flexible Premium Variable Life VP International Fund, VP Income and Growth Account Z Fund, VP Balanced Fund, VP Inflation Protection Fund, (Class I); VP Value Fund (Class II) Lincoln National Life Insurance Company VP Inflation Protection Fund (Classes I & II) Separate Account 92 Lincoln Life Flexible Premium Variable VP Inflation Protection Fund (Classes I & II) Life Account M Lincoln Life Flexible Premium Variable VP Inflation Protection Fund (Classes I & II) Life Account R
4 AMENDMENT NO. 8 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 8 TO FUND PARTICIPATION AGREEMENT (the "Amendment") is effective as of October 1, 2006, by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("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, as amended February 1, 1999, July 15, 2001, January 6, 2003, May 1, 2003, May 1, 2004, July 1, 2004 and May 1, 2006 (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; and WHEREAS, the parties desire to amend the Agreement to revise the list of variable annuity contracts and variable life policies supported by the separate accounts listed in the Agreement; and NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows: 1. SCHEDULE A. Schedule A is hereby deleted in its entirety and is replaced by Schedule A, attached hereto. 2. 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. 3. 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. 4. 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. 8 as of the date first above written. THE LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY SERVICES, INC. By: /s/ Kelly D. Clevenger By: /s/ David Larrabee --------------------------------- ------------------------------------ Name: Kelly D. Clevenger Name: David Larrabee Title: Vice President Title: Senior Vice President AS AMENDED EFFECTIVE OCTOBER 1, 2006 SCHEDULE A VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES SUPPORTED BY SEPARATE ACCOUNTS LISTED ON SCHEDULE B Group Variable Annuity eAnnuity Variable Annuity CVUL Variable Life CVUL Series III Variable Life Lincoln Corporate Variable 4 Lincoln Corporate Variable 5 Lincoln Corporate Variable Private Solution MultiFund(R) 5 Director ChoicePlus ChoicePlus Access ChoicePlus Bonus ChoicePlus II ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (Bonus) ChoicePlus Assurance (L Share) ChoicePlus Assurance (A Share) ChoicePlus Design ChoicePlus Momentum Income Option Lincoln VUL(CV) Lincoln VUL(CV) II Lincoln VUL(CV) II Elite Lincoln VUL(CV) III Lincoln VUL(CV) IV Lincoln VUL(DB) Lincoln VUL(DB) Elite Lincoln VUL(DB) II Lincoln VUL(DB) IV Lincoln VUL(ONE) Lincoln Momentum VULONE Lincoln Momentum SVULONELincoln SVUL Lincoln SVUL II Lincoln SVUL II Elite Lincoln SVUL III Lincoln SVUL IV Lincoln SVULone AMENDMENT NO. 9 TO FUND PARTICIPATION AGREEMENT THIS AMENDMENT NO. 9 TO FUND PARTICIPATION AGREEMENT (the "Amendment") by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company") and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("ACIS") is effective as of May 1, 2007 regardless of when executed. RECITALS WHEREAS, effective May 1, 2007, Lincoln Financial Distributors, Inc. assumed the role of principal underwriter of the separate accounts listed in the Agreement; NOW, THEREFORE, For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. SUBSTITUTION OF PARTY. By signing below, the parties hereby agree that Lincoln Financial Advisors Corporation shall be replaced as principal underwriter of the separate accounts and distributor of the contracts listed on Schedule B of the Agreement by Lincoln Financial Distributors, Inc., which as of the effective date of this Amendment, shall have all the rights and responsibilities associated with such substitution. 2. 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. 3. 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. 4. 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 caused this Amendment No.9 to be executed in its name and on behalf of its duly authorized officer as of the date first listed above. THE LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT INSURANCE COMPANY SERVICES, INC. By: /s/ Kelly D. Clevenger By: /s/ Brian H. Jeter ---------------------------- ---------------------------- Name: Kelly D. Clevenger Name: Brian H. Jeter Title: Vice President Title: President
EX-99 10 a2182663zex-99_1.txt FUND PARTICIPATION AGREEMENT This Agreement, effective this 1st day of July, 2003, among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ("Lincoln National"), a life insurance company organized under the laws of the State of Indiana, LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK ("LNY"), a life insurance company organized under the laws of the State of New York; AMERICAN FUNDS INSURANCE SERIES (the "Series"), an open-end management investment company organized under the laws of the Commonwealth of Massachusetts; and CAPITAL RESEARCH AND MANAGEMENT COMPANY ("CRMC"), a corporation organized under the laws of the State of Delaware, and having a business address of 333 South Hope Street, Los Angeles, California 90071. The term "Company" used in this Agreement refers to the respective undersigned life insurance company whose products are being solicited and sold. Unless otherwise stated in this Agreement, any rights, obligations and liabilities of the undersigned companies are separate and distinct. The agreements listed in Appendix A are hereby amended and restated by this Agreement as of the effective date of this Agreement. WITNESSETH: WHEREAS, the Company proposes to issue to the public, now and in the future, certain variable annuity contracts and life insurance policies (the "Contracts") as set forth in Appendix B; WHEREAS, the Company has established one or more separate accounts (the "Accounts"), as set forth in Appendix C, for the purposes of issuing the Contracts and has or will register the Accounts with the United States Securities and Exchange Commission (the "SEC") as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") unless exempt therefrom; WHEREAS, the Series was established for the purpose of serving as the investment vehicle for variable annuity contracts and variable life insurance policies offered by insurance companies; WHEREAS, the Series has received a "Mixed and Shared Funding Order" from the SEC granting relief from the certain provisions of the 1940 Act and the rules thereunder to the extent necessary to permit shares of the Series to be sold to variable annuity and life insurance separate accounts of unaffiliated insurance companies; WHEREAS, the Series is divided into various funds (the "Funds"), some of which are set forth in Appendix D, each Fund being subject to certain fundamental investment policies some of which may not be changed without a majority vote of the shareholders of such Fund; WHEREAS, certain Funds will serve as the underlying investments for the Contracts, one Fund for each Subaccount (the "Subaccount"); and WHEREAS, CRMC, by virtue of an Investment Advisory and Service Agreement between CRMC and the Series, will serve as the investment adviser to the Series, as the term "investment adviser" is defined in the 1940 Act. NOW THEREFORE, in consideration of the foregoing and of mutual covenants and conditions set forth herein and for other good and valuable consideration, the Company, the Account, the Series and CRMC hereby agree as follows: 1. The Series and CRMC each represents and warrants to the Company that: (i) a registration statement under the Securities Act of 1933 (the "1933 Act") and under the 1940 Act with respect to the Series has been filed with the SEC in the form previously delivered to the Company, and copies of any and all amendments thereto will be forwarded to the Company at the time that they are filed with the SEC; (ii) the Series is, and shall be at all times while this Agreement is in force, lawfully organized, validly existing, and properly qualified as an open-end management investment company; and (iii) the Series registration statement and any further amendments or supplements thereto (the "Prospectus") will, when they become effective, conform in all material respects to the requirements of the 1933 Act and the 1940 Act, and the rules and regulations of the SEC thereunder, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Series by the Company expressly for use therein; (iv) the Series currently qualifies 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 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; and (v) the Series will comply with Section 817(h) of the Code, and all regulations issued thereunder. 2. The Company represents and warrants that: (i) the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, unless exempt; (ii) the Contracts will be issued in compliance in all material respects with all 2 applicable federal and state laws; (iii) it has registered or will register, prior to the issuance of any Contracts, each Account (unless exempt) as a unit investment trust in accordance with the provisions of the 1940 Act; (iv) the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, under the applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Series immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated; (v) any information furnished in writing by the Company to the Series for use in the registration statement of the Series will not result in the registration statement's failing to conform in all material respects to the requirements of the 1933 Act and the 1940 Act and the rules and regulations thereunder, nor will contain any untrue statement of a material fact nor will omit a material fact required to be stated therein or necessary to make the statements therein not misleading; and (vi) The Company and its affiliates shall make no representations concerning the Series' shares except those contained in the then current Prospectus of the Series, and in such printed information subsequently issued on behalf of the Series or other funds managed by CRMC as supplemental to the appropriate Prospectus, or in materials approved by American Funds Distributors, Inc. ("AFD") as provided in the Business Agreement in effect among the Company, AFD and CRMC dated as of July 1, 2003. 3. The Series will furnish to the Company such information with respect to the Series in such form and signed by such of its officers as the Company may reasonably request, and will warrant that the statements therein contained when so signed will be true and correct. The Series will advise the Company immediately of: (a) any request by the SEC (i) for amendment of the registration statement relating to the Series or (ii) for additional information; (b) the issuance by the SEC of any stop order suspending the effectiveness of the registration statement of the Series or the initiation of any proceeding for that purpose; (c) the institution of any proceeding, investigation or hearing involving the offer or sale of the Contracts or the Series of which it becomes aware; or (d) the happening of any material event, if known, which makes untrue any statement made in the registration statement of the Series or which requires the making of a change therein in order to make any statement made therein not misleading. 4. The Series will use best efforts to register for sale under the 1933 Act and, if required, under state securities laws, such additional shares of the Series as may reasonably be necessary for use as the funding vehicle for the Contracts. 5. The Series has made and agrees to make Class 1 and Class 2 shares of the Funds available to the Contracts. To the extent the Company uses Class 2 shares, it or an affiliate will 3 be entitled to receive a fee from the Series, to be accrued daily and paid monthly in arrears, of 0.25% per annum of Class 2 assets attributable to the Contracts for personal services and account maintenance services for Contract owners for as long as the Series' Rule 12b-1 plan remains in effect. 6. Fund shares to be made available to Accounts for the Contracts shall be sold by the Series and purchased by the Company for a given Account at the net asset value (without the imposition of a sales load) next computed after receipt of each order by the Series or its designee, as established in accordance with the provisions of the then current Prospectus of the Series. For purposes of this Paragraph 6, the Company shall be a designee of the Series for receipt of such orders from each Account, and receipt by such designee by 4:00 p.m. New York time (or such other time as the Board of Trustees of the Series shall designate) shall constitute receipt by the Series, provided that the Series receives notice of such order by 10:00 a.m. New York time on the following business day ("Next Business Day"). "Business Day" shall mean any day on which the New York Stock Exchange ("NYSE") is open for trading and on which the Series calculates the net asset values of each class of shares of each Fund pursuant to the rules of the SEC. The Series will make the shares of each class available indefinitely for purchase at the applicable net asset value per share on those days on which the Series calculates its net asset value pursuant to the rules of the SEC, and the Series shall use its best efforts to calculate such net asset value on each day on which the NYSE is open for trading. The Series shall make the net asset value per share for each class of each of the Funds available to the Company (using a mutually agreed upon format) on a daily basis as soon as reasonably practical after the Series calculates such net asset values per share, and the Series shall use its best efforts to make such net asset values per share available by 6:00 p.m. New York time. The Series will notify the Company if the Series cannot communicate the net asset value per share by 6:00 p.m. New York time. Any material errors in the calculation of the net asset value shall be reported immediately upon discovery to the Company. The Series and its investment adviser are responsible for maintaining net asset values for the Funds in accordance with the requirements of the 1940 Act and its current Prospectus. Shares of particular Funds shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Company will pay for shares on the same day the Series receives notice of the purchase request. Payment for shares purchased shall be made to the Series in federal funds initiated by wire by 2:00 p.m. New York time, to be received by the close of business, as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. If payment is not received by the Series on such Business Day, the Company shall, upon the Series' request, promptly reimburse the Series for any charges, costs, fees, interest or other expenses incurred in connection with any advances, borrowing, or overdrafts. The Series will confirm receipt of each trade (ending share balance by the Account and the Fund) (using a mutually agreed upon format) by 1:00 p.m. New York time on the Business Day the trade is placed with the Series. The Series reserves the right to temporarily suspend sales if the Board of Trustees of the Series deems it appropriate and in the best interests of the Series or in response to the order of an appropriate regulatory authority. 4 7. The Company shall use its best efforts and shall cooperate, to the extent permitted under its Contracts, with the Series to enforce policies stated in the Series' Prospectus regarding transactions in shares, particularly those related to market timing. The Company acknowledges that the Series has the right to refuse any purchase order for any reason, particularly if the Series determines that a Fund would be unable to invest the money effectively in accordance with its investment policies or would be otherwise adversely affected due to the size of the transaction, frequency of trading by the Account or other factors. 8. The Contracts funded through each Account will provide for the allocation of net amounts among certain Subaccounts for investment in such shares of the Funds as may be offered from time to time in the Contracts. The selection of the particular Subaccount is to be made by the Contract owner and such selection may be changed in accordance with the terms of the Contracts. 9. Transfer of the Series' shares will be by book entry only. No stock certificates will be issued to the Account. Shares ordered from a particular Fund will be recorded by the Series as instructed by the Company in an appropriate title for the corresponding Account or subaccount. 10. The Series shall furnish notice promptly to the Company (using a mutually agreed upon format) of any dividend or distribution payable on any shares underlying Subaccounts. The Company hereby elects to receive all such dividends and distributions as are payable on shares of a Fund recorded in the title for the corresponding Subaccount in additional shares of that Fund. The Series shall notify the Company of the number of shares so issued. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. Any material errors in the calculation of the dividends or distributions shall be reported immediately upon discovery to the Company. 11. The Series shall redeem its shares in accordance with the terms of its then current prospectus. For purposes of this Paragraph 11, the Company shall be a designee of the Series for receipt of requests for redemption from each Account, and receipt by such designee by 4:00 p.m. New York time (or such other time as the Board of Trustees of the Series shall designate) shall constitute receipt by the Series; provided that the Series receives notice of such request for redemption by 10:00 a.m. New York time on the Next Business Day. The Company shall purchase and redeem the shares of Funds offered by the then current Prospectus of the Series in accordance with the provisions of such Prospectus. The Series agrees to redeem, upon the Company's request, any full or fractional shares of the designated portfolio held by the Company. The Series will pay for shares on the same day the Series receives notice from Company for the redemption request. Payment for shares shall be made to the Company in federal funds initiated by wire by 2:00 p.m. New York time, to be received by the close of business, as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. If payment is not received by the Company on such Business Day, the Series shall, upon the Company's request, promptly reimburse the Company for any charges, costs, fees, interest or other expenses incurred in connection with any advances, borrowing, or overdrafts. The Series will confirm receipt of each 5 trade (ending share balance by the Account and the Fund) (using a mutually agreed upon format) by 1:00 p.m. New York time on the Business Day the trade is placed with the Series. 12. The Series shall pay all expenses incidental to its performance under this Agreement. The Series shall see to it that all of its shares are registered and authorized for issue in accordance with applicable federal and state laws prior to their purchase for the Accounts. The Series shall bear the expenses for the cost of registration of its shares, preparation of prospectuses (and supplements thereto) and statements of additional information (and supplements thereto) to be sent to existing Contract owners (upon request in the case of the statement of additional information), proxy statements and related materials, and annual and semi-annual shareholder reports, the printing and distribution of such items to each Contract owner who has allocated net amounts to any Subaccount, the preparation of all statements and notices required from it by any federal or state law, and taxes on the issue or transfer of the Series' shares subject to this Agreement. The Series will provide to the Company, at least once a year, with enough copies of its statement of additional information to be able to distribute one to each Contract owner or prospective Contract owner who requests such statement of additional information. 13. The Company shall bear the expenses for the cost of printing and distribution of Series prospectuses (and supplements thereto) and statements of additional information (and supplements thereto) to be sent to prospective Contract owners. The Series shall provide, at its expense, such documentation (in camera ready or other mutually agreeable form) and other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for the Series is amended) to have the prospectus or prospectuses for the Contracts and the Series prospectus printed together in one or more documents. With respect to any Series prospectus that is printed in combination with any one or more Contract prospectus (the "Prospectus Booklet"), the Series shall bear the costs of printing and mailing the Prospectus Booklet to existing Contract owners based on the ratio of the number of pages of the Series prospectuses included in the Prospectus Booklet to the number of pages in the Prospectus Booklet as a whole. With respect to any Series annual and semi-annual shareholder report that is printed in combination with any one or more such reports of investment options for the Contracts (the "Report Booklet"), the Series shall bear the costs of printing and mailing the Report Booklet to existing Contract owners based on the ratio of the number of pages of the Series report included in the Report Booklet to the number of pages in the Report Booklet as a whole. 14. Shares of the Series may be offered to separate accounts of various insurance companies in addition to the Company. The Series shall comply with the provisions of Section 817 of the Internal Revenue Code of 1986 as amended and the regulations thereunder ("Section 817"). No shares will be sold to the general public. 15. The parties to this Agreement recognize that due to differences in tax treatment or other considerations, the interests of various Contract owners participating in one or more Funds might, at some time, be in conflict. Each party shall report to the other party any potential or existing conflict of which it becomes aware. The Board of Trustees of the Series shall promptly notify the Company of the existence of irreconcilable material conflict and its implications. If 6 such a conflict exists for which the Company is responsible as determined by the Board of Trustees, the Company will, at its own expense, take whatever action it deems necessary to remedy such conflict; in any case, Contract owners will not be required to bear such expenses. 16. The Company agrees to indemnify and hold the Series and CRMC and any officer, trustee, director, employee or agent of the foregoing, harmless against any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses) to which they may be subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements arising as a result of the Company: (a) making untrue statements of material facts or omitting material facts in the registration statement, prospectus or sales literature of the Contracts and/or Accounts; (b) making untrue statements of material facts that the Series includes in its materials, provided the Series relies on information supplied by the Company; (c) engaging in unlawful conduct with respect to the sale of the Contracts or Fund shares; and (d) materially breaching this Agreement or a representation or warranty. No party shall be entitled to indemnification if such loss, claim, damage, liability or expense is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 17. The Series and CRMC each agrees to indemnify and hold the Company and any officer, trustee, director, employee or agent of the foregoing, harmless against, any and all losses, claims, damages, liabilities or litigation (including reasonable legal and other expenses) to which the Company may be subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements arising as a result of the Series' or CRMC's (a) making untrue statements of material facts or omitting material facts in the registration statement, prospectus or sales literature of the Series; (b) making untrue statements of material facts that the Company includes in its materials, provided the Company relies on information supplied by or on behalf of the Series; (c) engaging in unlawful conduct with respect to the sale of the Contracts or Fund shares; (d) materially breaching this Agreement or a representation or warranty; and (e) failing to comply with the requirements of Section 817 and regulations thereunder. No party shall be entitled to indemnification if such loss, claim, damage, liability or expense is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 18. The Company shall be responsible for assuring that the Accounts provide pass-through voting privileges to Contract owners so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for the Contracts. 19. The parties understand that there is no intention to create a joint venture in the subject matter of this Agreement. Accordingly, the right to terminate this Agreement and to engage in any activity not inconsistent with this Agreement is absolute. This Agreement will terminate: 7 (i) by any party at any time upon six months' written notice to the other parties; (ii) at the option of the Company, CRMC or the Series, upon ten calendar days' prior written notice to the other parties, if a final non-appealable administrative or judicial decision is entered against any other party which has a material impact on the Contracts; (iii) at the option of the Company, upon ten calendar days' prior written notice to the other parties, if shares of the Series are not reasonably available; (iv) at the option of the Company, immediately upon written notice to the other parties, if the Series or CRMC fails to meet the requirements for either diversification under Section 817 or registered investment company status or if the Board of the Series terminates the Class 2 Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act; (v) immediately in the event the Series' shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as an underlying investment for the Contracts issued or to be issued by the Company; in such event prompt notice shall be given by the Company or the Series to the other parties; (vi) at the Company's option by written notice to CRMC or the Series if Company shall determine in its sole judgment exercised in good faith, that either CRMC or the Series 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 (vii) at CRMC's or the Series' option by written notice to Company if CRMC or the Series shall determine in its sole judgment exercised in good faith, that Company has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity. The effective date for termination pursuant to any notice required under this Paragraph shall be calculated beginning with the date of receipt of such notice to all other parties. 20. All notices, consents, waivers, and other communications under this Agreement must be in writing, and will be deemed to have been duly received (a) when delivered by hand (with written confirmation of receipt), (b) when sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) the day after it is sent by a nationally recognized overnight delivery service, in each case to the 8 appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): IF TO LINCOLN NATIONAL: The Lincoln National Insurance Company 1300 South Clinton Street Ft. Wayne, IN 46802 Attention: Rise C.M. Taylor, Vice President Facsimile No.: (260) 455-1773 IF TO LINCOLN NEW YORK: Lincoln Life & Annuity Company of New York c/o The Lincoln National Insurance Company 1300 South Clinton Street Ft. Wayne, IN 46802 Attention: Rise C.M. Taylor, Vice President Facsimile No.: (260) 455-1773 IF TO SERIES: American Funds Insurance Series 333 S. Hope Street, 55th Floor Los Angeles, California 90071 Attention: Michael J. Downer, Senior Vice President Facsimile No.: 213-486-9041 WITH A COPY TO: Capital Research and Management Company 333 S. Hope Street, 55th Floor Los Angeles, California 90071 Attention: Kenneth R. Gorvetzian, Vice President and Senior Counsel, Fund Business Management Group Facsimile No.: 213-486-9041 IF TO CRMC: Capital Research and Management Company 333 S. Hope Street, 55th Floor Los Angeles, CA 90071 Attention: Michael J. Downer, Senior Vice President and Legal Counsel Fund Business Management Group, and Secretary Facsimile No.: 213-486-9041 WITH A COPY TO: Capital Research and Management Company 333 S. Hope Street, 55th Floor Los Angeles, California 90071 9 Attention: Kenneth R. Gorvetzian, Vice President and Senior Counsel, Fund Business Management Group Facsimile No.: 213-486-9041 21. If this Agreement terminates, any provision of this Agreement necessary to the orderly windup of business under it will remain in effect as to that business, after termination. 22. If this Agreement terminates, the Series, at the Company's option, will continue to make additional shares of the Series available for all Contracts existing as of the effective date of termination (under the same terms and conditions as were in effect prior to termination of this Agreement with respect to existing Contract owners), unless the Series liquidates or applicable laws prohibit further sales. The Company agrees not to redeem shares unless legitimately required to do so according to a Contract owner's request or under an order from the SEC. 23. The obligations of the Series under this Agreement are not binding upon any of the Trustees, officers, employees, or shareholders (except CRMC if it is a shareholder) of the Series individually, but bind only the Series' assets. When seeking satisfaction for any liability of the Series in respect of this Agreement, the Company and the Account agree not to seek recourse against said Trustees, officers, employees, or shareholders, or any of them, or any of their personal assets for such satisfaction. Notwithstanding the foregoing, if the Company seeks satisfaction for the Series for any losses, claims, damages, liabilities or litigation in respect of this Agreement, the Company and the Accounts shall also have recourse against CRMC, which shall be jointly and severally liable for all amounts due the Company and not recovered from the Series. 24. This Agreement shall be construed in accordance with the laws of the State of California. 25. This Agreement and the parties' rights, duties and obligations under this Agreement are not transferable or assignable by any of them without the express, prior written consent of the other party hereto. Any attempt by a party to transfer or assign this Agreement or any of its rights, duties or obligations under this Agreement without such consent is void. 26. The following Paragraphs shall survive any termination of this Agreement: 14, 16, 17 and 20-26. 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested as of the date first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (ON BEHALF OF THE ACCOUNTS AND ITSELF) Attest: By: /s/ Todd R. Stephenson ---------------------------------------- /s/ Mary Jo Ardington Its: Senior Vice President and Chief Financial - ------------------------------ Officer LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK (ON BEHALF OF THE ACCOUNTS AND ITSELF) Attest: By: /s/ Rise C. M. Taylor ---------------------------------------- /s/ Mary Jo Ardington Its: 2nd Vice President - ------------------------------ AMERICAN FUNDS INSURANCE SERIES Attest: By: /s/ Chad Norton ---------------------------------------- /s/ Angela M. Mitchell Its: Secretary - ------------------------------ CAPITAL RESEARCH AND MANAGEMENT COMPANY Attest: By: /s/ Michael Downer ---------------------------------------- /s/ Angela M. Mitchell Its: Vice President and Secretary - ------------------------------ 11 APPENDIX A Fund Participation Agreement among The Lincoln National Life Insurance Company, American Variable Insurance Series, American Funds Distributors, Inc. and Capital Research and Management Company dated October 15, 1999. Fund Participation Agreement among Lincoln National Pension Insurance Company, Separate Account E of Lincoln National Pension Insurance Company and American Pathway Fund dated February 18, 1987. Fund Participation Agreement among Lincoln National Life Insurance Company, Lincoln Life Flexible Premium Variable Life Account F and American Variable Insurance Series. Fund Participation Agreement among Lincoln National Life Insurance Company, Lincoln National Flexible Premium Variable Life Account G and American Variable Insurance Series. Fund Participation Agreement among Lincoln National Life Insurance Company, Separate Account H of The Lincoln National Life Insurance Company and American Variable Insurance Series dated July 12, 1989. Fund Participation Agreement among The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York, American Funds Insurance Series, American Funds Distributors, Inc. and Capital Research and Management Company dated August 1, 2002. Fund Participation Agreement among Lincoln Life & Annuity Company of New York, American Variable Insurance Series, American Funds Distributors, Inc. and Capital Research and Management Company dated April 30, 2000. Fund Participation Agreement among Lincoln Life & Annuity Company of New York, Lincoln Life & Annuity Variable Annuity Account H of Lincoln Life & Annuity Company of New York and American Variable Insurance Series dated July 24, 2000. Agreement to Purchase Shares between The Lincoln National Life Insurance Company, Lincoln National Flexible Premium Variable Life Account J and American Variable Insurance Series dated April 30, 1995. Fund Participation Agreement among The Lincoln National Life Insurance Company, Separate Account 52 of The Lincoln National Life Insurance Company and American Variable Insurance Series dated May 1, 1996. Indemnification Agreement by and between Lincoln National Pension Insurance Company, Lincoln National Pension Variable Annuity Account E and Capital Research and Management Company. Indemnification Agreement by and between The Lincoln National Life Insurance Company, Lincoln National Flexible Premium Variable Life Account F and Capital Research and Management Company. Indemnification Agreement by and between The Lincoln National Life Insurance Company, Lincoln National Variable Annuity Account H and Capital Research and Management Company. Indemnification Agreement by and between The Lincoln National Life Insurance Company, Lincoln Life Flexible Premium Variable Life Account J and Capital Research and Management Company dated April 30, 1995. A-1 Indemnification Agreement by and between Lincoln Life & Annuity Company of New York, Lincoln Life & Annuity Variable Annuity Account H and Capital Research and Management Company. Indemnification Agreement by and between The Lincoln National Life Insurance Company, Separate Account 52 and Capital Research and Management Company dated May 1, 1996. Indemnification Agreement by and between The Lincoln National Life Insurance Company, Lincoln Life Flexible Premium Variable Life Account Y, Lincoln Life & Annuity Company of New York, Lincoln Life & Annuity Flexible Premium Variable Life Account Y and Capital Research and Management Company. A-2 APPENDIX B American Legacy Variable Annuity** American Legacy II Variable Annuity** American Legacy III Variable Annuity* American Legacy III C Share Variable Annuity* American Legacy III Plus Variable Annuity* American Legacy III View Variable Annuity* American Legacy Shareholder's Advantage* American Legacy Group American Legacy Retirement Income Plan American Legacy Life** American Legacy Estate Builder American Legacy Variable Life** American Legacy VUL(DB)-II* American Legacy VUL(CV)-III* American Legacy SVUL-III* Lincoln VUL(CV)* Lincoln VUL(CV)-II* Lincoln VUL(CV)-III* Lincoln VUL(DB)* Lincoln VUL(DB)-II* Lincoln VUL III** Lincoln VUL MoneyGuard Lincoln CVUL Series III* Lincoln Corporate Variable 4* Lincoln ChoicePlus* Lincoln ChoicePlus Access* Lincoln ChoicePlus Bonus Lincoln ChoicePlus II* Lincoln ChoicePlus II Access* Lincoln ChoicePlus II Bonus* Lincoln ChoicePlus II Advance* Lincoln ChoicePlus Assurance (B Share)* Lincoln ChoicePlus Assurance (C Share)* Lincoln ChoicePlus Assurance (L Share)* Lincoln ChoicePlus Assurance (Bonus)* MultiFund(R) 1-4 Individual Variable Annuity MultiFund(R) 5 Individual Variable Annuity MultiFund(R) Select Individual Variable Annuity MultiFund(R) Group Variable Annuity Lincoln SVUL* Lincoln SVUL II* Lincoln SVUL III* Group Variable Annuity (GVA) I, II, III Wells Fargo New Directions Core*** Wells Fargo New Directions Access*** Wells Fargo New Directions Access 4*** Lincoln Life Director(TM) *Includes both the Lincoln National and LNY versions of this product. **Class 1 shares are offered in these products. ***In connection with Wells Fargo New Directions Core, Wells Fargo New Directions Access and Wells Fargo New Directions Access 4 Contracts, Lincoln National, as the issuer of these Contracts, agrees to make shares of American Funds Insurance Series available through these Contracts only so long as they are sold exclusively through registered representatives of Lincoln Financial Advisors and Wells Fargo Investments LLC. In the event that Wells Fargo undergoes a change in control or assigns its responsibilities with respect to the Contracts to a third party, American Funds Insurance Series reserves the right to discontinue making its shares available for purchase through these Contracts. B-1 APPENDIX C Lincoln National Variable Annuity Account C Lincoln National Variable Annuity Account E Lincoln Life Flexible Premium Variable Life Account F Lincoln Life Flexible Premium Variable Life Account G Lincoln National Variable Annuity Account H Lincoln Life Flexible Premium Variable Life Account J Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Y Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 46 Lincoln National Life Insurance Company Separate Account 48 Lincoln National Life Insurance Company Separate Account 49 Lincoln National Life Insurance Company Separate Account 52 Lincoln National Life Insurance Company Separate Account 54 Lincoln Life & Annuity Variable Annuity Account H Lincoln Life & Annuity Flexible Premium Variable Life Account M Lincoln New York Account N for Variable Annuities LLANY Separate Account R for Flexible Premium Variable Life Insurance LLANY Separate Account S for Flexible Premium Variable Life Insurance Lincoln Life & Annuity Flexible Premium Variable Life Account Y C-1 Appendix D AMERICAN FUNDS INSURANCE SERIES CLASS 1: Asset Allocation Fund Blue Chip Income and Growth Fund Bond Fund Cash Management Fund Global Discovery Fund Global Growth Fund Global Small Capitalization Fund Growth Fund Growth-Income Fund High-Income Bond Fund International Fund New World Fund U.S. Government/AAA-Rated Securities Fund CLASS 2: Asset Allocation Fund Blue Chip Income and Growth Fund Bond Fund Cash Management Global Discovery Fund Global Growth Fund Global Small Capitalization Fund Growth Fund Growth-Income Fund High-Income Bond Fund International Fund New World Fund U.S. Government/AAA-Rated Securities Fund AMENDMENT NO. 1 TO APPENDIX B EFFECTIVE MAY 1, 2004 American Legacy Variable Annuity** American Legacy II Variable Annuity** American Legacy III Variable Annuity* American Legacy III C Share Variable Annuity* American Legacy III Plus Variable Annuity* American Legacy III View Variable Annuity* American Legacy Shareholder's Advantage* American Legacy Group American Legacy Retirement Income Plan American Legacy Life** American Legacy Estate Builder American Legacy Variable Life** American Legacy VUL(DB) II* American Legacy VUL(DB) IV* American Legacy VUL(CV) III* American Legacy VUL(CV) IV* American Legacy SVUL III* American Legacy SVUL IV* Lincoln VUL(ONE)* Lincoln Momentum VUL(ONE)* Lincoln VUL(CV)* Lincoln VUL(CV) II* Lincoln VUL(CV) III* Lincoln VUL(CV) IV* Lincoln VUL(DB)* Lincoln VUL(DB) II* Lincoln VUL(DB) IV* Lincoln VUL III** Lincoln VUL MoneyGuard Lincoln CVUL Series III* Lincoln Corporate Variable 4* Lincoln ChoicePlus* Lincoln ChoicePlus Access* Lincoln ChoicePlus Bonus Lincoln ChoicePlus II* Lincoln ChoicePlus II Access* Lincoln ChoicePlus II Bonus* Lincoln ChoicePlus II Advance* Lincoln ChoicePlus Assurance (B Share)* Lincoln ChoicePlus Assurance (C Share)* Lincoln ChoicePlus Assurance (L Share)* Lincoln ChoicePlus Assurance (Bonus)* Lincoln ChoicePlus Momentum Income Option* MultiFund(R) 1-4 Individual Variable Annuity MultiFund(R) 5 Individual Variable Annuity MultiFund(R) Select Individual Variable Annuity MultiFund(R) Group Variable Annuity Lincoln SVUL* Lincoln SVUL II* Lincoln SVUL III* Group Variable Annuity (GVA) I, II, III Wells Fargo New Directions Core*** Wells Fargo New Directions Access*** Wells Fargo New Directions Access 4*** Director(TM)* *Includes both the Lincoln National and LNY versions of this product. **Class 1 shares are offered in these products. ***In connection with Wells Fargo New Directions Core, Wells Fargo New Directions Access and Wells Fargo New Directions Access 4 Contracts, Lincoln National, as the issuer of these Contracts, agrees to make shares of American Funds Insurance Series available through these Contracts only so long as they are sold exclusively through registered representatives of Lincoln Financial Advisors and Wells Fargo Investments LLC. In the event that Wells Fargo undergoes a change in control or assigns its responsibilities with respect to the Contracts to a third party, American Funds Insurance Series reserves the right to discontinue making its shares available for purchase through these Contracts. Amendment No. 1 to APPENDIX C EFFECTIVE MAY 1, 2004 Lincoln National Variable Annuity Account C Lincoln National Variable Annuity Account E Lincoln Life Flexible Premium Variable Life Account F Lincoln Life Flexible Premium Variable Life Account G Lincoln National Variable Annuity Account H Lincoln Life Flexible Premium Variable Life Account J Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Y Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 46 Lincoln National Life Insurance Company Separate Account 48 Lincoln National Life Insurance Company Separate Account 49 Lincoln National Life Insurance Company Separate Account 52 Lincoln National Life Insurance Company Separate Account 54 Lincoln Life & Annuity Variable Annuity Account H Lincoln Life & Annuity Flexible Premium Variable Life Account M Lincoln New York Account N for Variable Annuities LLANY Separate Account R for Flexible Premium Variable Life Insurance LLANY Separate Account S for Flexible Premium Variable Life Insurance Lincoln Life & Annuity Flexible Premium Variable Life Account Y LNY Separate Account 401 for Group Annuities C-1 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and attested as of the date first above written. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (ON BEHALF OF THE ACCOUNTS AND ITSELF) Attest: By: /s/ Rise C .M. Taylor ---------------------------------------- /s/ Mary Jo Ardington Rise C. M. Taylor - ------------------------------ Its: Vice President LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK (ON BEHALF OF THE ACCOUNTS AND ITSELF) Attest: By: /s/ Rise C. M. Taylor ---------------------------------------- /s/ Mary Jo Ardington Rise C. M. Taylor - ------------------------------ Its: 2nd Vice President AMERICAN FUNDS INSURANCE SERIES Attest: By: /s/ Chad L. Norton ---------------------------------------- /s/ illegible Chad L. Norton - ------------------------------ Its: Secretary CAPITAL RESEARCH AND MANAGEMENT COMPANY Attest: By: /s/ Michael Downer ---------------------------------------- /s/ illegible Michael J. Downer - ------------------------------ Its: Vice President and Secretary AMENDMENT NO. 4 TO THE FUND PARTICIPATION AGREEMENT DATED JULY 1, 2003 This Amendment to the Fund Participation Agreement (the "Agreement"), by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, ("Lincoln National") a life insurance company organized under the laws of the State of Indiana; LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, ("LNY") a life insurance company organized under the laws of the State of New York; AMERICAN FUNDS INSURANCE SERIES ("Series"), an open-end management investment company organized under the laws of the Commonwealth of Massachusetts, and CAPITAL RESEARCH AND MANAGEMENT COMPANY ("CRMC"), a corporation organized under the laws of the State of Delaware, is effective as of April 2, 2007, regardless of when executed. WHEREAS, a merger of Lincoln Life & Annuity Company of New York and Jefferson Pilot LifeAmerica Insurance Company ("JPLA") occurred on or about April 2, 2007; WHEREAS, effective on or about April 2, 2007, JPLA changed its state of domicile from New Jersey to New York and changed its name to Lincoln Life & Annuity Company of New York; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and conditions set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to amend the Agreement as follows: ASSIGNMENT. The parties consent to an assignment of the responsibilities of the former Lincoln Life & Annuity Company of New York under this Agreement to the new Lincoln Life & Annuity Company of New York. Except as expressly supplemented, amended or consented to hereby, all of the representations and conditions of the Agreement will remain unamended and will continue to be in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 4 to the Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, on behalf of itself and each relevant Account, Attest: /s/ Kevin J. Adamson By: /s/ Kelly D. Clevenger - ------------------------------- --------------------------------- Its: Vice President LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, on behalf of itself and each relevant Account, Attest: /s/ Kevin J. Adamson By: /s/ Kelly D. Clevenger - ------------------------------- --------------------------------- Its: Second Vice President AMERICAN FUNDS INSURANCE SERIES, by Capital Research and Management Company, its investment adviser, Attest: /s/ Walter Burkely By: /s/ Michael Downer - ------------------------------- --------------------------------- Its: CAPITAL RESEARCH AND MANAGEMENT COMPANY Attest: /s/ Walter Burkely By: /s/ Michael Downer - ------------------------------- --------------------------------- Its: EX-99 11 a2182664zex-99_1.txt PARTICIPATION AGREEMENT AMONG DELAWARE GROUP PREMIUM FUND, INC. AND LINCOLN NATIONAL LIFE INSURANCE CO. AND DELAWARE DISTRIBUTORS, LP THIS AGREEMENT, made and entered into this Ist day of May, 1996, by and between DELAWARE GROUP PREMIUM FUND, INC., a corporation organized under the laws of Maryland (the "Fund"), and LINCOLN NATIONAL LIFE INSURANCE CO., an Indiana insurance corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule I to this Agreement as in effect at the time this Agreement is executed and such other separate accounts that may be added to Schedule I from time to time in accordance with the provisions of Article XI of this Agreement (each such account referred to as the "Account"), and DELAWARE DISTRIBUTORS, LP, a Delaware limited partnership (the "Distributor"). WHEREAS, the Fund is engaged in business as an open-end management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively referred to as "Variable Insurance Products," the owners of such products being referred to as "Product owners") to be offered by insurance companies which have entered into participation agreements with the Fund ("Participating Insurance Companies"); and WHEREAS, the common stock of the Fund (the "Fund shares") consists of separate series ("Series") issuing separate classes of shares ("Series shares"), each such class representing an interest in a particular managed portfolio of securities and other assets-, and WHEREAS, the Fund filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Fund Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Fund Prospectus") on Form N-lA to register itself as an open-end management investment company (File No. 811-5162) under the Investment Company Act of 1940, as amended (the " 1940 Act"), and the Fund shares (File No. 3 3 -143 63) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has filed a registration statement with the SEC to register under the 1933 Act certain variable annuity contracts described in Schedule 2 to this Agreement as in effect at the time this Agreement is executed and such other variable annuity contracts and variable life insurance policies which may be added to Schedule 2 from time to time in accordance with Article XI of this Agreement (such policies and contracts shall be referred to herein collectively as the "Contracts," each such registration statement for a class or classes of contracts 1 listed on Schedule 2 being referred to as the "Contracts Registration Statement" and the prospectus for each such class or classes being referred to herein as the "Contracts Prospectus," and the owners of the such contracts, as distinguished from all Product Owners, being referred to as "Contract Owners"); and WHEREAS, each Account, a validly existing separate account, duly authorized by resolution 'of the Board of Directors of the Company on the date set forth on Schedule 1, sets aside and invests assets attributable to the Contracts; and WHEREAS, the Company has registered or will have registered each Account with the SEC as a unit investment trust under the 1940 Act before any Contracts are issued by that Account; and WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, the Distributor and the Fund have entered into an agreement (the "Fund Distribution Agreement") pursuant to which the Distributor will distribute Fund shares; and WHEREAS, Delaware Management Company, Inc. (the "Investment Manager") is registered as an investment adviser under the 1940 Act and any applicable state securities laws and serves as an investment manager to the Fund pursuant to an agreement; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase Series shares on behalf of each Account to fund its Contracts and the Distributor is authorized to sell such Series shares to unit investment trusts such as the Accounts at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Distributor agree as follows: ARTICLE 1. SALE OF FUND SHARES 1. 1. The Distributor agrees to sell to the Company those Series shares which the Company orders on behalf of the Account, executing such orders on a daily basis in accordance with Section 1.4 of this Agreement. 1.2. The Fund agrees to make the shares of its Series available for purchase by the Company on behalf of the Account at the then applicable net asset value per share on Business Days as defined in Section 1.4 of this Agreement, and the Fund shall use its best efforts to calculate such net asset value by 6:00 p.m., E.S.T., on each such Business Day. Notwithstanding any other 2 provision in this Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board") may suspend or terminate the offering of Fund shares of any Series, if such action is required by law or by regulatory authorities having jurisdiction or if, in THE SOLE discretion of THE FUND BOARD acting in good faith and in light of its fiduciary duties under Federal and any applicable state laws, suspension or termination is necessary and in the best interests of the shareholders of any Series (it being understood that "shareholders" for this purpose shall mean Product owners). 1.3. The Fund agrees to redeem, at the Company's request, any full or fractional shares of the Fund held by the Account or the Company, executing such requests at the net asset value on a daily basis in accordance with Section 1.4 of this Agreement, the applicable provisions of the 1940 Act and the then currently effective Fund Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund shares of any Series to the extent permitted by the 1940 Act, any rules, regulations or orders thereunder, or the then currently effective Fund Prospectus. 1.4. (a) For purposes of Sections 1. 1, 1.2 and 1.3, the Company shall be the agent of the Fund for the limited purpose of receiving redemption and purchase requests from the Account (but not from the general account of the Company), and receipt on any Business Day by the Company as such limited agent of the Fund prior to the time prescribed in the current Fund Prospectus (which as of the date of execution of this Agreement is 4 p.m., E.S.T.) shall constitute receipt by the Fund on that same Business Day, provided that the Fund receives notice of such redemption or purchase request by 11:00 a.m., E.S.T. on the next following Business Day. For purposes of this Agreement, "Business Day" shall mean any day on which the New York Stock exchange is open for trading. (b) The Company shall pay for shares of each Series on the same day that it places an order with the Fund to purchase those Series shares for an Account. Payment for Series shares will be made by the Account or the Company in Federal Funds transmitted to the Fund by wire to be received by 11: 00 a.m., E. S. T. on the day the Fund is properly notified of the purchase order for Series shares. If Federal Funds are not received on time, such funds will be invested, and Series shares purchased thereby will be issued, as soon as practicable. (c) Payment for Series shares redeemed by the Account or the Company will be made in Federal Funds transmitted to the Company by wire on the day the Fund is notified of the redemption order of Series shares, except that the Fund reserves the right to delay payment of redemption proceeds, but in no event may such payment be delayed longer than the period permitted under Section 22(e) of the 1940 Act. Neither the Fund nor the Distributor shall bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds; the Company alone shall be responsible for such action. 3 1.5. Issuance and transfer of Fund shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Fund shares will be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. 1.6. The Fund shall furnish notice as soon as reasonably practicable to the Company of any income dividends or capital gain distributions payable on any Series shares. The Company, on its behalf and on behalf of the Account, hereby elects to receive all such dividends and distributions as are payable on any Series shares in the form of additional shares of that Series. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends in cash. The Fund shall notify the Company of the number of Series shares so issued as payment of such dividends and distributions. 1.7. The Fund shall use its best efforts to make the net asset value per share for each Series available to the Company by 6 p.m., E.S.T. each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share for such Series is calculated, and shall calculate such net asset value in accordance with the then currently effective Fund Prospectus. Neither the Fund, any Series, the Distributor, nor the Investment Manager nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by the Company to the Fund, the Distributor or the Investment Manager. 1.8. (a) The Company may withdraw the Account's investment in the Fund or a Series only: (I) necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (x) any Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contractowners having an interest in the affected Series to substitute the shares of another investment company for Series shares in accordance with the terms of the Contracts; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application; or (v) at the Company's sole discretion, pursuant to an order of the SEC under Section 26(b) of the 1940 Act. (b) The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Fund shares may be sold to other insurance companies (subject to Section 1.9 hereof) and the cash value of the Contracts may be invested in other investment companies. 4 (c) The Company shall not, without prior notice to the Distributor (unless otherwise required by applicable law), take any action to operate the Account as a management investment company under the 1940 Act. 1.9. The Fund and the Distributor agree that Fund shares will be sold only to Participating Insurance Companies and their separate accounts. The Fund and the Distributor will not sell Fund shares to any insurance company or separate account unless an agreement complying with Article VII of this Agreement is in effect to govern such sales. No Fund shares of any Series will be sold to the general public. ARTICLE H. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants (a) that the Contracts are registered under the 1933 Act or will be so registered before the issuance thereof, (b) that the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws and (c) that the Company will require of every person distributing the Contracts that the Contracts be offered and sold in compliance in all material respects with all applicable Federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly authorized each Account as a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the issuance of any Contracts, will register each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a separate account for its Contracts, and that it will maintain such registrations for so long as any Contracts issued under them are outstanding 2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for so long as the Fund shares are sold. The Fund further represents and warrants that it is a corporation duly organized and in good standing under the laws of Maryland. 2.3. The Fund represents and warrants that it currently qualifies as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Fund further represents and warrants that it will make every effort to continue to qualify and to maintain such qualification (under Subchapter M or any successor or similar provision), and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.4. The Fund represents and warrants that it will comply with Section 817(h) of the Code, and all regulations issued thereunder. 2.5. The Company represents that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code. The Company shall make every effort to maintain such treatment and shall notify the Fund and the Distributor immediately upon having a reasonable basis 5 for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.6. The Fund represents that the Fund's investment policies, fees and expenses, and operations are and shall at all times remain in material compliance with the laws of the state of Maryland, to the extent required to perform this Agreement; and with any state- mandated investment restrictions set forth on Schedule 3, as amended from time to time by the Company in accordance with Section 6.6. The Fund, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance law and applicable to the Fund. 2.7. The Distributor represents and warrants that it is duly registered as a broker-dealer under the 1934 Act, a member in good standing of the NASD, and duly registered as a broker dealer under applicable state securities laws; its operations are in compliance with applicable law, and it will distribute the Fund shares according to applicable law. 2.8. The Distributor, on behalf of the Investment Manager, represents and warrants that the Investment Manager is registered as an investment adviser under the Investment Advisers Act of 1940 and is in compliance with applicable federal and state securities laws. 2.9. The Fund represents and warrants that it has and maintains a fidelity bond in accordance with Rule 17g- I under the 1940 Act. The Fund will immediately notify the Company in the event the fidelity bond coverage should lapse at any time. ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS, SALES MATERIAL AND OTHER INFORMATION 3. 1. The Distributor shall provide the Company with as many copies of the current Fund Prospectus as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund at its expense shall provide to the Company a camera-ready copy of the current Fund Prospectus suitable for printing and other assistance as is reasonably necessary in order for the Company to have a new Contracts Prospectus printed together with the Fund Prospectus in one document. See Article V for a detailed explanation of the responsibility for the cost of printing and distributing Fund prospectuses. 3.2. The Fund Prospectus shall state that the Statement of Additional Information for the Fund is available from the Distributor (or, in the Fund's discretion, the Fund Prospectus shall state that such Statement is available from the Fund), and the Distributor (or the Fund) shall provide such Statement free of charge to the Company and to any outstanding or prospective Contract owner who requests such Statement. 3.3. (a) The Fund at its expense shall provide to the Company a camera-ready copy of the Fund's shareholder reports and other communications to shareholders (except proxy material), in each case in a form suitable for printing. The Fund shall be responsible for the costs of printing and distributing these materials to Contract owners. 6 (b) The Fund at its expense shall be responsible for preparing, printing and distributing its proxy material. The Company will provide the appropriate Contractowner names and addresses to the Fund for this purpose. 3.4. The Company shall furnish each piece of sales literature or other promotional material in which the Fund or the Investment Manager is named to the Fund or the Distributor prior to its use. No such material shall be used, except with the prior written permission of the Fund or the Distributor. The Fund and the Distributor agree to respond to any request for approval on a prompt and timely basis. Failure of the Fund to respond within 10 days of the request by the Company shall relieve the Company of the obligation to obtain the prior written permission of the Fund or the Distributor. 3.5. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund other than the information or representations contained in the Fund Registration Statement or Fund Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or by the Distributor, except with the prior written permission of the Fund or the Distributor. The Fund agrees to respond to any request for permission on a prompt and timely basis. If neither the Fund nor the Distributor responds within 10 days of a request by the Company, then the Company shall be relieved of the obligation to obtain the prior written permission of the Fund. 3.6. The Fund and the Distributor shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account or the Contracts other than the information or representations contained in the Contracts Registration Statement or Contracts Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in published reports of the Account which are in the public domain or approved in writing by the Company for distribution to Contract owners, or in sales literature or other promotional material approved in writing by the Company, except with the prior written permission of the Company. The Company agrees to respond to any request for permission on a prompt and timely basis. If the Company fails to respond within 10 days of a request by the Fund or the Distributor, then the Fund and the Distributor are relieved of the obligation to obtain the prior written permission of the Company. 3.7. The Fund will provide to the Company at least one complete copy of all Fund Registration Statements, Fund Prospectuses, Statements of Additional Information, annual and semi-annual reports and other reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Fund or Fund shares, promptly after the filing of such document with the SEC or other regulatory authorities. 3.8. The Company will provide to the Fund at least one complete copy of all Contracts Registration Statements, Contracts Prospectuses, Statements of Additional Information, Annual and Semi-annual Reports, sales literature and other promotional materials, and all amendments or supplements to any of the above, that relate to the Contracts, promptly after the filing of such document with the SEC or other regulatory authorities. 7 3.9. Each party will provide to the other party copies of draft versions of any registration statements, prospectuses, statements of additional information, reports, proxy statements, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, to the extent that the other party reasonably needs such information for purposes of preparing a report or other filing to be filed with or submitted to a regulatory agency. If a party requests any such information before it has been filed, the other party will provide the requested information if then available and in the version then available at the time of such request. 3.10. For purposes of this Article 1111, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, computer net site, signs or billboards, motion pictures or other public media), sales literature (Lie., any written communication distributed or made generally available to customers or the public, in print or electronically, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, Statements of Additional Information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act. ARTICLE IV. Voting 4.1 Subject to applicable law and the order referred to in Article VII, the Fund shall: solicit voting instructions from Contract owners, 4.2 Subject to applicable law and the order referred to in Article VII, the Company shall: (a) vote Fund shares of each Series attributable to Contract owners in accordance with structions or proxies received in timely fashion from such Contract owners; (b) vote Fund shares of each Series attributable to Contract owners for which no instructions have been received in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion; and (c) vote Fund shares of each Series held by the Company on its own behalf or on behalf of the Account that are not attributable to Contract owners in the same proportion as Fund shares of such Series for which instructions have been received in timely fashion. The Company shall be responsible for assuring that voting privileges for the Accounts are calculated in a manner consistent with the provisions set forth above. ARTICLE V. Fees and EXPENSES All expenses incident to performance by the Fund under this Agreement (including expenses expressly assumed by the Fund pursuant to this Agreement) shall be paid by the Fund to the extent permitted by law. Except as may otherwise be provided in Section 1.4 and Article VII of 8 this Agreement, the Company shall not bear any of the expenses for the cost of registration and qualification of the Fund shares under Federal and any state securities law, preparation and filing of the Fund Prospectus and Fund Registration Statement, the preparation of all statements and notices required by any Federal or state securities law, all taxes on the issuance or transfer of Fund shares, and any expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any, under Rule 12b- I under the 1940 Act. The Fund is responsible for the cost of printing and distributing Fund Prospectuses and SAIs to existing Contract owners. (If for this purpose the Company prints the Fund Prospectuses and SAIs in a booklet containing disclosure for the Contracts and for underlying funds other than those of the Fund, then the Fund shall pay only its proportionate share of the total cost to distribute the booklet to existing Contract owners.) The Company is responsible for the cost of printing and distributing Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for existing Contract owners. The Company shall have the final decision on choice of printer for all Prospectuses and SAIs. ARTICLE VI. COMPLIANCE UNDERTAKINGS 6. 1. The Fund undertakes to comply with Subchapter M and Section 817(h) of the Code, and all regulations issued thereunder. 6.2. The Company shall amend the Contracts Registration Statements under the 1933 Act and the Account's Registration Statement under the 1940 Act from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale to the extent required by applicable securities laws of the various states. 6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Fund shares are sold the continuous offering of Fund shares as described in the then currently effective Fund Prospectus. The Fund shall register and qualify Fund shares for sale to the extent required by applicable securities laws of the various states. 6.4. The Company shall be responsible for assuring that any prospectus offering a Contract that is a life insurance contract where it is reasonably possible that such Contract would be deemed a "modified endowment contract," as that term is defined in Section 7702A of the Code, will describe the circumstances under which a Contract could be treated as a modified endowment contract (or policy). 6.5. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b- I to finance distribution expenses. (a) The Company shall amend Schedule 3 when appropriate in order to inform the Fund of any applicable state-mandated investment restrictions with which the Fund must comply. 9 (b) Should the Fund or the Distributor become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Company has reviewed a copy of the order (the "Mixed and Shared Funding Order") dated November 2, 1987 of the Securities and Exchange Commission under Section 6 of the Act and, in particular, has reviewed the conditions to the relief set forth in the related Notice As set forth therein, the Company agrees to report to the Board of Directors of the Fund (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Fund, and to assist the Board in carrying out its responsibilities under the conditions of the Mixed and Shared Funding Order by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company agrees with that determination, the Company shall, at its sole cost and expense, take whatever steps are necessary to remedy the irreconcilable material conflict. These steps could include: (a) withdrawing the assets allocable to some or all of the affected Accounts from the Fund or any Series and reinvesting such assets in a different investment vehicle, including another Series of the Fund, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractowners and, as appropriate, segregating the assets of any particular group (i.e., variable annuity Contractowners, variable life insurance policyowners, or variable Contractowners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contractowners the option of making such a change; and (b) establishing a new registered mutual fund or management separate account, or taking such other action as is necessary to remedy or eliminate the irreconcilable material conflict. (b) If the Company disagrees with the Board's determination, the Company shall file a written protest with the Board, reserving its right to dispute the determination as between just the Company and the Fund. After reserving that right the Company, although disagreeing with the Board that it (the Company) was responsible for the conflict, shall take the necessary steps, under protest, to remedy the conflict, substantially in accordance with paragraph (a) just above, for the protection of Contractowners. (c) As between the Company and the Fund, if within 45 days after the Board's determination the Company elects to press the dispute, it shall so notify the Board in writing. The parties shall then attempt to resolve the matter amicably through negotiation by individuals from each party who are authorized to settle the controversy. 10 If the matter has not been amicably resolved within 60 days from the date of the Company's notice of its intent to press the dispute, then before either party shall undertake to litigate the dispute it shall be submitted to non-binding arbitration conducted expeditiously in accordance with the CPR Rules for Non-Administered Arbitration of Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER, that if one party has requested the other party to seek an amicable resolution and the other party has failed to participate, the requesting party may initiate arbitration before expiration of the 60-day period set out just above. If within 45 days of the commencement of the process to select an arbitrator the parties cannot agree upon the arbitrator, then he or she will be selected from the CPR Panels of Neutrals. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort Wayne, Indiana. The Arbitrator is not empowered to award damages in excess of compensatory damages. (d) If the Board shall determine that the Fund or another insurer was responsible for the conflict, then the Board shall notify the Company immediately of that determination. The Fund shall assure the Company that it (the Fund) or that other insurer, as applicable, shall, at its sole cost and expense, take whatever steps are necessary to eliminate the conflict. 7.3. If a material irreconcilable conflict arises because of the Company's decision to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company shall withdraw (without charge or penalty) the Account's investment in the Fund, if the Fund so elects. 7.4 Subject to the terms of Section 7.2 above, the Company shall carry out the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict with a view only to the interests of Contract Owners. 7.5. For purposes of this Article, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable conflict, but in no event will the Fund be required to establish a new funding medium for any variable contract, nor will the Company be required to establish a new funding medium for any Contract if an offer to do so has been declined by a vote of a majority of affected Contractowners. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Fund, the Distributor and each person who controls or is associated with the Fund (other than another Participating Insurance Company) or the Distributor within the meaning of such terms under the federal securities laws and any officer, trustee, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves(or any amendment or supplement to any of the foregoing(, or arise out of or are 11 based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Fund or the Distributor (or a person authorized in writing to do so on behalf of the Fund or the Distributor) for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact by or on behalf of the Company (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in fight of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or (d) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (e) arise out of any material breach by the Company of this Agreement, including but not limited to any failure to transmit a request for redemption or purchase of Fund shares on a timely basis in accordance with the procedures set forth in Article 1; or (f) arise as a result of the Company's providing the Fund with inaccurate information, which causes the Fund to calculate its Net Asset Values incorrectly. This indemnification will be in addition to any liability which the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify and hold harmless the Company and each person who controls or is associated with the Company within the meaning of such terms under the federal securities laws and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: 12 (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Fund, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Fund or the Distributor for use in the Fund Registration Statement, Fund Prospectus (or any amendment or supplement thereto) or sales literature for the Fund or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Distributor or the Fund (other than statements or representations contained in the Fund Registration Statement, Fund Prospectus or sales literature or other promotional material of the Fund not supplied by the Distributor or the Fund or persons under their control) or wrongful conduct of the Distributor or persons under its control with respect to the sale or distribution of the Contracts or Fund shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Contract's Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in fight of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Distributor or the Fund to the Company (or a person authorized in writing to do so on behalf of the Fund or the Distributor); or (d) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) to comply with the diversification requirements specified in Article VI of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the Contracts Prospectuses); or (e) arise out of any material breach by the Distributor or the Fund of this Agreement. This indemnification will be in addition to any liability which the Distributor may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to indemnification ("indemnified party") under this Article VIII of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article VIII ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article VIII, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the 13 fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VIII shall survive any termination of this Agreement. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Indiana, without giving effect to the principles of conflicts of laws. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon six months advance written notice to the other parties; or (b) at the option of the Company if shares of any Series are not available to meet the requirements of the Contracts as determined by the Company. Prompt notice of the election to terminate for such cause shall be furnished by the Company. Termination shall be effective ten days after the giving of notice by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the operation of the Account, the administration of the Contracts or the purchase of Fund shares, or an expected or anticipated ruling, judgment or outcome which would, in the Fund's reasonable 14 judgment, materially impair the Company's ability to perform the Company's obligations and duties hereunder; or (d) at the option of the Company upon institution of formal proceedings against the Fund, the Distributor, the Investment Manager or any Sub-Investment Manager, by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body regarding the duties of the Fund or the Distributor under this Agreement, or an expected or anticipated ruling, judgment or outcome which would, in the Company's reasonable judgment, materially impair the Fund's or the Distributor's ability to perform Fund's or Distributor's obligations and duties hereunder; or (e) at the option of the Company upon institution of formal proceedings against the Investment Manager or Sub-investment Manager by the NASD, the SEC, or any state securities or insurance commission or any other regulatory body which would, in the good faith opinion of the Company, result in material harm to the Accounts, the Company, or Contractowners. (f) upon requisite vote of the Contract owners having an interest in the affected Series (unless otherwise required by applicable law) and written approval of the Company, to substitute the shares of another investment company for the corresponding Series shares of the Fund in accordance with the terms of the Contracts; or (g) at the option of the Fund in the event any of the Contracts are not registered, issued or sold in accordance with applicable Federal and/or state law; or (h) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) any Product owners or (ii) the interests of the Participating Insurance Companies investing in the Fund; or (i) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes, based on an opinion of its counsel, that the Fund may fail to so qualify; or (j) at the option of the Company if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or (k) at the option of the Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that the Contracts may fail to so qualify; or (l) at the option of either the Fund or the Distributor if the Fund or the Distributor, respectively, shall determine, in their sole judgment exercised in good faith, that either (1) the Company shall have suffered a material adverse change in its 15 business or financial condition; or (2) the Company shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of either the Fund or the Distributor; or (m) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that either: (1) the Fund and the Distributor, or either of them, shall have suffered a material adverse change in their respective businesses or financial condition; or (2) the Fund or the Distributor, or both of them, shall have been the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company; or (n) upon the assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Accounts to another insurance company pursuant to an assumption reinsurance agreement) unless the non-assigning party consents thereto or unless this Agreement is assigned to an affiliate of the Distributor. 10.2. Notice REQUIREMENT. Except as otherwise provided in Section 10. 1, no termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to all other parties to this Agreement of its intent to terminate which notice shall set forth the basis for such termination. Furthermore: (a) In the event that any termination is based upon the provisions of Article VII or the provisions of Section 10. 1 (a) of this Agreement, such prior written notice shall be given in advance of the effective date of termination as required by such provisions; and (b) in the event that any termination is based upon the provisions of Section 10. 1 (c) or 10. 1 (d) of this Agreement, such prior written notice shall be given at least ninety (90) days before the effective date of termination, or sooner if required by law or regulation. (c) in the event that any termination is based upon the provisions of Section 10. 1 (e) of this Agreement, such prior written notice shall be given at least sixty (60) days before the date of any proposed vote to replace the Fund's shares. 10.3. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Fund and the Distributor will, at the option of the Company, continue to make available additional Fund shares for so long after the termination of this Agreement as the Company desires, pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if the Company so elects to make additional Fund shares available, the owners of the Existing Contracts or the Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. (b) In the event of a termination of this Agreement pursuant to Section 10. 1 of this Agreement, the Fund and the Distributor shall promptly notify the Company whether 16 the Distributor and the Fund will continue to make Fund shares available after such termination. If Fund shares continue to be made available after such termination, the provisions of this Agreement shall remain in effect except for Section 10. 1 (a) and thereafter either the Fund or the Company may terminate the Agreement, as so continued pursuant to this Section 10.3, upon prior written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund, need not be for more than six months. (c) The parties agree that this Section 10.3 shall not apply to any termination made pursuant to Article VII or any conditions or undertakings incorporated by reference in Article VII and the effect of such Article VII termination shall be governed by the provisions set forth or incorporated by reference therein. ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts and to add new classes of variable annuity contracts and variable fife insurance policies to be issued by the Company through a Separate Account investing in the Fund. The provisions of this Agreement shall be equally applicable to each such class of contracts or policies, unless the context otherwise requires. ARTICLE XII. NOTICES Any notice shall be sufficiently given when sent by registered or certified mail to the other party(ies) at the address of such party(ies) set forth below or at such other address as such party(ies) may from time to time specify in writing to the other party. If to the Fund: Delaware Group Premium Fund, Inc. Ten Penn Center Plaza Philadelphia, PA 19103 Attn: Christopher Price If to the Company: Lincoln National Life Insurance Co. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Kelly D. Clevenger If to the Distributor: Delaware Distributors, Inc. Ten Penn Center Plaza Philadelphia, PA 19103 Attn: Keith E. Mitchell 17 ARTICLE XIII. MISCELLANEOUS 13.1. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.2. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 13.4. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 13.5. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party, and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 18 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND, INC. (Fund) Date: By: Name: Title: LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Date: 4/30/96 By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President DELAWARE DISTRIBUTORS, LP (Distributor) Date: By: Name: Title: authorized by all necessary corporate or trust action, as applicable, by such party, and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its NAME and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND, INC. (Fund) Date: 5/1/96 By: /s/ David K. Downes Name: David K. Downes Title: Senior Vice President, CAO & CFO LINCOLN NATIONAL LIFE INSURANCE CO. (Company) Date: By: Name: Title: DELAWARE DISTRIBUTORS, LP (Distributor) Date: 5/1/96 By: /s/ Keith E. Mitchell Name: Keith E. Mitchell Title: President & CEO 19 SCHEDULE I Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 1996 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K 20 SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule I As of May 1, 1996 Multi Fund Variable Annuity Contracts Multi Fund Variable Life Insurance Contracts 21 SCHEDULE 3 State-mandated Investment Restrictions Applicable to the Fund As of May 1, 1996 The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: Borrowing. Borrowing limits for any variable contract separate account portfolio are (1) 10% of net asset value when borrowing for any general purpose; and (2) 25% of net asset value when borrowing as a temporary measure to facilitate redemptions. Net asset value of a portfolio is the market value of all investments or assets owned less outstanding liabilities of the portfolio at the time that any new or additional borrowing is undertaken. FOREIGN INVESTMENTS - DIVERSIFICATION. 1. A portfolio will be invested in a minimum of five different foreign countries at all times. However, this minimum is reduced to four when foreign investments comprise less than 80% of the portfolio's net asset value; to three when less than 60% of that value; to two when less than 40%; and to one when less than 20%. 2. Except as set forth in items 3 and 4 below, a Portfolio will have no more than 20% of its net asset value invested in securities of issuers located in any one country. 3. A Portfolio may have an additional 15% of its net asset value invested in securities of issuers located in any one of the following countries: Australia, Canada, France, Japan, the United Kingdom or Germany. 4. A Portfolio's investments in United States issuers are not subject to the foreign country diversification guidelines. 22 AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln Life Insurance Company Investing in the Fund As of May 1, 1999 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln National Life Insurance Company Separate Account 53 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 1 to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND, INC (Fund) Date: May 26, 1999 By: ------------------- -------------------------------- Jeffrey L. Nick Chairman/President/Chief Executive Officer LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: June 4, 1999 By: ------------------- -------------------------------- Kelly D. Clevenger Vice President DELAWARE DISTRIBUTORS, LP (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: May 26, 1999 By: ------------------- -------------------------------- Bruce D. Barton President and Chief Executive Officer -------------------------------- -------------------------------- AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Support by Separate Accounts Listed on Schedule 1 As of May 1, 1999 Multi-Fund -Registered Trademark- Individual Variable Annuity Contracts (Registered and Non-Registered) Multi-Fund -Registered Trademark- Variable Life Insurance Contracts Group Multi-Fund -Registered Trademark- Variable Annuity Contracts Delaware-Lincoln Accru ChoicePlusVariable Annuity Contracts VUL I Variable Universal Life Insurance Contracts Lincoln VUL Variable Universal Life Insurance Contracts e-Annuity tm Variable Annuity Contracts SVUL I Variable Universal Life Insurance Contracts Lincoln SVUL Variable Universal Life Insurance Contracts CVUL Variable Universal Life Insurance Contracts AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 15, 1999 Multi Fund-Registered Trademark- Individual Variable Annuity Contracts (Registered and non-registered) Multi Fund-Registered Trademark- Variable Life Insurance Contracts Group Multi Fund-Registered Trademark- Variable Annuity Contracts Delaware-Lincoln ChoicePlus Variable Annuity Contracts VUL I Variable Universal Life Insurance Contracts Lincoln VUL Variable Universal Life Insurance Contracts eAnnuity(TM) Variable Annuity Contracts SVUL I Variable Universal Life Insurance Contracts Lincoln SVUL Variable Universal Life Insurance Contracts Lincoln CVUL Variable Universal Life Insurance Contracts Lincoln VUL(DB) Variable Universal Life Insurance Contracts IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND, INC. (Fund) Date: By: /s/ David K. Downes -------------------- ----------------------------- David K. Downes President/CEO LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 3/22/2000 By: /s/ Steven M. Kluever -------------------- ----------------------------- Steven M. Kluever Second Vice President DELAWARE DISTRIBUTORS, LP (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: By: /s/ Bruce Barton -------------------- ----------------------------- Bruce Barton President AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2000 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln National Life Insurance Company Separate Account 53 AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2000 Multi Fund-Registered Trademark- Individual Variable Annuity Contract (Registered and non-registered) Multi Fund-Registered Trademark- Variable Life Insurance Contract Group Multi Fund-Registered Trademark- Variable Annuity Contract Delaware-Lincoln New York ChoicePlus Variable Annuity Contract VUL I Variable Universal Life Insurance Contract Lincoln VUL Variable Universal Life Insurance Contract Lincoln VUL(DB) Variable Universal Life Insurance Contract eAnnuity(TM) Variable Annuity Contract SVUL I Variable Universal Life Insurance Contract Lincoln SVUL Variable Universal Life Insurance Contract Lincoln SVUL II Variable Universal Life Insurance Contract Lincoln CVUL Variable Universal Life Insurance Contract Lincoln CVUL Series III Variable Universal Life Insurance Contract Group Variable Annuity (GVA) I, II, III IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules 1 and 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND (Fund) Date: By: /s/ David K. Downes ---------------- ----------------------- Name: David K. Downes Title: President/CEO LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 3/22/2000 By: /s/ Steven M. Kluever ---------------- ----------------------- Steven M. Kluever Second Vice President DELAWARE DISTRIBUTORS, LP (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: By: /s/ Bruce Barton ---------------- ----------------------- Name: Bruce Barton Title: President AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of July 15, 2000 Multi Fund-Registered Trademark- Individual Variable Annuity Contract (Registered and non-registered) Multi Fund-Registered Trademark- Variable Life Insurance Contract Group Multi Fund-Registered Trademark- Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract VUL I Variable Universal Life Insurance Contract Lincoln VUL Variable Universal Life Insurance Contract Lincoln VUL-DB- Variable Universal Life Insurance Contract eAnnuity-TM- Variable Annuity Contract SVUL I Variable Universal Life Insurance Contract Lincoln SVUL Variable Universal Life Insurance Contract Lincoln SVUL II Variable Universal Life Insurance Contract Lincoln CVUL Variable Universal Life Insurance Contract Lincoln CVUL Series III Variable Universal Life Insurance Contract Group Variable Annuity (GVA) I, II, III IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND (Fund) Date: 7-15-2000 By: ---------------- ----------------------------------- Name: Title: LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 7-15-2000 By: /s/ Steven M. Kluever ---------------- ------------------------------------ Steven M. Kluever Second Vice President DELAWARE DISTRIBUTORS, LP (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 7-15-2000 By: /s/ Bruce M. Barton ---------------- ------------------------------------ Name: Bruce M. Barton Title: AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2001 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account W Lincoln National Life Insurance Company Separate Account 53 Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2001 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) Variable Life Insurance Policy Group Multi Fund(R) Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus Advance Variable Annuity Contract VUL I Variable Universal Life Insurance Policy Lincoln VUL(DB) Variable Universal Life Insurance Policy Lincoln VUL(CV) Variable Universal Life Insurance Policy Lincoln VUL(CV2) Variable Universal Life Insurance Policy eAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Linconl SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Lincoln Life Director(TM) 2 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules 1 and 2 to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE GROUP PREMIUM FUND (Fund) Date: By: /s/ David K. Downes ---------------------- ----------------------------------------- Name: David K. Downes Title: President/Chief Executive Officer/ Chief Financial Officer THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: By: /s/ Steven M. Kluever ---------------------- ----------------------------------------- Steven M. Kluever Second Vice President DELAWARE DISTRIBUTORS, LP (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: By: /s/ Richard J. Flannery ---------------------- ----------------------------------------- Name: Richard J. Flannery Title: President/Chief Executive Officer 3 AMENDMENT TO PARTICIPATION AGREEMENT This Amendment to the Participation Agreement ("Agreement") dated the 1st day of May, 1996, as amended, between Delaware VIP Trust (formerly Delaware Group Premium Fund, Inc.,) a statutory trust organized under the laws of Delaware (the "Fund"), The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") and Delaware Distributors, L.P., a Delaware limited partnership (the "Distributor") is effective as of May 1, 2003. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. ARTICLE II: Representations and Warranties Section 2.2 is hereby replaced with the following: 2.2 The Fund represents and warrants the 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 statutory trust and in good standing under the laws of Delaware. 2. ARTICLE II: Representations and Warranties Section 2.6 is hereby replaced with the following: 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 Delaware, 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. 1 3. ARTICLE XII. Notices If to the Fund: Delaware VIP Trust 2005 Market Street Philadelphia, PA 19103 Attn: President 4. Article XII NOTICES If to the Company is replaced with The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attn: Rise C. M. Taylor Vice President 5. ARTICLE XII. Notices If to the Distributor: Delaware Distributors, Inc. 2005 Market Street Philadelphia, PA 19103 Attn: General Counsel 6. Schedule 1 of this Agreement shall be deleted and replaced with the attached Schedule 1. 7. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 8. All other terms of the Agreement shall remain in full force and effect. 2 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE VIP TRUST (Fund) Date: 4/3/06 By: /s/ David P. O'Connor ------------------------------------ Name: David P. O'Connor Title: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 4/3/06 By: /s/ Rise C. M. Taylor ------------------------------------ Rise C.M. Taylor Vice President DELAWARE DISTRIBUTORS, L.P. (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 4/3/06 By: /s/ Debra Landsman-Yaros ------------------------------------ Name: Debra Landsman-Yaros Title: Senior Vice President 3 AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2003 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 53 Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 Lincoln National Life Insurance Company Separate Account 93 Lincoln National Life Insurance Company Separate Account 94 4 AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2003 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) 5 Individual Variable Annuity Contract Multi Fund(R) Select Individual Variable Annuity Contract Multi Fund(R) Variable Life Insurance Policy Group Multi Fund(R) Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus II Advance Variable Annuity Contract Lincoln ChoicePlus Assurance (B Share) Lincoln ChoicePlus Assurance (C Share) Lincoln ChoicePlus Assurance (L Share) Lincoln ChoicePlus Assurance (Bonus) Lincoln VUL I Variable Universal Life Insurance Policy Lincoln VUL(DB) Variable Universal Life Insurance Policy Lincoln VUL(DB) II Variable Universal Life Insurance Policy Lincoln VUL(DB) IV Variable Universal Life Insurance Policy Lincoln VUL(CV) Variable Universal Life Insurance Policy Lincoln VUL(CV) II Variable Universal Life Insurance Policy Lincoln VUL(CV) III Variable Universal Life Insurance Policy Lincoln VUL(CV) IV Variable Universal Life Insurance Policy Lincoln VUL(ONE) Variable Universal Life Insurance Policy Lincoln Momentum VUL(ONE) Variable Universal Life Insurance Policy eAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Lincoln SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln SVUL III Variable Universal Life Insurance Policy Lincoln SVUL IV Variable Universal Life Insurance Policy Lincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Lincoln Corporate Variable 4 Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Individual Variable Annuity B Share Individual Variable Annuity C Share Lincoln Life Director(TM) 5 AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2003 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 53 Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 Lincoln National Life Insurance Company Separate Account 93 Lincoln National Life Insurance Company Separate Account 94 AMENDMENT TO PARTICIPATION AGREEMENT This Amendment to the Participation Agreement ("Agreement") dated the 1st day of May, 1996, as amended, between Delaware VIP Trust (formerly Delaware Group Premium Fund, Inc.,) a statutory trust organized under the laws of Delaware (the "Fund"), The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") and Delaware Distributors, L.P., a Delaware limited partnership (the "Distributor") is effective as of May 1, 2005. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE VIP TRUST (Fund) Date: 4/3/06 By: /s/ David P. O'Connor ------------------------------------ Name: David P. O'Connor Title: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 4/3/06 By: /s/ Rise C. M. Taylor ------------------------------------ Rise C.M. Taylor Vice President DELAWARE DISTRIBUTORS, L.P. (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 4/3/06 By: /s/ Debra Landsman-Yaros ------------------------------------ Name: Debra Landsman-Yaros Title: Senior Vice President AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2003 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 53 Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 Lincoln National Life Insurance Company Separate Account 87 Lincoln National Life Insurance Company Separate Account 93 Lincoln National Life Insurance Company Separate Account 94 AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2005 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) 5 Individual Variable Annuity Contract Multi Fund(R) Select Individual Variable Annuity Contract Multi Fund(R) Variable Life Insurance Policy Group Multi Fund(R) Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus II Advance Variable Annuity Contract Lincoln ChoicePlus Assurance (B Share) Lincoln ChoicePlus Assurance (C Share) Lincoln ChoicePlus Assurance (L Share) Lincoln ChoicePlus Assurance (Bonus) Lincoln ChoicePlus Momentum Income Option Lincoln VUL I Variable Universal Life Insurance Policy Lincoln VUL(DB) Variable Universal Life Insurance Policy Lincoln VUL(DB) II Variable Universal Life Insurance Policy Lincoln VUL(DB) IV Variable Universal Life Insurance Policy Lincoln VUL(CV) Variable Universal Life Insurance Policy Lincoln VUL(CV) II Variable Universal Life Insurance Policy Lincoln VULFlex Variable Universal Life Insurance Policy Lincoln VUL(CV) III Variable Universal Life Insurance Policy Lincoln VUL(CV) IV Variable Universal Life Insurance Policy Lincoln VUL(ONE) Variable Universal Life Insurance Policy Lincoln VUL(ONE) 2005 Variable Universal Life Insurance Policy Lincoln Momentum VULONE Variable Universal Life Insurance Policy Lincoln Momentum VULONE 2005 Variable Universal Life Insurance Policy eAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Lincoln SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln SVUL III Variable Universal Life Insurance Policy Lincoln SVUL IV Variable Universal Life Insurance Policy Lincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Lincoln Corporate Variable 4 Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Individual Variable Annuity B Share Individual Variable Annuity C Share Lincoln Life Director(TM) AMENDMENT TO PARTICIPATION AGREEMENT This Amendment to the Participation Agreement ("Agreement") dated the 1st day of May, 1996, as amended, between Delaware Group Premium Fund, Inc., a corporation organized under the laws of Maryland (the "Fund"), The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") and Delaware Distributors, L.P., a Delaware limited partnership (the "Distributor") is effective as of May 1, 2006. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedules 1 and 2 of this Agreement shall be deleted and replaced with the attached Schedules 1 and 2. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE VIP TRUST (Fund) Date: 11/6/07 By: /s/ See Yeng Quek ---------------------- ----------------------------- Name: See Yeng Quek Title: Executive Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 12/21/07 By: /s/ Kelly D. Clevenger ---------------------- ----------------------------- Kelly D. Clevenger Vice President DELAWARE DISTRIBUTORS, L.P. (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 11/8/07 By: /s/ Theodore K. Smith ---------------------- ----------------------------- Name: Theodore K. Smith Title: President AMENDMENT TO SCHEDULE 1 Separate Accounts of Lincoln National Life Insurance Company Investing in the Fund As of May 1, 2006 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 Lincoln National Life Insurance Company Separate Account 87 Lincoln National Life Insurance Company Separate Account 93 Lincoln National Life Insurance Company Separate Account 94 Lincoln Life Separate Account 4k AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2006 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) 5 Individual Variable Annuity Contract Multi Fund(R) Select Individual Variable Annuity Contract Multi Fund(R) Variable Life Insurance Policy Multi Fund(R) Group Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus II Advance Variable Annuity Contract Lincoln ChoicePlus Assurance (B Share) Lincoln ChoicePlus Assurance (C Share) Lincoln ChoicePlus Assurance (L Share) Lincoln ChoicePlus Assurance (Bonus) Lincoln ChoicePlus Momentum Income Option Lincoln VUL I Variable Universal Life Insurance Policy Lincoln VULDB Variable Universal Life Insurance Policy Lincoln VULDB II Variable Universal Life Insurance Policy Lincoln VULDB IV Variable Universal Life Insurance Policy Lincoln VULCV Variable Universal Life Insurance Policy Lincoln VULCV II Variable Universal Life Insurance Policy Lincoln VULFlex Variable Universal Life Insurance Policy Lincoln VULCV III Variable Universal Life Insurance Policy Lincoln VULCV IV Variable Universal Life Insurance Policy Lincoln VULONE Variable Universal Life Insurance Policy Lincoln VULONE 2005 Variable Universal Life Insurance Policy Lincoln Momentum VULONE Variable Universal Life Insurance Policy Lincoln Momentum VULONE 2005 Variable Universal Life Insurance Policy Lincoln Momentum SVULONE Variable Universal Life Insurance PolicyeAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Lincoln SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln SVUL III Variable Universal Life Insurance Policy Lincoln SVUL IV Variable Universal Life Insurance Policy Lincoln SVULONE Variable Universal Life Insurance PolicyLincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Lincoln Corporate Variable 4 Lincoln Corporate Variable 5 Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Individual Variable Annuity B Share Individual Variable Annuity C Share Lincoln Life Director(TM) Lincoln American Legacy Retirement Group Variable Annuity AMENDMENT TO PARTICIPATION AGREEMENT This Amendment to the Participation Agreement ("Agreement") dated the 1st day of May, 1996, as amended, between Delaware VIP Trust (formerly Delaware Group Premium Fund, Inc.), a statutory trust organized under the laws of Delaware (the "Fund"), The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") and Delaware Distributors, L.P., a Delaware limited partnership (the "Distributor") is effective as of October 1, 2006. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE VIP TRUST (Fund) Date: 11/6/07 By: /s/ See Yeng Quek ------------------------ --------------------------------- Name: See Yeng Quek Title: Executive Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 2/21/07 By: /s/ Kelly D. Clevenger ------------------------ --------------------------------- Kelly D. Clevenger Vice President DELAWARE DISTRIBUTORS, L.P. (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 11/8/07 By: /s/ Theodore K. Smith ------------------------ --------------------------------- Name: Theodore K. Smith Title: President AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of October 1, 2006 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) 5 Individual Variable Annuity Contract Multi Fund(R) Select Individual Variable Annuity Contract Multi Fund(R) Variable Life Insurance Policy Multi Fund(R) Group Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus II Advance Variable Annuity Contract Lincoln ChoicePlus Assurance (B Share) Lincoln ChoicePlus Assurance (C Share) Lincoln ChoicePlus Assurance (L Share) Lincoln ChoicePlus Assurance (Bonus) Lincoln ChoicePlus Assurance (A Share) Lincoln ChoicePlus Momentum Income Option Lincoln ChoicePlus Design Lincoln VUL I Variable Universal Life Insurance Policy Lincoln VUL(DB) Variable Universal Life Insurance Policy Lincoln VUL(DB) II Variable Universal Life Insurance Policy Lincoln VUL(DB) IV Variable Universal Life Insurance Policy Lincoln VUL(CV) Variable Universal Life Insurance Policy Lincoln VUL(CV) II Variable Universal Life Insurance Policy Lincoln VULFlex Variable Universal Life Insurance Policy Lincoln VUL(CV)III Variable Universal Life Insurance Policy Lincoln VUL(CV) IV Variable Universal Life Insurance Policy Lincoln VUL(ONE) Variable Universal Life Insurance Policy Lincoln VUL(ONE) 2005 Variable Universal Life Insurance Policy Lincoln Momentum VUL(ONE) Variable Universal Life Insurance Policy Lincoln Momentum VUL(ONE) 2005 Variable Universal Life Insurance Policy Lincoln Momentum SVUL(ONE) Variable Universal Life Insurance Policy eAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Lincoln SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln SVUL III Variable Universal Life Insurance Policy Lincoln SVUL IV Variable Universal Life Insurance Policy Lincoln SVULONE Variable Universal Life Insurance Policy Lincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Lincoln Corporate Variable 4 Lincoln Corporate Variable 5 Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Individual Variable Annuity B Share Individual Variable Annuity C Share Lincoln Life Director(TM) Lincoln American Legacy Retirement Group Variable Annuity AMENDMENT TO PARTICIPATION AGREEMENT This Amendment to the Participation Agreement ("Agreement") dated the 1st day of May, 1996, as amended, between Delaware VIP Trust (formerly Delaware Group Premium Fund, Inc.), a statutory trust organized under the laws of Delaware (the "Fund"), The Lincoln National Life Insurance Company, an Indiana life insurance company (the "Company") and Delaware Distributors, L.P., a Delaware limited partnership (the "Distributor") is effective as of May 1, 2007. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Jefferson Pilot Financial Insurance Company, a life insurance company organized under the laws of the state of Nebraska, is added as a party to this Agreement until such time as it is merged into The Lincoln National Life Insurance Company, and together with The Lincoln National Life Insurance Company, is referred to as the "Company." 2. Article XII Notices - The following information should be added to the "If to the Company" section: Jefferson Pilot Financial Insurance Company One Granite Place Concord, NH 03301 Attn: John Weston 3. Schedule 1 of this Agreement shall be deleted and replaced with the attached Schedule 1. 4. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 5. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. DELAWARE VIP TRUST (Fund) Date: 11/6/07 By: /s/ See Yeng Quek ----------------------- ------------------------------- Name: See Yeng Quek Title: Executive Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 12/21/07 By: /s/ Kelly D. Clevenger ----------------------- ------------------------------- Kelly D. Clevenger Vice President DELAWARE DISTRIBUTORS, L.P. (Distributor), by DELAWARE DISTRIBUTORS, INC., General Partner Date: 11/8/07 By: /s/ Theodore K. Smith ----------------------- ------------------------------- Name: Theodore K. Smith Title: President JEFFERSON PILOT FINANCIAL INSURANCE COMPANY Date: 12/27/07 By: /s/ John A. Weston ----------------------- ------------------------------- John A. Weston Vice President AMENDMENT TO SCHEDULE 1 Separate Accounts of the Company Investing in the Fund As of May 1, 2007 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 55 Lincoln National Life Insurance Company Separate Account 56 Lincoln National Life Insurance Company Separate Account 87 Lincoln National Life Insurance Company Separate Account 93 Lincoln National Life Insurance Company Separate Account 94 Lincoln Life Separate Account 4k JPF Separate Account A JPF Separate Account C AMENDMENT TO SCHEDULE 2 Variable Annuity Contracts and Variable Life Insurance Policies Supported by Separate Accounts Listed on Schedule 1 As of May 1, 2007 Multi Fund(R) Individual Variable Annuity Contract (Registered and non-registered) Multi Fund(R) 5 Individual Variable Annuity Contract Multi Fund(R) Select Individual Variable Annuity Contract Multi Fund(R) Variable Life Insurance Policy Multi Fund(R) Group Variable Annuity Contract Lincoln ChoicePlus Variable Annuity Contract Lincoln ChoicePlus Access Variable Annuity Contract Lincoln ChoicePlus Bonus Variable Annuity Contract Lincoln ChoicePlus II Variable Annuity Contract Lincoln ChoicePlus II Access Variable Annuity Contract Lincoln ChoicePlus II Bonus Variable Annuity Contract Lincoln ChoicePlus II Advance Variable Annuity Contract Lincoln ChoicePlus Assurance (B Share) Lincoln ChoicePlus Assurance (C Share) Lincoln ChoicePlus Assurance (L Share) Lincoln ChoicePlus Assurance (Bonus) Lincoln ChoicePlus Assurance (A Share) Lincoln ChoicePlus Momentum Income Option Lincoln ChoicePlus Design Lincoln VUL I Variable Universal Life Insurance Policy Lincoln VUL(DB) Variable Universal Life Insurance Policy Lincoln VUL(DB) II Variable Universal Life Insurance Policy Lincoln VUL(DB) IV Variable Universal Life Insurance Policy Lincoln VUL(CV) Variable Universal Life Insurance Policy Lincoln VUL(CV) II Variable Universal Life Insurance Policy Lincoln VULFlex Variable Universal Life Insurance Policy Lincoln VUL(CV) III Variable Universal Life Insurance Policy Lincoln VUL(CV) IV Variable Universal Life Insurance Policy Lincoln VUL(ONE) Variable Universal Life Insurance Policy Lincoln VUL(ONE) 2005 Variable Universal Life Insurance Policy Lincoln Momentum VUL(ONE) Variable Universal Life Insurance Policy Lincoln Momentum VUL(ONE) 2005 Variable Universal Life Insurance Policy Lincoln Momentum SVUL(ONE) Variable Universal Life Insurance Policy eAnnuity(TM) Variable Annuity Contract Lincoln Money Guard Variable Universal Life Policy Lincoln SVUL Variable Universal Life Insurance Policy Lincoln SVUL I Variable Universal Life Insurance Policy Lincoln SVUL II Variable Universal Life Insurance Policy Lincoln SVUL III Variable Universal Life Insurance Policy Lincoln SVUL IV Variable Universal Life Insurance Policy Lincoln SVULONE Variable Universal Life Insurance Policy Lincoln CVUL Variable Universal Life Insurance Policy Lincoln CVUL Series III Variable Universal Life Insurance Policy Lincoln Corporate Variable 4 Lincoln Corporate Variable 5 Lincoln Corporate Variable Private Solutions Group Variable Annuity (GVA) I, II, III New Directions Core New Directions Access New Directions Access 4 Individual Variable Annuity B Share Individual Variable Annuity C Share Lincoln Life Director(TM) Lincoln American Legacy Retirement Group Variable Annuity Lincoln Ensemble Accumulator VUL Lincoln Ensemble Protector VUL Lincoln Ensemble II VUL Lincoln Ensemble III Lincoln Ensemble Exec VUL 2006 Lincoln Ensemble Exec Lincoln Ensemble SVUL EX-99 12 a2182654zex-99_1.txt FUND PARTICIPATION AGREEMENT THIS AGREEMENT made as of the 11th day of May, 1998, by and between BT Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers Trust Company ("ADVISER"), a New York banking corporation, and The Lincoln National Life Insurance Company ("LIFE COMPANY"), a life insurance company organized under the laws of the State of Indiana. WHEREAS, TRUST is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the ... 40 Act"), as an open-end, diversified management investment company; and WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"), with those Portfolios currently available being listed on Appendix A hereto; and WHEREAS, TRUST was organized to act as the funding vehicle for certain variable life insurance and/or variable annuity contracts ("Variable Contracts") offered by life insurance companies through separate accounts ("Separate Accounts") of such life insurance companies ("Participating Insurance Companies"); and WHEREAS, TRUST may also offer its shares to certain qualified pension and retirement plans ("Qualified Plans"); and WHEREAS, TRUST has received an order from the SEC, granting Participating Insurance Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Portfolios of the TRUST to be sold to and held by Variable Contract Separate Accounts of both affiliated and unaffiliated Participating Insurance Companies and Qualified Plans ("Exemptive Order"); and WHEREAS, LIFE COMPANY has established or will establish one or more Separate Accounts to offer Variable Contracts and is desirous of having TRUST as one of the underlying funding vehicles for such Variable Contracts; and WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of 1940, as amended (the "Advisers Act") and as such is excluded from the definition of "Investment Adviser" and is not required to register as an investment adviser pursuant to the Advisers Act; and 1 WHEREAS, ADVISER serves as the TRUST's investment adviser; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the aforementioned Variable Contracts and TRUST is authorized to sell such shares to LIFE COMPANY at such shares' net asset value; NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, TRUST, and ADVISER agree as follows: Article 1. SALE OF TRUST SHARES 1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY shares of the selected Portfolios as listed on Appendix B for investment of purchase payments of Variable Contracts allocated to the designated Separate Accounts as provided in TRUST's Registration Statement. 1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the order for the shares of TRUST. For purposes of this Section 1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in writing) of such order by 9:00 a.m. New York time on the next Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which TRUST calculates its net asset value pursuant to the rules of the SEC. 1.3 TRUST agrees to redeem on LIFE COMPANY's request, any -full or fractional shares of TRUST held by LIFE COMPANY, executing such requests on a daily basis at the net asset value next computed after receipt by TRUST or its designee of the request for redemption, in accordance with the provisions of this Agreement and TRUST's Registration Statement (in the event of a conflict between the provisions of this Agreement and the Trust's Registration Statement, the provisions of the Registration Statement shall govern.) For purposes of this Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests for redemption from the designated Separate Account and receipt by such designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives the request for redemption by 4:00 p.m. New York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE COMPANY may agree in 2 writing) of such request for redemption by 9:00 a.m. New York time on the next Business Day. 1.4 TRUST shall furnish, on or before each ex-dividend date, notice to LIFE COMPANY of any income dividends or capital gain distributions payable on the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional shares of the Portfolio. LIFE COMPANY reserves the right to change such election. TRUST shall notify LIFE COMPANY or its designee of the number of shares so issued as payment of such dividends and distributions. 1.5 TRUST shall make the net asset value per share for the selected Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m. New York time. If TRUST provides LIFE COMPANY with materially incorrect share net asset value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts, shall be entitled to an adjustment to the number of shares purchased or redeemed on each day for which such incorrect information was provided to reflect the correct share net asset value. Any material error in the calculation of net asset value per share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. 1.6 At the end of each Business Day, LIFE COMPANY shall use the information described in Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, LIFE COMPANY shall process each such Business Day's Separate Account transactions based on requests and premiums received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount of TRUST shares which shall be purchased or redeemed at that day's closing net asset value per share. The net purchase or redemption orders so determined shall be transmitted to TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the Business Day next following LIFE COMPANY's receipt of such requests and premiums in accordance with the terms of Sections 1.2 and 1.3 hereof. 1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE COMPANY shall pay for such purchase by wiring federal funds to TRUST or its designated custodial account by 2:00 pm on the day the order is transmitted by LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption proceeds to LIFE COMPANY by 2:00 pm that day, unless doing so would require TRUST to dispose of Portfolio securities or otherwise incur additional costs. In any event, proceeds shall be wired to LIFE COMPANY within the time period permitted by the '40 Act or the rules, orders or regulations thereunder, and TRUST shall notify the 3 person designated in writing by LIFE COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York Time on the same Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's order requests the application of redemption proceeds from the redemption of shares to the purchase of shares of another Fund advised by ADVISER, TRUST shall so-apply such proceeds on the same Business Day that LIFE COMPANY transmits such order to TRUST. 1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold only to Participating Insurance Companies which have agreed to participate in TRUST to fund their Separate Accounts and/or to Qualified Plans, all in accordance with the requirements of Section 817(h)(4) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the TRUSTs Portfolios will not be sold directly to the general public. 1.9 TRUST may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of the shares of or liquidate any Portfolio of TRUST if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST (the "Board"), acting in good faith and in light of its duties under federal and any applicable state laws, deemed necessary, desirable or appropriate and in the best interests of the shareholders of such Portfolios. 1. 10 Issuance and transfer of Portfolio shares will -be by book entry only. Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts. Shares ordered from Portfolio will be recorded in appropriate book entry titles for the Separate Accounts. Article II. REPRESENTATIONS AND WARRANTIES 2.1 LIFE COMPANY represents and warrants that it is an insurance company duly organized and validly existing under the laws of Indiana and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that LIFE COMPANY, the principal underwriter for the Variable Contracts, is registered as a broker-dealer under. the Securities Exchange Act of 1934 (the ... 34 Act"). 2.2 LIFE COMPANY represents and warrants that it has registered or, prior to any issuance or sale of the Variable Contracts, will register each Separate Account as a unit investment trust ("UIT") in accordance with the provisions of the '40 Act and cause each Separate Account to remain so registered to serve as a segregated asset account for the Variable Contracts, unless an exemption from registration is available. 2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be registered under the Securities Act of 1933 (the "'33 Act") unless an exemption from registration is available prior to any issuance or sale of the Variable Contracts, and that 4 the Variable Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws (including all applicable blue sky laws and further that the sale of the variable contracts shall comply in all material respects with applicable state insurance law suitability requirements). 2.4 LIFE COMPANY represents and warrants that the Variable Contracts are currently and at the time of issuance will be treated as life insurance policies, endowment or annuity contracts under applicable provisions of the Code, that it will maintain such treatment and that it will notify TRUST im mediately Upon having a reasonable basis for believing that the Variable Contracts have ceased to be so treated or that they might not be so treated in the future. 2.5 TRUST represents and warrants that the Fund shares offered and sold pursuant to this Agreement will be registered under the '33 Act and sold in accordance with all applicable federal laws, and TRUST shall be registered under the '40 Act prior to and at the time of any issuance or sale of such shares. TRUST, subject to Section 1.9 above, shall amend its registration statement under the '33 Act and the '40 Act from time to time as required in order to effect the continuous offering of its shares. TRUST shall register and qualify its shares for sale in accorda n with the laws of the various states only if and to the extent deemed advisable by TRUST. 2.6 TRUST and ADVISER each represents and warrants that each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing any Portfolio has ceased to comply and will immediately take all reasonable steps to adequately diversify the Portfolio to achieve compliance. 2.7 TRUST represents and warrants that each Portfolio invested in by the Separate Account will be treated as a "regulated investment company" under Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a reasonable basis for believing it has ceased to so qualify or might not so qualify in the future. 2.8 ADVISER represents and warrants that it shall perform its obligations hereunder in compliance in all material respects with all applicable state and federal laws. 2.9 TRUST and ADVISER each represents and warrants that all officers, employees and agents of the TRUST having access to securities or funds of any Portfolio shall be covered by a blanket fidelity bond in such minimum amount as the SEC may prescribe under Section 17 (g) of the '40 act. 5 Article Ill. PROSPECTUS AND PROXY STATEMENTS 3.1 TRUST shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of TRUST. TRUST shall bear the costs of registration and qualification of shares of the Portfolios, preparation and filing of the documents listed in this Section 3.1 and all taxes and filing fees to which an issuer is subject on the issuance and transfer of its shares. 3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge, with as many copies of the current prospectus (or prospectuses), statements of additional information, annual and semi-annual reports and proxy statements for the shares of the Portfolios as LIFE COMPANY may reasonably request for distribution to existing Variable Contract owners whose Variable Contracts are funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE COMPANY's expense, with as many copies of the current prospectus (or prospectuses) for the shares as LIFE COMPANY may reasonably request for distribution to prospective purchasers of Variable Contracts. If requested by LIFE COMPANY, TRUST or its designee shall provide such documentation [including a "camera ready" copy of the current prospectus (or prospectuses) for the Portfolios used in THE LIFE COMPANY'S Variable Contracts as set in type or, at the request of LIFE COMPANY, as a diskette in the form sent to the financial printer] and other assistance as is reasonably necessary in order for the parties hereto once a year [or more frequently if the prospectus (or prospectuses), for such Portfolios for the shares is supplemented or amended] to have the prospectus for the Variable Contracts and the prospectus (or prospectuses) for the TRUST shares printed together in one document. The expenses of such printing will be apportioned between LIFE COMPANY and TRUST in proportion to the number of pages of the Variable Contract and TRUST prospectus, taking account of other relevant factors affecting the expense of printing, such as covers, columns, graphs and charts; TRUST shall bear the cost of printing the TRUST prospectus portion of such document for distribution only to owners of existing Variable Contracts funded by the' TRUST shares and LIFE COMPANY shall bear the expense of printing the portion of such documents relating to the Separate Account; provided, however, LIFE COMPANY shall bear all printing expenses of such combined documents where used for distribution to prospective purchasers or to owners of existing Variable Contracts not funded by the shares. In the event that LIFE COMPANY requests that TRUST or its designee provide TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be responsible for providing the prospectus (or prospectuses) in the format in which it is accustomed to formatting prospectuses and shall bear the expense of providing the prospectus (or prospectuses) in such format (e.g. typesetting expenses), and LIFE COMPANY shall bear the expense of adjusting or changing the format to conform with any of its prospectuses. 6 3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all prospectuses, statements of additional information, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to the Portfolios and any other material constituting sales literature or advertising under NASD rules, the 40 Act or the 33 Act within 20 days of the date of such material and annual and semi-annual reports and any amendments or supplements thereto within 80 days of the date of such report or amendment or supplement thereto. LIFE COMPANY will provide TRUST with at least one complete copy of all prospectuses, statements of additional information, proxy statements, exemptive applications and all amendments or supplements to any of the above that relate to a Separate Account and its investment in Trust and any other material constituting sales literature or advertising under NASD rules, the 40 Act or the 33 Act within 20 days of the date of such material and annual and semi-annual reports and any amendments within 80 days of the date of such report or amendment or supplement thereto. Article IV. SALES MATERIALS 4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and ADVISER, each piece of sales literature or other promotional material in which TRUST or ADVISER is named, at least ten (10) Business Days prior to its intended use. No such material will be used if TRUST or ADVISER objects to its use in writing within seven (7) Business Days after receipt of such material. 4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE COMPANY, each piece of sales literature or other promotional material in which LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days prior to its intended use. No such material will be used if LIFE COMPANY objects to its use in writing within seven (7) Business Days after receipt of such material. 4.3 TRUST and its affiliates and agents shall not give any information or make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other than the information or representations contained in a registration statement or prospectus for such Variable Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports of the Separate Accounts or reports prepared for distribution to owners of such Variable Contracts, or in sales literature or other promotional material approved by LIFE COMPANY or its designee, except with the written permission of LIFE COMPANY. 4.4 LIFE COMPANY and its affiliates and agents shall not give any information or make any representations on behalf of TRUST or concerning TRUST other than the information or representations contained in a registration statement or prospectus for 7 TRUST, as such registration statement and prospectus may be amended or supplemented from time to time, or in sales literature or other promotional material approved by TRUST or its designee, except with the written permission of TRUST or ADVISER. 4.5 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under National Association of Securities Dealers, Inc. ("NASD") rules, the '40 Act, the '33 Act or rules thereunder. Article V. POTENTIAL CONFLICTS 5.1 The parties acknowledge that TRUST has received an order from the SEC granting relief from various provisions of the '40 Act and the rules thereunder to the extent necessary to permit TRUST shares to be sold to and held by Variable Contract separate accounts of both affiliated and unaffiliated Participating Insurance Companies and Qualified Plans. The Exemptive Order requires TRUST and each Participating Insurance Company to comply with conditions and undertakings substantially as provided in this Section 5. The TRUST will not enter into a participation agreement with any other Participating Insurance Company unless it imposes the same conditions and undertakings as are imposed on LIFE COMPANY hereby. 5.2 The Board will monitor TRUST for the existence of any material irreconcilable conflict between the interests of Variable Contract owners of all separate accounts and with participants of Qualified Plans investing in TRUST. An irreconcilable material conflict may arise for a variety of reasons, which may include: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of TRUST are being managed; (e) a difference in voting instructions given by Variable Contract owners; (f) a decision by a Participating Insurance Company 8 to disregard the voting instructions of Variable Contract owners and (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of plan participants. 5.3 LIFE COMPANY will report any potential or existing conflicts of which it becomes aware to the Board. LIFE COMPANY will be responsible for assisting the Board in carrying out its duties in this regard by providing the Board with all information reasonably necessary for the Board to consider any issues raised. The responsibility includes, but is not limited to, an obligation by the LIFE COMPANY to inform the Board whenever it has determined to disregard Variable Contract owner voting instructions. These responsibilities of LIFE COMPANY will be carried out with a view only to the interests of the Variable Contract owners. 5.4 If a majority of the Board or majority of its disinterested Trustees, determines that a material irreconcilable conflict exists affecting LIFE COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable (as determined by a majority of the Board's disinterested Trustees), will take any steps necessary to remedy or eliminate the irreconcilable material conflict, up to and including; (a) withdrawing the assets allocable to some or all of the Separate Accounts from TRUST or any Portfolio thereof and reinvesting those assets in a different investment medium, which may include another Portfolio of TRUST, or another investment company; (b) submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and as appropriate, segregating the assets of any appropriate group (i.e variable annuity, or variable life insurance Contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; and (c) establishing a new registered management investment company (or series thereof) or managed separate account. If a material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at the election of TRUST, to withdraw the Separate Account's investment in TRUST, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take such remedial action shall be carried out with a view only to the interests of the Variable Contract owners. For the purposes of this Section 5.4, a majority of the disinterested members of the Board shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will TRUST or ADVISER (or any other investment adviser of TRUST) be required to establish a new funding medium for any Variable Contract. Further, LIFE COMPANY shall not be required by this Section 5.4 to establish a new funding medium for any Variable Contracts [if any offer to do so has been declined by a vote of a majority of Variable Contract owners materially and adversely affected by the irreconcilable material conflict.] 9 5.5 The Board's determination of the existence of an irreconcilable material conflict and its implications shall be made known promptly and in writing to LIFE COMPANY. 5.6 LIFE COMPANY shall from time to time submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out its obligations under this Article V. Article VI. VOTING 6.1 LIFE COMPANY will provide pass-through voting privileges to all Variable Contract owners so long as and to the extent the SEC continues to interpret the '40 Act as requiring pass-through voting privileges for Variable Contract owners. Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio held in its 40 Act registered Separate Accounts in a manner consistent with voting instructions timely received from its Variable Contract owners. LIFE COMPANY will be responsible for assuring that each of its Separate Accounts that participates in TRUST calculates voting privileges in a manner consistent with other Participating Insurance Companies. LIFE COMPANY will vote shares in a registered Separate Account for which it has not received timely voting instructions in the same proportion as it votes those shares in that Separate Account for which it has received voting instructions. 6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act or the rules thereunder with respect to mixed and shared funding on terms and conditions materially different from any exemptions granted in the Exemptive Order, then TRUST, and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable. Article VII. INDEMNIFICATION 7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify and hold harmless TRUST, ADVISER and each of their Trustees, directors, principals, officers, employees and agents and each person, if any, who controls TRUST or ADVISER within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties") against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY, which consent shall not be unreasonably withheld) or litigation or threatened litigation (including reasonable legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of TRUST's shares or the Variable Contracts and: 10 (a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement or prospectus or sales literature for the Variable Contracts or contained in the Variable Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY by or on behalf of TRUST for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) untrue statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of TRUST not supplied by LIFE COMPANY, or persons under its control) or (ii) willful misfeasance, bad faith or gross negligence of LIFE COMPANY or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of TRUST or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to TRUST by or on behalf of LIFE COMPANY; or (d) arise as a result of any failure by LIFE COMPANY to provide substantially the services and furnish the materials under the terms of this Agreement; or (e) arise out of or result from any material breach of any representation and/or warranty made by LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY. 11 7.2 LIFE COMPANY shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party to the extent that such losses, claims, damages, liabilities or litigation are attributable to such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 7.3 LIFE COMPANY shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified LIFE COMPANY in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY of any such claim shall not relieve LIFE COMPANY from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against an Indemnified Party, LIFE COMPANY shall be entitled to participate at its own expense in the defense of such action. LIFE COMPANY also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from LIFE COMPANY to such party of LIFE COMPANY's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and LIFE COMPANY will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.4 INDEMNIFICATION BY TRUST AND ADVISER. TRUST and ADVISER each agree to indemnify and hold harmless LIFE COMPANY and each of its directors, officers, employees, and agents and each person, if any, who controls LIFE COMPANY within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified Parties") against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of TRUST or ADVISER (which consent shall not be unreasonably withheld) or litigation or threatened litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute, or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of TRUST's shares for the Variable Contracts and: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of TRUST (or any amendment or supplement to any of the foregoing), or arise out of 12 or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to ADVISER I or TRUST by or on behalf of LIFE COMPANY for use in the registration statement or prospectus for TRUST or in sales literature (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Variable Contracts or TRUST shares; or (b) arise out of or result from (i) untrue statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by ADVISER or TRUST or persons under its control) or (ii) gross negligence, bad faith or willful misfeasance of TRUST or ADVISER or persons under its control, with respect to the sale or distribution of the Variable Contracts or TRUST shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts, or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to LIFE COMPANY for inclusion therein by or on behalf of TRUST; or (d) arise as a result of (i) a failure by TRUST or ADVISER to provide substantially the services and furnish the materials under the terms of this Agreement; or (ii) a failure by a Portfolio(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code; or (iii) a failure by a Portfolio(s) invested in by the Separate Account to qualify as a regulated investment company" under Subchapter M of the Code; or 13 (e) arise out of or result from any material breach of any representation and/or warranty made by TRUST or ADVISER in this Agreement or arise out of or result from any other material breach of this Agreement by TRUST or ADVISER. 7.5 TRUST and ADVISER shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party to the extent that such losses, claims, damages, liabilities or litigation are attributable to such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 7.6 TRUST and ADVISER shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified TRUST and ADVISER in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify TRUST and ADVISER of any such claim shall not relieve TRUST and ADVISER from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, TRUST and ADVISER shall be entitled to participate at their own expense in the defense thereof. TRUST and ADVISER also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from TRUST or ADVISER to such party of TRUST's or ADVISER's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and TRUST and/or ADVISER as the case may be will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. Article Vill. TERM; TERMINATION 8.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein. 8.2 This Agreement shall terminate in accordance with the following provisions: (a) At the option of LIFE COMPANY or TRUST At any time from the date hereof upon 180 days' written notice, unless a shorter time is agreed to by the parties; 14 (b) At the option of LIFE COMPANY, if TRUST shares are not reasonably available to meet the requirements of the Variable Contracts as determined by LIFE COMPANY. Prompt notice of election to terminate shall be furnished by LIFE COMPANY, said termination to be effective ten days after receipt of notice unless TRUST makes available a sufficient number of shares to reasonably meet the requirements of the Variable Contracts within said ten-day period; (c) At the option of LIFE COMPANY, upon the institution of formal proceedings against TRUST or ADVISER or any sub-adviser by the SEC, the NASD, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in LIFE COMPANY's reasonable judgment, after affording TRUST and ADVISER reasonable opportunity for consultation with LIFE COMPANY, materially impair TRUST's ability to meet and perform TRUST's obligations and duties hereunder, or result in material harm to the Separate Accounts, LIFE COMPANY, or owners of Variable Contracts. Prompt notice of election to terminate shall be furnished by LIFE COMPANY with said termination to be effective upon receipt of notice; (d) At the option of TRUST or ADVISER, upon the institution of formal proceedings against LIFE COMPANY by the SEC, the NASD, or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in TRUST's or ADVISER's reasonable judgment, after affording LIFE COMPANY reasonable opportunity for consultation with TRUST and ADVISER, materially impair LIFE COMPANY's ability to meet and perform its obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by TRUST with said termination to be effective upon receipt of notice; (e) In the event TRUST's shares are not registered, issued or sold in accordance with applicable state or federal law, or such law precludes the use of such shares as the underlying investment medium of Variable Contracts issued or to be issued by LIFE COMPANY. Termination shall be effective upon such occurrence without notice; (f) At the option of TRUST if the Variable Contracts cease to- qualify as annuity contracts or life insurance- contracts, as applicable, 15 under the Code, or if TRUST reasonably believes that the Variable Contracts may fail to so qualify. Termination shall be effective upon receipt of notice by LIFE COMPANY; (g) At the option of LIFE COMPANY, upon TRUST's or ADVISER's breach of any material provision of this Agreement, which breach has not been cured to the reasonable satisfaction of LIFE COMPANY within ten days after written notice of such breach is delivered to TRUST; (h) At the option of TRUST or ADVISER, upon LIFE COMPANY's breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of TRUST within ten days after written notice of such breach is delivered to LIFE COMPANY; (i) At the option of TRUST or ADVISER, if the Variable Contracts are not registered, issued or sold in accordance with applicable federal and/or state law. Termination shall be effective immediately upon such occurrence without notice; At the option of LIFE COMPANY, upon 75 days written notice of a vote of Variable Contract owners having an interest in a Portfolio and upon written approval of LIFE COMPANY, to substitute the shares of another investment company for the corresponding shares of a Portfolio in accordance with the terms of the Variable Contracts; (k) In the event this Agreement is assigned without the prior written consent of LIFE COMPANY, TRUST, and ADVISER, termination shall be effective immediately upon such occurrence without notice. 8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2 hereof, TRUST at LIFE COMPANY'S option shall continue to make available additional TRUST shares, as provided below, for so long as TRUST desires pursuant to the terms and conditions of this Agreement, for all Variable Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, if TRUST makes additional TRUST shares available, the owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal authority to do so, shall be permitted to reallocate investments in TRUST, redeem investments in TRUST and/or invest in TRUST upon the payment- of additional premiums under the Existing Contracts. If TRUST shares continue to be made 16 available after such termination, the provisions of this Agreement shall remain in effect and thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so continued pursuant to this Section 8.3, upon sixty (60) days prior written notice to the other party. 8.4 Except as necessary to implement Variable Contract owner initiated transactions, or as required by state insurance laws or regulations, LIFE COMPANY shall not redeem the shares attributable to the Variable Contracts (as opposed to the shares attributable to LIFE COMPANY's assets held in the Separate Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from allocating payments to a Portfolio that was otherwise available under the Variable Contracts until thirty (30) days after the LIFE COMPANY shall have notified TRUST of its intention to do so. Article IX. NOTICES Any notice hereunder shall be given by registered or certified mail return receipt requested to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to TRUST: BT Insurance Funds Trust c/o First Data Investor Services Group, Inc. One Exchange Place 53 State Street, Mail Stop BOS865 Boston, MA 02109 AND c/o BT Alex Brown One South Street, Mail Stop 1-18-6 Baltimore, MD 21202 Attn: Brian Wixted If to ADVISER: Bankers Trust Company 130 Liberty Street, Mail Stop 2355 New York, NY 10006 Attn.: Vinay Mendiratta 17 If to LIFE COMPANY: Lincoln National Life Insurance Kelly D. Clevenger 1300 S. Clinton Street Fort Wayne, IN 46802-3506 Notice shall be deemed given on the date of receipt by the addressee as evidenced by the return receipt. Article X. MISCELLANEOUS 10.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 10.2 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 10.3 If any provision of this Agreement shall be held or made invalid by a -court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 10.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder and to any orders of the SEC granting exemptive relief therefrom and the conditions of such orders. 10.5 It is understood and expressly stipulated that neither the shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or any Portfolio shall be personally liable hereunder. No Portfolio shall be liable for the liabilities of any other Portfolio. All persons dealing with TRUST or a Portfolio must look solely to the property of TRUST or that Portfolio, respectively, for enforcement of any claims against TRUST or that Portfolio. It is also understood that each of the Portfolios shall be deemed to be entering into a separate Agreement with LIFE COMPANY so that it is as if each of the Portfolios had signed a separate Agreement with LIFE COMPANY and that a single document is being signed simply to facilitate the execution and administration of the Agreement. 18 10.6 Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 10.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 10.8 If the Agreement terminates, the parties agree that Article 7 and Sections 10.5, 10.6 and 10.7 shall remain in effect after termination. 10.9 No provision of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by TRUST, ADVISER and the LIFE COMPANY. 10.10 No failure or delay by a party in exercising any right or remedy under this Agreement will operate as a waiver thereof and no single or partial exercise of rights shall preclude a further or subsequent exercise. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Fund Participation Agreement as of the date and year first above written. BT INSURANCE FUNDS TRUST By: /s/ Elizabeth Russell Name: Elizabeth Russell Title: Secretary 19 BANKERS TRUST COMPANY By: /s/ Irene S. Greenberg Name: Irene S. Greenberg Title: Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President 20 Appendix A BT Insurance Funds Trust Portfolios Equity 500 Index Fund Small Cap Index Fund APPENDIX B SEPARATE ACCOUNTS LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT M LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT R AMENDMENT NO. 2 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of May 1, 1999, to the Fund Participation Agreement dated 11th day of May, 1998 (the "Agreement"), by and between BT Insurance Funds Trust ("Trust"), Bankers Trust Company ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company"). WHEREAS, Trust, Life Company and Adviser wish to revise Appendices A and B to the Agreement; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company and Adviser hereby agree as follows: I. Appendix A to the Agreement is hereby amended, and restated in its entirety, by the Appendix A attached to this Amendment. 2. Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. BT INSURANCE FUNDS TRUST By /s/ Gerald J. Holland Name: Gerald J. Holland Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President BANKERS TRUST COMPANY By: /s/ Irene S. Greenberg Name: Irene S. Greenberg Title: Vice President APPENDIX A (Revised effective May 1, 1999) BT INSURANCE FUNDS TRUST PORTFOLIOS Equity 500 Index Fund Small Cap Index Fund EAFE Equity Index Fund APPENDIX B (Revised effective May 1, 1999) SEPARATE ACCOUNTS LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT Q LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 53 LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT M LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT R LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 36 (EFFECTIVE AUGUST 13, 1999) AMENDMENT TO APPENDIX B AS OF NOVEMBER 1, 1998 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln National Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Account R Lincoln National Life Insurance Company Separate Account 27 Lincoln National Life Insurance Company Separate Account 53 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedule A to be executed in its name and behalf by its duly authorized officer on the date specified below. Date: BT INSURANCE FUNDS TRUST By: Elizabeth Russell, Secretary Date: BANKERS TRUST COMPANY By: Irene S. Greenberg, Vice President Date: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, on behalf of itself and its separate accounts and as principal underwriter for its separate accounts By: Kelly D. Clevenger, Vice President Exhibit A Funds Available to Name of Separate Accounts THE SEPARATE ACCOUNTS UTILIZING SOME OR ALL OF THE FUNDS Please amend Please add Lincoln Life Flexible Appendix A of the FPA Premium Variable Life Account and Exhibit A of the S and Lincoln National Life Admin Services Letter Insurance Company Separate to include the EAFE Account 36 Index Fund AMENDMENT NO. 4 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of May 1, 2001, to the Fund Participation Agreement dated as of the 1st day of October, 1998 (the "Agreement"), by and between BT Insurance Funds Trust (now known as Deutsche Asset Management VIT Funds ) ("Trust"), Bankers Trust Company ("Adviser"), and Lincoln Life & Annuity Company of New York ("Life Company"). WHEREAS, effective May 1, 2001 Deutsche Asset Management, Inc. ("DAMI") will replace Adviser as investment adviser to the Trust; WHEREAS, effective May 1, 2001 Adviser wishes to transfer all of its rights, responsibilities and duties under the Agreement to ("DAMI"); WHEREAS, DAMI is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act"); WHEREAS, Trust, Life Company and Adviser wish to revise Appendix A to the Agreement in its entirety; WHEREAS, Trust, Life Company and Adviser wish to revise Appendix B to the Agreement in its entirety; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company, Adviser and DAMI hereby agree as follows: 1. Effective May 1, 2001 DAMI will replace Adviser and assume all of the Adviser's rights, responsibilities and duties under the Agreement. 2. Life Company agrees to the replacement of Adviser with DAMI 3. Article IX. NOTICES is hereby amended such that the addresses for Trust and Adviser are replaced in their entirety with the following: If to TRUST: Deutsche Asset Management VIT Funds c/o PFPC Global Fund Services 3200 Horizon Drive King of Prussia, PA 19406-0903 Attn: Tom Calabria, Legal Department AND c/o Deutsche Asset Management Mutual Fund Services One South Street, Mail Stop 1-18-6 Baltimore, MD 21202 Attn: Richard Hale If to ADVISER: Deutsche Asset Management, Inc. 130 Liberty Street, Mail Stop 2355 New York, NY 10006 Attn: Legal Department 4. Appendix A to the Agreement is hereby amended, and restated in its entirety, by the Appendix A attached to this Amendment. 5. Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. DEUTSCHE ASSET MANAGEMENT VIT FUNDS By: /s/ Daniel O. Hersch -------------------------------------------- Name: Daniel O. Hersch Title: Secretary LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK By: /s/ Steven M. Kluever ------------------------------------------ Name: Steven M. Kluever Title: Second Vice President BANKERS TRUST COMPANY By: /s/ Douglas W. Doucette -------------------------------------------- Name: Douglas W. Doucette Title: Managing Director DEUTSCHE ASSET MANAGEMENT, INC. By: /s/ Marco Veissid -------------------------------------------- Name: Marco Veissid Title: Director APPENDIX A (Revised effective May 1, 2001) DEUTSCHE ASSET MANAGEMENT VIT FUNDS Deutsche Asset Management VIT Funds - Equity 500 Index Fund Deutsche Asset Management VIT Funds - Small Cap Index Fund Deutsche Asset Management VIT Funds - EAFE Equity Index Fund APPENDIX B (Revised effective May 1, 2001) SEPARATE ACCOUNTS 1. Lincoln Life & Annuity Variable Annuity Account L 2. Lincoln Life & Annuity Flexible Premium Variable Life Account M 3. Lincoln New York Separate Account N for Variable Annuities 4. LLANY Separate Account R for Flexible Premium Variable Life Insurance 5. LLANY Separate Account S for Flexible Premium Variable Life Insurance AMENDMENT NO. 4 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of August 1, 2002, to the Fund Participation Agreement dated as of the 11th day of May, 1998 (the "Agreement"), is between Deutsche Asset Management VIT Funds ("Trust"), Deutsche Asset Management, Inc. ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company"). 1. Section 1.5 to the Agreement shall be deleted in its entirety and replaced with the following: 1.5 TRUST shall make the net asset value per share for the selected Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably practicable after the net asset value per share is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m. New York time. If TRUST provides LIFE COMPANY with materially incorrect share net asset value information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the Separate Accounts, shall be entitled to an adjustment to the number of shares purchased or redeemed on each day for which such incorrect information was provided to reflect the correct share net asset value. Any material errors in the calculation of the net asset value, dividends or capital gain information shall be reported immediately upon discovery to the Life Company. In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the Life Company for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make contractowners whole and reasonable administrative costs necessary to correct the error. In accordance with Section 10.9 of the Agreement, Trust, Life Company and Adviser hereby agree as follows: 2. Article IX. NOTICES is hereby amended such that the addresses for the Life Company are replaced in their entirety with the following: If to the LIFE COMPANY: Lincoln National Life Insurance Company Attn: Steven M. Kluever, 2nd Vice President 1300 S. Clinton Street Fort Wayne IN 46802 Facsimile: (260) 455-1773 3. Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. DEUTSCHE ASSET MANAGEMENT VIT FUNDS By:____/s/ Brian Bader_____________________ Name: Brian Bader Title: Director THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By:___/s/ Steven M. Kluever________________ Name: Steven M. Kluever Title: Second Vice President DEUTSCHE ASSET MANAGEMENT, INC. By:___/s/ Brian Bader______________________ Name: Brian Bader Title: Director APPENDIX B (Revised effective August 1, 2002) SEPARATE ACCOUNTS 1) Lincoln National Variable Annuity Account C 2) Lincoln National Variable Annuity Account L 3) Lincoln Life Flexible Premium Variable Life Separate Account M 4) Lincoln Life Variable Annuity Account N 5) Lincoln National Variable Annuity Account Q 6) Lincoln Life Flexible Premium Variable Life Separate Account R 7) Lincoln Life Flexible Premium Variable Life Account S 8) Lincoln Life Variable Annuity Account W 9) Lincoln National Life Insurance Company Separate Account 27 10) Lincoln National Life Insurance Company Separate Account 36 11) Lincoln National Life Insurance Company Separate Account 40 12) Lincoln National Life Insurance Company Separate Account 53 AMENDMENT NO. 5 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of April 2, 2003, to the Fund Participation Agreement dated as of the 11th day of May, 1998 (the "Agreement"), by and between Scudder Investments VIT Funds (formerly Deutsche Asset Management VIT Funds) ("Trust"), Deutsche Asset Management, Inc. ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company"). WHEREAS, Trust, Life Company and Adviser wish to revise Appendix A to the Agreement in its entirety; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company, and Adviser hereby agree as follows: Appendix A to the Agreement is hereby amended, and restated in its entirety, by the Appendix A attached to this Amendment. Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. SCUDDER INVESTMENTS VIT FUNDS By: /s/ Bruce A. Rosenblum ------------------------------------------ Name: Bruce A. Rosenblum Title: Assistant Secretary THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise Taylor ------------------------------------------ Name: Rise Taylor Title: Vice President DEUTSCHE ASSET MANAGEMENT, INC. By: /s/ William G. Butterly, III ------------------------------------------ Name: William G. Butterly, III Title: Managing Director and Senior Counsel APPENDIX A To the Participation Agreement by and among Scudder Investments VIT Funds, Deutsche Asset Management, Inc. and The Lincoln National Life Insurance Company. List of Portfolios: Equity 500 Index Fund - Class A Shares Equity 500 Index Fund - Class B Shares Small Cap Index Fund - Class A Shares Small Cap Index Fund - Class B Shares EAFE Equity Index Fund - Class A Shares EAFE Equity Index Fund - Class B Shares APPENDIX B (Revised effective April 2, 2003) 1) Lincoln National Variable Annuity Account C 2) Lincoln National Variable Annuity Account L 3) Lincoln Life Flexible Premium Variable Life Separate Account M 4) Lincoln Life Variable Annuity Account N 5) Lincoln Life Variable Annuity Account Q 6) Lincoln Life Flexible Premium Variable Life Separate Account R 7) Lincoln Life Flexible Premium Variable Life Account S 8) Lincoln Life Variable Annuity Account T 9) Lincoln Life Variable Annuity Account W 10) Lincoln National Life Insurance Company Separate Account 27 11) Lincoln National Life Insurance Company Separate Account 36 12) Lincoln National Life Insurance Company Separate Account 40 13) Lincoln National Life Insurance Company Separate Account 53 AMENDMENT NO. 6 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of July 30, 2003, to the Fund Participation Agreement dated as of the 11th day of May, 1998 (the "Agreement"), by and between Scudder Investments VIT Funds (formerly Deutsche Asset Management VIT Funds) ("Trust"), Deutsche Asset Management, Inc. ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company"). WHEREAS, Trust, Life Company and Adviser wish to revise Appendix B to the Agreement in its entirety; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company, and Adviser hereby agree as follows: Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. SCUDDER INVESTMENTS VIT FUNDS By: /s/ Bruce A. Rosenblum ------------------------------------------ Name: Bruce A. Rosenblum Title: Assistant Secretary THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C. M. Taylor ------------------------------------------ Name: Rise C. M. Taylor Title: Vice President DEUTSCHE ASSET MANAGEMENT, INC. By: /s/ John H. Kim ------------------------------------------ Name: John H. Kim Title: Assistant Secretary APPENDIX B (Revised effective July 30, 2003) 1) Lincoln National Variable Annuity Account C 2) Lincoln National Variable Annuity Account L 3) Lincoln Life Flexible Premium Variable Life Separate Account M 4) Lincoln Life Variable Annuity Account N 5) Lincoln Life Variable Annuity Account Q 6) Lincoln Life Flexible Premium Variable Life Separate Account R 7) Lincoln Life Flexible Premium Variable Life Account S 8) Lincoln Life Variable Annuity Account T 9) Lincoln Life Variable Annuity Account W 10) Lincoln Life Flexible Premium Variable Life Account Z 11) Lincoln National Life Insurance Company Separate Account 27 12) Lincoln National Life Insurance Company Separate Account 36 13) Lincoln National Life Insurance Company Separate Account 40 14) Lincoln National Life Insurance Company Separate Account 53 AMENDMENT NO. 7 to the FUND PARTICIPATION AGREEMENT AMENDMENT, dated as of July 30, 2005, to the Fund Participation Agreement dated as of the 11th day of May, 1998 (the "Agreement"), by and between Scudder Investments VIT Funds (formerly Deutsche Asset Management VIT Funds) ("Trust"), Deutsche Asset Management, Inc. ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company"). WHEREAS, Trust, Life Company and Adviser wish to revise Appendix A and Appendix B to the Agreement in their entirety; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company, and Adviser hereby agree as follows: Appendix A to the Agreement is hereby amended, and restated in its entirety, by the Appendix A attached to this Amendment. Appendix B to the Agreement is hereby amended, and restated in its entirety, by the Appendix B attached to this Amendment. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. SCUDDER INVESTMENTS VIT FUNDS By: /s/ Paul H. Schubert ------------------------------------- Name: Paul H. Schubert Title: Chief Financial Officer & Treasurer THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C. M. Taylor ------------------------------------- Name: Rise C.M. Taylor Title: Vice President DEUTSCHE ASSET MANAGEMENT, INC. By: /s/ A. Thomas Smith, III ------------------------------------- Name: A. Thomas Smith, III Title: Secretary & Chief Legal Officer APPENDIX A (Revised effective July 30, 2005) To the Participation Agreement by and among Scudder Investments VIT Funds, Deutsche Asset Management, Inc. and The Lincoln National Life Insurance Company. List of Portfolios: Equity 500 Index Fund - Class A Shares Equity 500 Index Fund - Class B Shares Small Cap Index Fund - Class A Shares Small Cap Index Fund - Class B Shares APPENDIX B (Revised effective July 30, 2005) 1) Lincoln National Variable Annuity Account C 2) Lincoln National Variable Annuity Account L 3) Lincoln Life Flexible Premium Variable Life Separate Account M 4) Lincoln Life Variable Annuity Account N 5) Lincoln Life Variable Annuity Account Q 6) Lincoln Life Flexible Premium Variable Life Separate Account R 7) Lincoln Life Flexible Premium Variable Life Account S 8) Lincoln Life Variable Annuity Account T 9) Lincoln Life Variable Annuity Account W 10) Lincoln Life Flexible Premium Variable Life Account Z 11) Lincoln National Life Insurance Company Separate Account 27 12) Lincoln National Life Insurance Company Separate Account 36 AMENDMENT NO. 8 to the FUND PARTICIPATION AGREEMENT This AMENDMENT to the Fund Participation Agreement dated as of the 11th day of May, 1998, and as amended (the "Agreement"), by and between DWS Investments VIT Funds (formerly, Scudder Investments VIT Funds and prior to that Deutsche Asset Management VIT Funds) ("Trust"), Deutsche Investment Management Americas Inc. (assignee by merger with Deutsche Asset Management, Inc.) ("Adviser"), and The Lincoln National Life Insurance Company ("Life Company") is effective as of May 1, 2007, regardless of when executed. WHEREAS, Lincoln Financial Distributors, Inc. will serve as the Principal Underwriter for the Variable Contracts; NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust, Life Company, and Adviser hereby agree as follows: Section 2.1 of the Agreement is deleted and replaced in its entirety as follows: 2.1 LIFE COMPANY represents and warrants that it is an insurance company duly organized and validly existing under the laws of Indiana and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that Lincoln Financial Distributors, Inc., a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member in good standing of the National Association of Securities Dealers, Inc., is the principal underwriter for the Variable Contracts. Except as expressly set forth above, all other terms and provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Amendment as of the date and year first above written. DWS INVESTMENTS VIT FUNDS By: /s / Michael G. Clark ----------------------------- Name: Michael Clark Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. CLevenger ----------------------------- Name: Kelly D. Clevenger Title: Vice President DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC. By: /s Michael Colon ----------------------------- Name: Michael Colon Title: COO By: /s/ Philip J. Collora Name: Philip J. Collora Title: Director EX-99 13 a2182665zex-99_1.txt 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President VARIABLE INSURANCE PRODUCTS FUND By: /s/ J. Gary Burkhead Name: J. Gary Burkhead Title: Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: Name: Neal Litvack Title: President 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President VARIABLE INSURANCE PRODUCTS FUND By: /s/ Robert C. Pozen Name: Robert C. Pozen Title: Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: /s/ Kevin J. Kelly Name: Kevin J. Kelly Title: Vice President 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 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President VARIABLE INSURANCE PRODUCTS FUND II By: /s/ J. Gary Burkhead Name: J. Gary Burkhead Title: Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: /s/ Neal Litvak Name: Neal Litvak Title: President 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President VARIABLE INSURANCE PRODUCTS By: /s/ Robert C. Pozen Name: Robert C. Pozen Title: Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: /s/ Kevin J. Kelly Name: Kevin J. Kelly Title: Vice President 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 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: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President Date 5/3/99 VARIABLE INSURANCE TRODUCTS FU S By: /s/ Robert C. Pozen Name: Robert C. Pozen Title: Senior Vice President Date 5/7/99 FIDELITY DISTRIBUTION By: /s/ Kevin J. Kelly Name: Kevin J. Kelly Title: Vice President 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: 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: ------------------------ 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: /s/ Kelly D. Clevenger Kelly D. Clevenger Vice President VARIABLE INSURANCE PRODUCTS FUND III By: /s/ Robert C. Pozen Robert C. Pozen Senior Vice President FIDELITY DISTRIBUTORS CORPORATION By: /s/ Kevin J. Kelly 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 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: ------------------------ 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 3/22/2000 LINCOLN NATIONAL LIFE INSURANCE COMPANY ---------------------- By: /s/ Steven M. Kluever ---------------------- Steven M. Kluever 2nd Vice President Date 3/31/2000 VARIABLE INSURANCE PRODUCTS FUND ----------------------- By: /s/ Robert C. Pozen ---------------------- Name: Robert C. Pozen ---------------------- Title: Senior Vice President ---------------------- Date 3/31/2000 FIDELITY DISTRIBUTORS CORPORATION ---------------------- By: /s/ Kevin J. Kelly ---------------------- Name: Kevin J. Kelly ---------------------- Title: Vice President ---------------------- 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 3/22/2000 LINCOLN NATIONAL LIFE INSURANCE COMPANY --------- By: /s/ Steven M. Kluever --------------------- Steven M. Kluever 2nd Vice President Date 3/31/2000 VARIABLE INSURANCE PRODUCTS FUNDS II --------- By: /s/ Robert C. Pozen --------------------- Name: Robert C. Pozen --------------------- Title: Senior Vice President --------------------- Date 3/31/2000 FIDELITY DISTRIBUTORS CORPORATION --------- By: /s/ Kevin J. Kelly --------------------- Name: Kevin J. Kelly --------------------- Title: Vice President --------------------- 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 3/22/2000 LINCOLN NATIONAL LIFE INSURANCE COMPANY ---------------------- By: /s/ Steven M. Kluever ------------------------- Steven M. Kluever 2nd Vice President Date: 3/31/2000 VARIABLE INSURANCE PRODUCTS FUND III ---------------------- By: /s/ Robert C. Pozen ------------------------- Name: Robert C. Pozen ----------------------- Title: Senior Vice President ---------------------- Date: 3/31/2000 FIDELITY DISTRIBUTORS CORPORATION ---------------------- By: /s/ Kevin J. Kelly ------------------------ Name: Kevin J. Kelly ---------------------- Title: Vice President --------------------- 87158 3917 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 GAC96-11 1; GAC9 I - 101 Asset Manager - Initial Class (GVA 1, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL 1) 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 (CVT-JL 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 3/22/2000 LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever Name: Steven M. Kluever Title: 2nd Vice President Date 3/31/2000 VARIABLE INSURANCE PRODUCTS FUNDS II By: /s/ Robert C. Pozen Name: Robert C. Pozen Title: Senior Vice President Date 3/31/2000 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Kevin J. Kelly Name: Kevin J. Kelly Title: Vice President 3917 AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE JULY 15, 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 GAC9 1 - 10 1; GAC96-1 11 Equity-Income - Initial Class GAC96-101 (GVA I, H, III) Growth - Initial Class Lincoln Life Flexible Premium Variable Life LN605/615 (VUL 1) Equity-Income - Initial Class Account M LN660 (VUL) Growth - Service Class LN680 (VULdb) High Income - Service Class Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class 30296 (ChoicePlus, Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2 Growth - Service Class 2 Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Growth - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth - Service Class Separate Account R LN655 (SVUL 11). High Income - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Growth Portfolio Account S LN925/926 (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. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever 2nd Vice President Date 3/31/2000 VARIABLE INSURANCE PRODUCTS FUND By: /s/ Robert C. Pozen Name: Robert C. Pozen Title: Senior Vice President Date 3/31/2000 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Kevin J. Kelly Name: Kevin J. Kelly Title: Vice President AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE JULY 15, 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) 30070-B Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class Contrafund - Service Class 2 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 (VUL(DB)) (VUL(CV)) Contrafund - Service Class Investment Grade Bond - Service Class LN665 (LVUL(CV2)) Contrafund - Service Class MoneyGuard Lincoln Life Variable Annuity Account N 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 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) Asset Manager - Initial Class Investment Grade Bond - Initial Class 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 Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - 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 8/3/01 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY -------------------- By: /s/ Steven M. Kluever ----------------------------- Steven M. Kluever 2nd Vice President Date 8/10/01 VARIABLE INSURANCE PRODUCTS FUNDS II -------------------- By: /s/ Bob Dwight ----------------------------- Name: Bob Dwight ----------------------------- Title: Treasurer ----------------------------- Date 8/10/01 FIDELITY DISTRIBUTORS CORPORATION -------------------- By: /s/ Mike Kellog ----------------------------- Name: Mike Kellog ----------------------------- Title: EVP ----------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE JULY 15, 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 (VUL(DB)) (VUL(CV)) Lincoln Life Variable Annuity Account N AN425LL (ChoicePlus) Growth Opportunities - Initial Class 30295 (ChoicePlus Access) Growth Opportunities - Service Class 2 30296 (ChoicePlus Bonus) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities - Service Class Separate Account R LN655 (SVUL II) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4)
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 8/3/01 LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------------ By: /s/ Steven M. Kluever ---------------------------------------- Steven M. Kluever 2nd Vice President Date: 8/10/01 VARIABLE INSURANCE PRODUCTS FUND III ----------------------- By: /s/ Bob Dwight ---------------------------------------- Name: Bob Dwight -------------------------------------- Title: Treasurer ------------------------------------- Date: 8/10/01 IDELITY DISTRIBUTORS CORPORATION ----------------------- By: /s/ Mike Kellog ---------------------------------------- Name: Mike Kellog -------------------------------------- Title: EVP ------------------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE JULY 15, 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) 30070-B Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity-Income - Initial Class GAC96-101 (GVA I, II, III) Growth - Initial Class Money Market Portfolio Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN605/615 (VUL 1) Equity-Income - Initial Class Account M Equity-Income - Service Class High Income - Service Class LN660 (VUL) Growth - Service Class LN680 (VUL(DB)) High Income - Service Class LN660 (VUL(DB), VUL(CV)) Equity-Income - Service Class Growth Portfolio - Service Class High Income - Service Class Overseas - Service Class LN665 (LVUL(CV2)) Equity-Income - Service Class MoneyGuard Growth Portfolio - Service Class Overseas - Service Class Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class Equity-Income - Service Class Growth Portfolio - Service Class 30296 (ChoicePlus Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2
Growth - Service Class 2 30070-B (ChoicePlus II) Equity-Income - Service Class 2 30070-B (ChoicePlus II Access) Growth Portfolio - Service Class 2 30070-B (ChoicePlus II Bonus) Overseas - Service Class 2 30070-B (ChoicePlus II Advance) Lincoln Life Variable Annuity Account Q 28883,28884,28890,28867,28868, Growth - Service Class 28891,28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Equity-Income - Service Class Separate Account R LN655 (SVUL II) Growth - Service Class Growth Portfolio - Service Class High Income - Service Class Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Equity-Income - Service Class Account S LN925/926 (CVUL Series III) Growth Portfolio - Service Class High Income - Service Class Overseas - Service Class Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Overseas - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln National Variable Annuity Account 57 19476 (Director) Equity Income - Service Class 2 Lincoln National Variable Annuity Account 58 19476 (Director) Growth Portfolio - Service Class 2 Lincoln National Variable Annuity Account 59 19476 (Director) Overseas - Service Class 2
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 8/3/01 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ---------------------- By: /s/ Steven M. Kluever ----------------------------- Steven M. Kluever 2nd Vice President Date 8/10/01 VARIABLE INSURANCE PRODUCTS FUND ---------------------- By: /s/ Bob Dwight ----------------------------- Name: Bob Dwight ----------------------------- Title: Treasurer ----------------------------- Date 8/10/01 FIDELITY DISTRIBUTORS CORPORATION ---------------------- By: /s/ Mike Kellog ----------------------------- Name: Mike Kellog ----------------------------- Title: Executive Vice President ----------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2003 (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) 30070-B Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity-Income - Initial Class GAC96-101 Growth - Initial Class (GVA I, II, III) Money Market Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity-Income - Initial Class Account M LN660(VUL)( VUL(CV)) Growth - Service Class LN680(VUL(DB)) High Income - Service LN665(VUL(CV)-II) Overseas - Service Class ELITE SERIES: LN680 (LVUL(DB)) Equity-Income - Service Class LN665 Growth - Service Class (LVUL(CV)-II) Overseas - Service Class MoneyGuard LN670(LVUL(CV)-III) LN690(LVUL(DB)-II) Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class Equity-Income - Service Class Growth - Service Class 30296 (ChoicePlus Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2 Growth - Service Class 2 30070-B (ChoicePlus II) Equity-Income - Service Class 2 30070-B (ChoicePlus II Access) Growth - Service Class 2 30070-B (ChoicePlus II Bonus) Overseas - Service Class 2 30070-B (ChoicePlus II Advance) 30070-B ChoicePlus Assurance - (B Share) Equity-Income - Service Class 2 30070-B ChoicePlus Assurance - (C Share) Growth - Service Class 2 30070-B ChoicePlus Assurance - (L Share) Overseas - Service Class 2 30070-B ChoicePlus Assurance - (Bonus) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Growth - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL-I) Equity-Income - Initial Class Separate Account R LN650 (SVUL) Growth - Service Class LN655 (SVUL-II) High Income - Service Class Overseas - Service Class ELITE SERIES: LN655 (SVUL-II) Equity-Income - Service Class LN656 (SVUL-III) Growth - Service Class Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Growth - Service Class Account S LN925/926 (CVUL Series III) High Income - Service Class Overseas - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Equity-Income - Service Class LN935 (LCV4) Growth - Service Class Overseas - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Equity-Income - Service Class 2 30070-B (SEI Select) Growth - Service Class 2 Money Market - Service Class Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Overseas - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Equity-Income - Service Class Account Z (Lincoln Corporate Variable Private Solutions) Growth - Service Class Overseas - Service Class Lincoln National Variable Annuity Account 57 19476 (Director) Equity Income - Service Class 2 Lincoln National Variable Annuity Account 58 19476 (Director) Growth - Service Class 2 Lincoln National Variable Annuity Account 59 19476 (Director) Overseas - Service Class 2
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 10/6/03 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------ By: /s/ Rise C. M. Taylor ----------------------------------- Rise C. M. Taylor Vice President Date VARIABLE INSURANCE PRODUCTS FUND ------------------ By: /s/ Maria Dwyer ---------------------------------- Name: Maria Dwyer ---------------------------------- Title: Treasurer ---------------------------------- Date Oct. 17, 2003 FIDELITY DISTRIBUTORS CORPORATION ------------------ By: /s/ D. Holborn --------------------------------- Name: D. Holborn --------------------------------- Title: EVP --------------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2003 (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) 30070-B Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL)( VUL(CV)) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (LVUL(DB)) Contrafund - Service Class LN665 (LVUL(CV)-II) MoneyGuard LN670 (LVUL(CV)-III) LN690 (LVUL(DB)-II) Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)] 30070-B [ChoicePlus Assurance - (Bonus)] Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL-I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial Class LN655 (SVUL-II) Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL-II) Asset Manager - Initial Class LN656 (SVUL-III) Investment Grade Bond - Initial Class Contrafund - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Solutions) Asset Manager - Service Class Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - 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 10/6/03 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY --------------------- By: /s/ Rise C. M. Taylor ----------------------------------- Rise C. M. Taylor Vice President Date VARIABLE INSURANCE PRODUCTS FUND II --------------------- By: /s/ Maria Dwyer ----------------------------------- Name: Maria Dwyer ----------------------------------- Title: Treasurer ----------------------------------- Date Oct. 17, 2003 FIDELITY DISTRIBUTORS CORPORATION --------------------- By: /s/ D. Holborn ----------------------------------- Name: D. Holborn ----------------------------------- Title: EVP ----------------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2003 (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 Life Flexible Premium Variable Life LN660(VUL)( VUL(CV)) Growth Opportunities -- Service Class Account M LN680(VUL(DB)) LN665 (VUL(CV)-II Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities -- Service Class Separate Account R LN655 (SVUL-II) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities -- Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4)
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 10/6/03 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------------ By: /s/ Rise C. M. Taylor ---------------------------------------------- Rise C. M. Taylor Vice President Date VARIABLE INSURANCE PRODUCTS FUND III ----------------------- By: /s/ Maria Dwyer --------------------------------------------- Name: Maria Dwyer ----------------------------------- Title: Treasurer ----------------------------------- Date Oct. 27, 2003 FIDELITY DISTRIBUTORS CORPORATION ---------------------- By: /s/ D. Holborn --------------------------------------------- Name: D. Holborn -------------------------------------------- Title: EVP ------------------------------------------- AMENDED SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2004 (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) 30070-B 30070-CD-B (Multi-Fund(R) Select) Contrafund - Service Class 2 Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL)(VUL(CV)) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (LVUL(DB)) Contrafund - Service Class LN690 (LVUL(DB) II) (LVUL(DB) IV) MoneyGuard LN665 (LVUL(CV) II) LN670 (LVUL(CV) III) (LVUL(CV) IV) LN691 (LVUL(ONE)) LN693 (Momentum LVUL(ONE)) Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)]
30070-B [ChoicePlus Assurance - (Bonus)] 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial Class LN655 (SVUL II) Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL II) Asset Manager - Initial Class LN656 (SVUL III) (SVUL IV) Investment Grade Bond - Initial Class Contrafund - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Solutions) Asset Manager - Service Class Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - 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 10/27/04 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------ By: /s/ Rise C. M. Taylor ---------------------------- Rise C. M. Taylor Vice President Date 12/07/04 VARIABLE INSURANCE PRODUCTS FUND II ------------------ By: /s/ Christine Reynolds ---------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 12/07/04 FIDELITY DISTRIBUTORS CORPORATION ------------------ By: /s/ Don Holborn ---------------------------- Name: Don Holborn Title: EVP AMENDMENT NO. 7 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A in its entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2005 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Growth - Service Class 2 Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity-Income - Initial Class GAC96-101 Growth - Initial Class (GVA I, II, III) Money Market Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity-Income - Initial Class Account M LN660(VUL) (VUL(CV)) Growth - Service Class LN680(VUL(DB)) High Income - Service LN665(VUL(CV) II) Overseas - Service Class ELITE SERIES: LN680 (VUL(DB)) Equity-Income - Service Class LN665 (VUL(DB) II) (VUL(DB) IV) Growth - Service Class MoneyGuard Overseas - Service Class LN690 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VULONE) LN694 (VULONE2005) LN695 (Momentum VULONE2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class Equity-Income - Service Class Growth - Service Class 30296 (ChoicePlus Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2 Growth - Service Class 2 30070-B (ChoicePlus II) Equity-Income - Service Class 2 30070-B (ChoicePlus II Access) Growth - Service Class 2 30070-B (ChoicePlus II Bonus) Overseas - Service Class 2 30070-B (ChoicePlus II Advance) 30070-B ChoicePlus Assurance - (B Share) Equity-Income - Service Class 2 30070-B ChoicePlus Assurance - (C Share) Growth - Service Class 2 30070-B ChoicePlus Assurance - (L Share) Overseas - Service Class 2 30070-B ChoicePlus Assurance - (Bonus) 30070-B ChoicePlus Momentum Income Option Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Growth - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Equity-Income - Initial Class Separate Account R LN650 (SVUL) Growth - Service Class LN655 (SVUL II) High Income - Service Class Overseas - Service Class ELITE SERIES: LN655 (SVUL II) Equity-Income - Service Class LN656 (SVUL III) (SVUL IV) Growth - Service Class Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Growth - Service Class Account S LN925/926 (CVUL Series III) High Income - Service Class Overseas - Service Class ELITE SERIES: Equity-Income - Service Class LN925-926 (CVUL Series III) Growth - Service Class LN935 (LCV4) Overseas - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Equity-Income - Service Class 2 30070-B (SEI Select) Growth - Service Class 2 Money Market - Service Class
Lncoln Life Variable Annuity Account W 30070-B (New Directions Core) Overseas - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Equity-Income - Service Class Account Z (Lincoln Corporate Variable Private Growth - Service Class Solutions) Overseas - Service Class Lincoln National Variable Annuity Account 57 19476 (Director) Equity Income - Service Class 2 Lincoln National Variable Annuity Account 58 19476 (Director) Growth - Service Class 2 Lincoln National Variable Annuity Account 59 19476 (Director) Overseas - Service Class 2
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 June 1, 2005 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ---------------- By: /s/ Rise C.M. Taylor ------------------------------------ Name: Rise C. M. Taylor Title: Vice President Date July 15, 2005 VARIABLE INSURANCE PRODUCTS FUND ----------------- By: /s/ Christine Reynolds ------------------------------------ Name: Christine Reynolds Title: Treasurer, SVP Date June 7, 2005 FIDELITY DISTRIBUTORS CORPORATION ---------------- By: /s/ Bill Loehning ------------------------------------ Name: Bill Loehning Title: EVP AMENDMENT NO. 7 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated October 30, 1998, and as subsequently amended, by replacing Schedule A in its entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2005 (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 30070-B (Multi-Fund(R) 5) Mid Cap - Service Class 2 Lincoln Life Flexible Premium Variable Life LN660 (VUL) ( VUL(CV)) Growth Opportunities -- Service Account M LN680 (VUL(DB)) Class LN665 (VUL(CV) II) ELITE SERIES: LN680 (VUL(DB)) Mid Cap - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Mid Cap - Service Class 2 30296 (ChoicePlus Access) 30295 (ChoicePlus Bonus) 30070-B (ChoicePlus II) 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B (ChoicePlus Assurance B Share) 30070-B (ChoicePlus Assurance C Share) 30070-B (ChoicePlus Assurance L Share) 30070-B (ChoicePlus Assurance Bonus) 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities -- Service Separate Account R LN655 (SVUL-II) Class ELITE SERIES: LN655 (SVUL II) Mid Cap - Service Class LN656 (SVUL III) (SVUL IV) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Mid Cap - Service Class Account S LN925/926 (CVUL Series III) LN925/926 (CVUL Series III) (Elite) LN935 (LCV4) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities - Service 30070-B (New Directions Access) Class 2 30070-B (New Directions Access 4) Lincoln National Variable Annuity Account 84 19476 (Director) Mid Cap - Initial 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 June 1, 2005 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------- By: /s/ Rise C.M. Taylor ------------------------------------ Name: Rise C. M. Taylor Title: Vice President Date July 15, 2005 VARIABLE INSURANCE PRODUCTS FUND III ------------------- By: /s/ Christine Reynolds ------------------------------------ Name: Christine Reynolds Title: Treasurer, SVP Date June 7, 2005 FIDELITY DISTRIBUTORS CORPORATION ------------------- By: /s/ Bill Loehning ------------------------------------ Name: Bill Loehning Title: EVP AMENDMENT NO. 9 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A in its entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2005 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Contrafund - Service Class 2 Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL) (VUL(CV) II) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (VUL(DB)) Contrafund - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)] 30070-B [ChoicePlus Assurance - (Bonus)] 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial LN655 (SVUL II) Class Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL II) Asset Manager - Initial Class LN656 (SVUL III) (SVUL IV) Investment Grade Bond - Initial Class Contrafund - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select)
Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Asset Manager - Service Class Solutions) Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - 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 June 1, 2005 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ------------------ By: /s/ Rise C. M. Taylor ------------------------------------ Name: Rise C. M. Taylor Title: Vice President Date July 15, 2005 VARIABLE INSURANCE PRODUCTS FUND II ------------------ By: /s/ Christine Reynolds ------------------------------------ Name: Christine Reynolds Title: Treasurer, SVP Date June 7, 2005 FIDELITY DISTRIBUTORS CORPORATION ------------------ By: /s/ Bill Loehining ------------------------------------ Name: Bill Loehning Title: EVP AMENDMENT NO. 8 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated October 30, 1998, and as subsequently amended, by replacing Schedule A and Schedule C in their entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE APRIL 1, 2006 (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 30070-B (Multi-Fund(R) 5) Mid Cap - Service Class 2 Lincoln Life Flexible Premium Variable Life LN660 (VUL) ( VUL(CV)) Growth Opportunities -- Service Class Account M LN680 (VUL(DB)) LN665 (VUL(CV) II) ELITE SERIES: LN680 (VUL(DB)) Mid Cap - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Mid Cap - Service Class 2 30296 (ChoicePlus Access) 30295 (ChoicePlus Bonus) 30070-B (ChoicePlus II) 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B (ChoicePlus Assurance B Share) 30070-B (ChoicePlus Assurance C Share) 30070-B (ChoicePlus Assurance L Share) 30070-B (ChoicePlus Assurance Bonus) 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities -- Service Class Separate Account R LN655 (SVUL-II) ELITE SERIES: LN655 (SVUL II) Mid Cap - Service Class LN656 (SVUL III) (SVUL IV) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Mid Cap - Service Class Account S LN925/926 (CVUL Series III) LN925/926 (CVUL Series III) (Elite) LN935 (LCV4) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln National Variable Annuity Account 84 19476 (Director) Mid Cap - Initial Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Mid Cap - Service Class 2 Group Variable Annuity)
Amendment to Schedule C Effective April 1, 2006 Other investment companies currently available under the separate accounts listed in Amended Schedule A: AIM, American Century, American Funds, DWS (f/k/a Scudder), Baron, Delaware, Dreyfus, Franklin Templeton, Janus, Lincoln National, MFS, Neuberger Berman, OpCap, Oppenheimer, Putnam, T. Rowe Price, Wells Fargo IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules A and C 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 4/1/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor --------------------------------------- Name: Rise C. M. Taylor Title: Vice President Date 4/1/06 VARIABLE INSURANCE PRODUCTS FUND III By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 4/20/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 9 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated October 30, 1998, and as subsequently amended, by replacing Schedule A and Schedule C in their entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2006 (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 30070-B (Multi-Fund(R) 5) Mid Cap - Service Class 2 Lincoln Life Flexible Premium Variable Life LN660 (VUL) ( VUL(CV)) Growth Opportunities -- Service Class Account M LN680 (VUL(DB)) LN665 (VUL(CV) II) ELITE SERIES: LN680 (VUL(DB)) Mid Cap - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Mid Cap - Service Class 2 30296 (ChoicePlus Access) 30295 (ChoicePlus Bonus) 30070-B (ChoicePlus II) 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B (ChoicePlus Assurance B Share) 30070-B (ChoicePlus Assurance C Share) 30070-B (ChoicePlus Assurance L Share) 30070-B (ChoicePlus Assurance Bonus) 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities -- Service Class Separate Account R LN655 (SVUL-II) ELITE SERIES: LN655 (SVUL II) Mid Cap - Service Class LN656 (SVUL III) (SVUL IV) LN657 (SVULONE) LN658 (Momentum SVULONE) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Mid Cap - Service Class Account S LN925/926 (CVUL Series III) LN925/926 (CVUL Series III) (Elite) LN935 (LCV4) LN939 (LCV5) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 (Lincoln Corporate Private Solution) Mid Cap - Service Class Account Z Growth Opportunities - Service Class
Lincoln National Variable Annuity Account 84 19476 (Director) Mid Cap - Initial Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Mid Cap - Service Class 2 Group Variable Annuity)
Amendment to Schedule C Effective May 1, 2006 Other investment companies currently available under the separate accounts listed in Amended Schedule A: AIM, Alger, Alliance, American Century, American Funds, DWS (f/k/a Scudder), Baron, Delaware, Dreyfus, Evergreen, Franklin Templeton, Janus, Lincoln National, M Funds, MFS, Neuberger Berman, OpCap, Oppenheimer, Putnam, T. Rowe Price, Wells Fargo IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules A and C 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 6/12/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger --------------------------------------- Name: Kelly D. Clevenger Title: Vice President Date 8/31/06 VARIABLE INSURANCE PRODUCTS FUND III By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 10/5/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 10 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated October 30, 1998, and as subsequently amended, by replacing Schedule A in its entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE OCTOBER 1, 2006 (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 30070-B (Multi-Fund(R)5) Mid Cap - Service Class 2 Lincoln Life Flexible Premium Variable Life LN660 (VUL)(VUL(CV)) Growth Opportunities -- Service Class Account M LN680 (VUL(DB)) LN665 (VUL(CV) II) ELITE SERIES: LN680 (VUL(DB)) Mid Cap - Service Class LN690 (VUL(DB)II)(VUL(DB)IV) MoneyGuard LN665 (VUL(CV)II)(VULFlex) LN670 (VUL(CV)III)(VUL(CV)IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Mid Cap - Service Class 2 30296 (ChoicePlus Access) 30295 (ChoicePlus Bonus) 30070-B (ChoicePlus II) 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B (ChoicePlus Assurance B Share) 30070-B (ChoicePlus Assurance C Share) 30070-B (ChoicePlus Assurance L Share) 30070-B (ChoicePlus Assurance Bonus) 30070-B (ChoicePlus Momentum Income Option) 30070-CP-Design (all variations) (ChoicePlus Design) Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities -- Service Class Separate Account R LN655 (SVUL-II) ELITE SERIES: LN655 (SVUL II) Mid Cap - Service Class LN656 (SVUL III) (SVUL IV) LN657 (SVUL(ONE)) LN658 (Momentum SVUL(ONE)) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Mid Cap - Service Class Account S LN925/926 (CVUL Series III) LN925/926 (CVUL Series III) (Elite) LN935 (LCV4) LN939 (LCV5) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Growth Opportunities - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) LN930 (Lincoln Corporate Private Solution) Mid Cap - Service Class
Lincoln Life Flexible Premium Variable Life Growth Opportunities - Service Class Account Z Lincoln National Variable Annuity Account 84 19476 (Director) Mid Cap - Initial Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Mid Cap - Service Class 2 Group Variable Annuity)
Date 11/1/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger --------------------------------------- Name: Kelly D. Clevenger Title: Vice President Date 12/7/06 VARIABLE INSURANCE PRODUCTS FUND III By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer Date 11/27/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 10 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A and Schedule C in their entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE APRIL 1, 2006 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Contrafund - Service Class 2 Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL) (VUL(CV) II) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (VUL(DB)) Contrafund - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)] 30070-B [ChoicePlus Assurance - (Bonus)] 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial Class LN655 (SVUL II) Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL II) Asset Manager - Initial Class LN656 (SVUL III) (SVUL IV) Investment Grade Bond - Initial Class Contrafund - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select)
Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Solutions) Asset Manager - Service Class Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - Service Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Contrafund - Service Class 2 Group Variable Annuity)
Amendment to Schedule C Effective April 1, 2006 Other investment companies currently available under the separate accounts listed in Amended Schedule A: AIM, American Century, American Funds, DWS (f/k/a Scudder), Baron, Delaware, Dreyfus, Franklin Templeton, Janus, Lincoln National, MFS, Neuberger Berman, OpCap, Oppenheimer, Putnam, T. Rowe Price, Wells Fargo IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules A and C 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 4/1/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor --------------------------------------- Name: Rise C. M. Taylor Title: Vice President Date 4/1/06 VARIABLE INSURANCE PRODUCTS FUND II By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 4/20/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 11 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A and Schedule C in their entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2006 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Contrafund - Service Class 2 Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL) (VUL(CV) II) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (VUL(DB)) Contrafund - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)] 30070-B [ChoicePlus Assurance - (Bonus)] 30070-B (ChoicePlus Momentum Income Option) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial Class LN655 (SVUL II) Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL II) Asset Manager - Initial Class LN656 (SVUL III) (SVUL IV) Investment Grade Bond - Initial Class Contrafund - Service Class LN657 (SVUL(ONE)) Contrafund - Service Class LN658 (Momentum SVUL(ONE)) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class LN939 (LCV5)
Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Solutions) Asset Manager - Service Class Investment Grade Bond - Service Class Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - Service Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Contrafund - Service Class 2 Group Variable Annuity)
Amendment to Schedule C Effective May 1, 2006 Other investment companies currently available under the separate accounts listed in Amended Schedule A: AIM, Alger, Alliance, American Century, American Funds, DWS (f/k/a Scudder), Baron, Delaware, Dreyfus, Evergreen, Franklin Templeton, Janus, Lincoln National, M Funds, MFS, Neuberger Berman, OpCap, Oppenheimer, Putnam, T. Rowe Price, Wells Fargo IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules A and C 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 6/12/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger --------------------------------------- Name: Kelly D. Clevenger Title: Vice President Date 8/31/06 VARIABLE INSURANCE PRODUCTS FUND II By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 10/5/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 12 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund II and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A in its entirety with the Attached Schedule A. 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 11/1/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger --------------------------------------- Name: Kelly D. Clevenger Title: Vice President Date 12/7/06 VARIABLE INSURANCE PRODUCTS FUND II By: /s/ Christine Reynolds --------------------------------------- Name: Christine Reynolds Title: Treasurer Date 11/27/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning --------------------------------------- Name: Bill Loehning Title: EVP SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE OCTOBER 1, 2006 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Contrafund - Service Class 2 Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class (GVA I, II, III) Contrafund - Service Class 2 Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class Account M Investment Grade Bond - Initial Class LN660(VUL) (VUL(CV) II) Contrafund - Service Class LN680(VUL(DB)) ELITE SERIES: LN680 (VUL(DB)) Contrafund - Service Class LN690 (VUL(DB) II) (VUL(DB) IV) MoneyGuard LN665 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VUL(ONE)) LN693 (Momentum VUL(ONE)) LN694 (VUL(ONE)2005) LN695 (Momentum VUL(ONE)2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Contrafund - Service Class 2 30070-B (ChoicePlus II) Contrafund - Service Class 2 30070-B (ChoicePlus II Access) 30070-B (ChoicePlus II Bonus) 30070-B (ChoicePlus II Advance) 30070-B [ChoicePlus Assurance - (B Share)] Contrafund - Service Class 2 30070-B [ChoicePlus Assurance - (C Share)] 30070-B [ChoicePlus Assurance - (L Share)] 30070-B [ChoicePlus Assurance - (Bonus)] 30070-B (ChoicePlus Momentum Income Option) 30070-CP-Design (all variations) (ChoicePlus Design) Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Contrafund - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Asset Manager - Initial Class Separate Account R Investment Grade Bond - Initial Class LN650 (SVUL) Investment Grade Bond - Initial Class LN655 (SVUL II) Asset Manager - Initial Class Contrafund - Service Class ELITE SERIES: LN655 (SVUL II) Asset Manager - Initial Class LN656 (SVUL III) (SVUL IV) Investment Grade Bond - Initial Class Contrafund - Service Class LN657 (SVUL(ONE)) Contrafund - Service Class LN658 (Momentum SVUL(ONE)) Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Contrafund - Service Class Account S LN925/926 (CVUL Series III) Asset Manager - Service Class ELITE SERIES: LN925-926 (CVUL Series III) Contrafund - Service Class LN935 (LCV4) Asset Manager - Service Class LN939 (LCV5)
Lincoln Life Variable Annuity Account T 30070-B (SEI) Contrafund - Service Class 2 30070-B (SEI Select) Lincoln Life Variable Annuity Account W 30070-B (New Directions Core) Contrafund - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Contrafund - Service Class 2 Account Z (Lincoln Corporate Variable Private Solutions) Asset Manager - Service Class Investment Grade Bond - Service Class Lincoln National Variable Annuity Account 35 19476 (Director) Contrafund - Service Class Lincoln Life Separate Account 4k 19476 (Lincoln American Legacy Retirement Group Contrafund - Service Class 2 Variable Annuity)
AMENDMENT NO. 8 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A in its entirety with the following: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE MAY 1, 2006 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Growth - Service Class 2 Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity-Income - Initial Class GAC96-101 Growth - Initial Class (GVA I, II, III) Money Market Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity-Income - Initial Class Account M LN660(VUL) (VUL(CV)) Growth - Service Class LN680(VUL(DB)) High Income - Service LN665(VUL(CV) II) Overseas - Service Class ELITE SERIES: LN680 (VUL(DB)) Equity-Income - Service Class LN665 (VUL(DB) II) (VUL(DB) IV) Growth - Service Class MoneyGuard Overseas - Service Class LN690 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VULONE) LN693 (Momentum VULONE) LN694 (VULONE2005) LN695 (Momentum VULONE2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class Equity-Income - Service Class Growth - Service Class 30296 (ChoicePlus Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2 Growth - Service Class 2 30070-B (ChoicePlus II) Equity-Income - Service Class 2 30070-B (ChoicePlus II Access) Growth - Service Class 2 30070-B (ChoicePlus II Bonus) Overseas - Service Class 2 30070-B (ChoicePlus II Advance) 30070-B ChoicePlus Assurance - (B Share) Equity-Income - Service Class 2 30070-B ChoicePlus Assurance - (C Share) Growth - Service Class 2 30070-B ChoicePlus Assurance - (L Share) Overseas - Service Class 2 30070-B ChoicePlus Assurance - (Bonus) 30070-B ChoicePlus Momentum Income Option Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Growth - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Equity-Income - Initial Class Separate Account R LN650 (SVUL) Growth - Service Class LN655 (SVUL II) High Income - Service Class Overseas - Service Class ELITE SERIES: LN655 (SVUL II) Equity-Income - Service Class LN656 (SVUL III) (SVUL IV) Growth - Service Class Overseas - Service Class LN657 (SVULONE) Growth - Service Class LN658 (Momentum SVULONE) Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Growth - Service Class Account S LN925/926 (CVUL Series III) High Income - Service Class Overseas - Service Class
ELITE SERIES: Equity-Income - Service Class LN925-926 (CVUL Series III) Growth - Service Class LN935 (LCV4) Overseas - Service Class LN939 (LCV5) Growth - Service Class Overseas - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Equity-Income - Service Class 2 30070-B (SEI Select) Growth - Service Class 2 Money Market - Service Class Lncoln Life Variable Annuity Account W 30070-B (New Directions Core) Overseas - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Equity-Income - Service Class Account Z (Lincoln Corporate Variable Private Solutions) Growth - Service Class Overseas - Service Class High Income - Service Class Money Market - Service Class Lincoln National Variable Annuity 19476 (Director) Equity Income - Service Class 2 Account 57 Lincoln National Variable Annuity 19476 (Director) Growth - Service Class 2 Account 58 Lincoln National Variable Annuity 19476 (Director) Overseas - Service Class 2 Account 59
Amendment to Schedule C Effective May 1, 2006 Other investment companies currently available under the separate accounts listed in Amended Schedule A: AIM, Alger, Alliance, American Century, American Funds, DWS (f/k/a/ Scudder) , Baron, , Delaware, Dreyfus, Evergreen, Franklin Templeton, Janus, , Lincoln National, M Funds, MFS, Neuberger Berman, OpCap, Oppenheimer, Putnam, T. Rowe Price, Wells Fargo IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to Schedules A and C 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 6/12/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ------------------------------------------ Name: Kelly D. Clevenger Title: Vice President Date 8/31/06 VARIABLE INSURANCE PRODUCTS FUND By: /s/ Christine Reynolds ------------------------------------------- Name: Christine Reynolds Title: Treasurer, SVP Date 10/5/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning ------------------------------------------- Name: Bill Loehning Title: EVP AMENDMENT NO. 9 TO PARTICIPATION AGREEMENT The Lincoln National Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation, hereby amend their Participation Agreement, dated September 1, 1996, and as subsequently amended, by replacing Schedule A in its entirety with the attached Schedule A. 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 11/1/06 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ----------------------------------- Name: Kelly D. Clevenger Title: Vice President Date 12/7/06 VARIABLE INSURANCE PRODUCTS FUND By: /s/ Christine Reynolds ----------------------------------- Name: Christine Reynolds Title: Treasurer Date 11/27/06 FIDELITY DISTRIBUTORS CORPORATION By: /s/ Bill Loehning ----------------------------------- Name: Bill Loehning Title: EVP SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS EFFECTIVE OCTOBER 1, 2006 (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 Multi-Fund(R)) 30070-B (Multi-Fund(R) 5) 30070-CD-B (Multi-Fund(R) Select) Growth - Service Class 2 Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity-Income - Initial Class GAC96-101 Growth - Initial Class (GVA I, II, III) Money Market Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity-Income - Initial Class Account M LN660(VUL) (VUL(CV)) Growth - Service Class LN680(VUL(DB)) High Income - Service LN665(VUL(CV) II) Overseas - Service Class ELITE SERIES: LN680 (VUL(DB)) Equity-Income - Service Class LN665 (VUL(DB) II) (VUL(DB) IV) Growth - Service Class MoneyGuard Overseas - Service Class LN690 (VUL(CV) II) (VULFlex) LN670 (VUL(CV) III) (VUL(CV) IV) LN691 (VULONE) LN693 (Momentum VULONE) LN694 (VULONE2005) LN695 (Momentum VULONE2005)
Lincoln Life Variable Annuity Account N AN425 (ChoicePlus) Overseas - Initial Class Equity-Income - Initial Class Growth - Initial Class Equity-Income - Service Class Growth - Service Class 30296 (ChoicePlus Access) Overseas - Service Class 2 30295 (ChoicePlus Bonus) Equity-Income - Service Class 2 Growth - Service Class 2 30070-B (ChoicePlus II) Equity-Income - Service Class 2 30070-B (ChoicePlus II Access) Growth - Service Class 2 30070-B (ChoicePlus II Bonus) Overseas - Service Class 2 30070-B (ChoicePlus II Advance) 30070-B ChoicePlus Assurance - (B Share) Equity-Income - Service Class 2 30070-B ChoicePlus Assurance - (C Share) Growth - Service Class 2 30070-B ChoicePlus Assurance - (L Share) Overseas - Service Class 2 30070-B ChoicePlus Assurance - (Bonus) 30070-B ChoicePlus Momentum Income Option 30070-CP-Design (all variations) Growth - Service Class 2 Overseas - Service Class 2 Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, 28868, Growth - Service Class 28891, 28903 (Group MultiFund) Lincoln Life Flexible Premium Variable Life LN650 (SVUL I) Equity-Income - Initial Class Separate Account R LN650 (SVUL) Growth - Service Class LN655 (SVUL II) High Income - Service Class Overseas - Service Class ELITE SERIES: LN655 (SVUL II) Equity-Income - Service Class LN656 (SVUL III) (SVUL IV) Growth - Service Class Overseas - Service Class LN657 (SVULONE) Growth - Service Class LN658 (Momentum SVULONE) Overseas - Service Class Lincoln Life Flexible Premium Variable Life LN920/921 (CVUL) Growth - Service Class Account S LN925/926 (CVUL Series III) High Income - Service Class Overseas - Service Class
ELITE SERIES: Equity-Income - Service Class LN925-926 (CVUL Series III) Growth - Service Class LN935 (LCV4) Overseas - Service Class LN939 (LCV5) Growth - Service Class Overseas - Service Class Lincoln Life Variable Annuity Account T 30070-B (SEI) Equity-Income - Service Class 2 30070-B (SEI Select) Growth - Service Class 2 Money Market - Service Class Lncoln Life Variable Annuity Account W 30070-B (New Directions Core) Overseas - Service Class 2 30070-B (New Directions Access) 30070-B (New Directions Access 4) Lincoln Life Flexible Premium Variable Life LN930 Equity-Income - Service Class Account Z (Lincoln Corporate Variable Private Solutions) Growth - Service Class Overseas - Service Class High Income - Service Class Money Market - Service Class Lincoln National Variable Annuity 19476 (Director) Equity Income - Service Class 2 Account 57 Lincoln National Variable Annuity 19476 (Director) Growth - Service Class 2 Account 58 Lincoln National Variable Annuity 19476 (Director) Overseas - Service Class 2 Account 59
EX-99 14 a2182655zex-99_1.txt PARTICIPATION AGREEMENT as of May 1, 2000 Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. The Lincoln National Life Insurance Company CONTENTS SECTION SUBJECT MATTER ------- -------------- 1. Parties and Purpose 2. Representations and Warranties 3. Purchase and Redemption of Trust Portfolio Shares 4. Fees, Expenses, Prospectuses, Proxy Materials and Reports 5. Voting 6. Sales Material, Information and Trademarks 7. Indemnification 8. Notices 9. Termination 10. Miscellaneous SCHEDULES TO THIS AGREEMENT A. The Company B. Accounts of the Company C. Available Portfolios and Classes of Shares of the Trust; Investment Advisers D. Contracts of the Company E. Other Portfolios Available under the Contracts F. Rule 12b-1 Plans of the Trust G. Addresses for Notices H. Shared Funding Order 1. PARTIES AND PURPOSE This agreement (the "Agreement") is between certain portfolios, specified below and in Schedule C, of Franklin Templeton Variable Insurance Products Trust, an open-end management investment company organized as a business trust under Massachusetts law (the "Trust"), Franklin Templeton Distributors, Inc., a California corporation which is the principal underwriter for the Trust (the "Underwriter," and together with the Trust, "we" or "us") and the insurance company identified on Schedule a ("you"), on your own behalf and on behalf of each segregated asset account maintained by you that is listed on Schedule B, as that schedule may be amended from time to time ("Account" or "Accounts"). The purpose of this Agreement is to entitle you, on behalf of the Accounts, to purchase the shares, and classes of shares, of portfolios of the Trust ("Portfolios") that are identified on Schedule C, solely for the purpose of funding benefits of your variable life insurance policies or variable annuity contracts ("Contracts") that are identified on Schedule D. This Agreement does not authorize any other purchases or redemptions of shares of the Trust. 2. REPRESENTATIONS AND WARRANTIES 2.1 REPRESENTATIONS AND WARRANTIES BY YOU You represent and warrant that: 2.1.1 redacted 2.1.2 All of your directors, officers, employees, and other individuals or entities dealing with the money and/or securities of the Trust are and shall be at all times covered by a blanket fidelity bond or similar coverage, in an amount not less than $5 million. Such bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. You agree to make all reasonable efforts to see that this bond or another bond containing such provisions is always in effect, and you agree to notify us in the event that such coverage no longer applies. 2.1.3 Each Account is a duly organized, validly existing segregated asset account under applicable insurance law and interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract" within the meaning of such terms under Section 817 of the Internal Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You will use your best efforts to continue to meet such definitional requirements, and will notify us immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. 2.1.4 Each Account either: (i) has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so registered in proper reliance upon an exemption from registration under Section 3(c) of the 1940 Act; if the Account is exempt from registration as an investment company under Section 3(c) of the 1940 Act, you will use your best efforts to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future. 2.1.5 The Contracts or interests in the Accounts: (i) are or, prior to any issuance or sale will be, registered as securities under the Securities Act of 1933, as amended (the "1933 Act"); or (ii) are not registered because they are properly exempt from registration under Section 3(a)(2) of the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under Section 4(2) or Regulation D of the 1933 Act, in which case you will make every effort to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future. 2 2.1.6 redacted 2.1.7 The Contracts currently are treated as annuity contracts or life insurance contracts under applicable provisions of the Code and you will use your best efforts to maintain such treatment; you will notify us immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.1.8 The fees and charges deducted under each Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by you. 2.1.9 You will use shares of the Trust only for the purpose of funding benefits of the Contracts through the Accounts. 2.1.10 redacted 2.1.11 With respect to any Accounts which are exempt from registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7) thereof: 2.1.11.1 the principal underwriter for each such Account and any subaccounts thereof is a registered broker-dealer with the SEC under the 1934 Act; 2.1.11.2 the shares of the Portfolios of the Trust are and will continue to be the only investment securities held by the corresponding subaccounts; and 2.1.11.3 with regard to each Portfolio, you, on behalf of the corresponding subaccount, will: (a) vote such shares held by it in the same proportion as the vote of all other holders of such shares; and (b) refrain from substituting shares of another security for such shares unless the SEC has approved such substitution in the manner provided in Section 26 of the 1940 Act. 2.1.12 You and the principal underwriter for each of the Contracts will comply in all material respects with the 1933 and 1940 Acts and the rules and regulations thereunder. 2.2 REPRESENTATIONS AND WARRANTIES BY THE TRUST The Trust represents and warrants that: 2.2.1 It is duly organized and in good standing under the laws of the State of Massachusetts. 3 2.2.2 All of its directors, officers, employees and others dealing with the money and/or securities of a Portfolio, that are so required by Rule 17g-1 under the 1940 Act, are and shall be at all times covered by a blanket fidelity bond or similar coverage in an amount not less that the minimum coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company. 2.2.3 It is registered as an open-end management investment company under the 1940 Act. 2.2.4 Each class of shares of the Portfolios of the Trust is registered under the 1933 Act. 2.2.5 redacted 2.2.6 redacted 2.2.7 redacted 2.2.8 redacted 2.2.9 It currently intends for one or more classes of shares (each, a "Class") to make payments to finance its distribution expenses, including service fees, pursuant to a plan ("Plan") adopted under rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may determine to discontinue such practice in the future. 2.3 REPRESENTATIONS AND WARRANTIES BY THE UNDERWRITER The Underwriter represents and warrants that: 2.3.1 It is registered as a broker dealer with the SEC under the 1934 Act, and is a member in good standing of the NASD. 2.3.2 Each investment adviser listed on Schedule C (each, an "Adviser") is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities law. 2.3.3 All of its directors, officers, employees and others dealing with the money and/or securities of a Portfolio, that are so required by Rule 17g-1 under the 1940 Act, are and shall be at all times covered by a blanket fidelity bond or similar coverage in an amount not less that the minimum coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company. redacted 2.3.4 It will comply in all material respects with the 1933 and 1940 Acts and the rules and regulations thereunder. 4 2.3.5 redacted 2.3.6 redacted 2.4 WARRANTY AND AGREEMENT BY BOTH YOU AND US We received an order from the SEC dated November 16, 1993 (file no. 812-8546), which was amended by a notice and an order we received on September 17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively, the "Shared Funding Order," attached to this Agreement as Schedule H). The Shared Funding Order grants exemptions from certain provisions of the 1940 Act and the regulations 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 qualified pension and retirement plans outside the separate account context. You and we both warrant and agree that both you and we will comply with the "Applicants' Conditions" prescribed in the Shared Funding Order as though such conditions were set forth verbatim in this Agreement, including, without limitation, the provisions regarding potential conflicts of interest between the separate accounts which invest in the Trust and regarding contract owner voting privileges. In order for the Trust's Board of Trustees to perform its duty to monitor for conflicts of interest, you agree to inform us of the occurrence of any of the events specified in condition 2 of the Shared Funding Order to the extent that such event may or does result in a material conflict of interest as defined in that order. 3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES 3.1 We will make shares of the Portfolios available to the Accounts for the benefit of the Contracts. The shares will be available for purchase at the net asset value per share next computed after we (or our agent) receive a purchase order, as established in accordance with the provisions of the then current prospectus of the Trust. For purposes of this Section 3, you shall be the Trust's agent or designee for receipt of purchase orders and requests for redemption. Notwithstanding the foregoing, the Trust's Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person, or may suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees, they deem such action to be in the best interests of the shareholders of such Portfolio. Without limiting the foregoing, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors whose purchase and redemption activity follows a market timing pattern, and have authorized the Trust, the Underwriter and the Trust's transfer agent to adopt procedures and take other action (including, without limitation, rejecting specific purchase orders) as they deem necessary to reduce, discourage or eliminate market timing activity. You agree to cooperate with us to the extent possible to assist us in implementing the Trust's restrictions on purchase and redemption activity that follows a market timing pattern. 3.2 We agree that shares of the Trust will be sold only to life insurance companies which have entered into fund participation agreements with the Trust ("Participating Insurance Companies") and their separate accounts or to qualified pension and retirement plans in accordance 5 with the terms of the Shared Funding Order. No shares of any Portfolio will be sold to the general public. 3.3 redacted 3.4 redacted 3.5 We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall communicate these net asset values to you or your designated agent on a daily basis after the calculation is completed (normally by 6:30 p.m. New York time). 3.6 You shall submit payment for the purchase of shares of a Portfolio on behalf of an Account no later than the close of business on the next Business Day after we receive the purchase order. Payment shall be made in federal funds transmitted by wire to the Trust or to its designated custodian. 3.7 redacted 3.8 Issuance and transfer of the Portfolio shares will be by book entry only. Stock certificates will not be issued to you or the Accounts. Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 3.9 We shall furnish, on or before the ex-dividend date, notice to you of any income dividends or capital gain distributions payable on the shares of any Portfolio. You hereby elect to receive all such income dividends and capital gain distributions as are payable on shares of a Portfolio in additional shares of that Portfolio, and you reserve the right to change this election in the future. We will notify you of the number of shares so issued as payment of such dividends and distributions. 3.10 redacted 4. FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS 4.1 We shall pay no fee or other compensation to you under this Agreement except as provided on Schedule F, if attached. 4.2 We shall prepare and be responsible for filing with the SEC, and any state regulators requiring such filing, all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), prospectuses and statements of additional information of the Trust. We shall bear the costs of preparation and filing of the documents listed in the preceding sentence, registration and qualification of the Trust's shares of the Portfolios. 4.3 redacted 4.4 redacted 6 4.5 We shall provide you, at our expense, with copies of any Trust-sponsored proxy materials in such quantity as you shall reasonably require for distribution to Contract owners who are invested in a designated subaccount. You shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. 4.6 You assume sole responsibility for ensuring that the Trust's prospectuses, shareholder reports and communications, and proxy materials are delivered to Contract owners in accordance with applicable federal and state securities laws. 5. VOTING 5.1 All Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in the Shared Funding Order. 5.2 If and to the extent required by law, you shall: (i) solicit voting instructions from Contract owners; (ii) vote the Trust shares in accordance with the instructions received from Contract owners; and (iii) vote Trust shares for which no instructions have been received in the same proportion as Trust shares of such Portfolio for which instructions have been received; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. redacted 5.3 redacted 6. SALES MATERIAL, INFORMATION AND TRADEMARKS 6.1 For purposes of this Section 6, "Sales literature or other Promotional material" includes, but is not limited to, portions of the following that use any logo or other trademark related to the Trust, or Underwriter or its affiliates, or refer to the Trust: advertisements (such as material published or designed for use in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, electronic communication or other public media), sales literature (I.E., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts or any other advertisement, sales literature or published article or electronic communication), educational or training materials or other communications distributed or made generally available to some or all agents or employees in any media, and disclosure documents, shareholder reports and proxy materials. 6.2 redacted 6.3 redacted 6.4 You and your agents shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust, the Underwriter or an Adviser, 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 7 supplemented from time to time), annual and semi-annual reports of the Trust, Trust-sponsored proxy statements, or in Sales literature or other Promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. 6.5 We shall not give any information or make any representations or statements on behalf of you or concerning you, the Accounts or the Contracts other than information or representations contained in and accurately derived from Disclosure Documents for the Contracts (as such Disclosure Documents may be amended or supplemented from time to time), or in materials approved by you for distribution, including Sales literature or other Promotional materials, except as required by legal process or regulatory authorities or with your written permission. 6.6 Except as provided in Section 6.2, you shall not use any designation comprised in whole or part of the names or marks "Franklin" or "Templeton" or any logo or other trademark relating to the Trust or the Underwriter without prior written consent, and upon termination of this Agreement for any reason, you shall cease all use of any such name or mark as soon as reasonably practicable. 6.7 You shall furnish to us ten (10) Business Days prior to its first submission to the SEC or its staff, any request or filing for no-action assurance or exemptive relief naming, pertaining to, or affecting, the Trust, the Underwriter or any of the Portfolios. 7. INDEMNIFICATION 7.1 INDEMNIFICATION BY YOU 7.1.1 You agree to indemnify and hold harmless the Underwriter, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually the "Indemnified Party" for purposes of this Section 7) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with your written consent, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of shares of the Trust or the Contracts and 7.1.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a Disclosure Document for the Contracts or in the Contracts themselves or in sales literature generated or approved by you 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 Section 7), 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 8 such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to you 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 7.1.1.2 arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined below in Section 7.2) or wrongful conduct of you or persons under your control, with respect to the sale or acquisition of the Contracts or Trust shares; or 7.1.1.3 arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined below in Section 7.2 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 you; or 7.1.1.4 arise out of or result from any failure by you to provide the services or furnish the materials required under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to have any Contract qualify as a "variable contract" within the meaning of such term under Section 817 of the Code, as amended, or any regulations thereunder); 7.1.1.5 arise out of or result from any material breach of any representation and/or warranty made by you in this Agreement or arise out of or result from any other material breach of this Agreement by you; or 7.1.1.6 arise out of or result from a Contract failing to be considered a life insurance policy or an annuity Contract, whichever is appropriate, under applicable provisions of the Code thereby depriving the Trust of its compliance with Section 817(h) of the Code (including a failure, whether unintentional or in good faith or otherwise). 7.1.2 You shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Trust or Underwriter, whichever is applicable. You shall also not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified you 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 you of any such claim shall not relieve you 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, you shall be entitled to participate, at your own expense, in the defense of such action. Unless the Indemnified Party releases you from 9 any further obligations under this Section 7.1, you also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from you to such party of the your election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and you will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.1.3 The Indemnified Parties will promptly notify you of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust. 7.2 INDEMNIFICATION BY THE UNDERWRITER 7.2.1 The Underwriter agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually an "Indemnified Party" for purposes of this Section 7.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses") to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the shares of the Trust or the Contracts and: 7.2.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement, prospectus, statement of additional information or sales literature of the Trust (or any amendment or supplement to any of the foregoing) (collectively, the "Trust Documents") or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission of such alleged statement or omission was made in reliance upon and in conformity with information furnished to us by or on behalf of you for use in the Registration Statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or 7.2.1.2 arise out of or as a result of statements or representations (other than statements or representations contained in the Disclosure Documents or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Trust, Adviser or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Trust shares; or 7.2.1.3 arise out of any untrue statement or alleged untrue statement of a material fact contained in a Disclosure Document or sales literature covering the Contracts, 10 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 you by or on behalf of the Trust; or 7.2.1.4 arise as a result of any failure by us 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 qualification representation specified above in Section 2.2.7 and the diversification requirements specified above in Section 2.2.8); or 7.2.1.5 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 7.2.2 and 7.2.3 hereof. 7.2.2 The Underwriter shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you or the Accounts, whichever is applicable. 7.2.3 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. Unless the Indemnified Party releases the Underwriter from any further obligations under this Section 7.2, the Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.2.4 You agree promptly to notify the Underwriter of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with the issuance or sale of the Contracts or the operation of each Account. 7.3 INDEMNIFICATION BY THE TRUST 11 7.3.1 The Trust agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust, which consent shall not be unreasonably withheld) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Trust, and arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; as limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3 hereof. It is understood and expressly stipulated that neither the holders of shares of the Trust nor any Trustee, officer, agent or employee of the Trust shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Trust only shall be liable. 7.3.2 The Trust shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against any Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you, the Trust, the Underwriter or each Account, whichever is applicable. 7.3.3 The Trust shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claims shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof. Unless the Indemnified Party releases the Trust from any further obligations under this Section 7.3, the Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Trust to such party of the Trust's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Trust will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.3.4 You agree promptly to notify the Trust of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of the Account, or the sale or acquisition of shares of the Trust. 12 8. 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 in Schedule G below or at such other address as such party may from time to time specify in writing to the other party. 9. TERMINATION 9.1 redacted 9.2 redacted 9.3 If this Agreement is terminated for any reason, except as required by the Shared Funding Order or pursuant to Section 9.2.5.3, above, we shall, at your option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio pursuant to all of the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement. If this Agreement is terminated as required by the Shared Funding Order, its provisions shall govern. 9.4 The provisions of Sections 2 (Representations and Warranties) and 7 (Indemnification) shall survive the termination of this Agreement. All other applicable provisions of this Agreement shall survive the termination of this Agreement, as long as shares of the Trust are held on behalf of Contract owners in accordance with Section 9.3, except that we shall have no further obligation to sell Trust shares with respect to Contracts issued after termination. 9.5 You shall not redeem Trust shares attributable to the Contracts (as opposed to Trust shares attributable to your assets held in the Account) except: (i) as necessary to implement Contract owner initiated or approved transactions; (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"); or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon reasonable request, you shall promptly furnish to us the opinion of your counsel (which counsel shall be reasonably satisfactory to us) 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, you shall not prevent Contract owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving us ninety (90) days notice of your intention to do so. 10. 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 of this Agreement or otherwise affect their construction or effect. 10.2 This Agreement may be executed simultaneously in two or more counterparts, all of which taken together shall constitute one and the same instrument. 13 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 its provisions interpreted under and in accordance with the laws of the State of California. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder, to any orders of the SEC on behalf of the Trust granting it exemptive relief, and to the conditions of such orders. We shall promptly forward copies of any such orders to you. 10.5 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. 10.6 The parties to this Agreement agree that the assets and liabilities of each Portfolio of the Trust are separate and distinct from the assets and liabilities of each other Portfolio. No Portfolio shall be liable or shall be charged for any debt, obligation or liability of any other Portfolio. 10.7 Each party to this Agreement shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 10.8 Each party to this Agreement shall treat as confidential all information reasonably identified as confidential in writing by any other party to this Agreement, and, except as permitted by this Agreement or as required by legal process or regulatory authorities, shall not disclose, disseminate, or use such names and addresses and other confidential information until such time as they may come into the public domain, without the express written consent of the affected party to this Agreement. Without limiting the foregoing, no party to this Agreement shall disclose any information that such party has been advised is proprietary, except such information that such party is required to disclose by any appropriate governmental authority (including, without limitation, the SEC, the NASD, and state securities and insurance regulators). 10.9 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties to this Agreement are entitled to under state and federal laws. 10.10 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect, except as provided above in Section 3.3. 10.11 Neither this Agreement nor any rights or obligations created by it may be assigned by any party without the prior written approval of the other parties. 14 10.12 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. 15 IN WITNESS WHEREOF, each of the parties have caused their duly authorized officers to execute this Agreement. The Company: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever ---------------------------------------- Name: Steven M. Kluever Title: Second Vice President The Trust: FRANKLIN TEMPLETON VARIABLE INSURANCE ONLY ON BEHALF OF EACH PRODUCTS TRUST PORTFOLIO LISTED ON SCHEDULE C HEREOF. By: /s/ Karen L. Skidmore ---------------------------------------- Name: Karen L. Skidmore Title: Assistant Vice President The Underwriter: FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Phil Kearns ---------------------------------------- Name: Phil Kearns Title: 16 SCHEDULE A THE COMPANY The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-40 Fort Wayne, Indiana 46802 Incorporated in the State of Indiana. 17 SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: Lincoln Life Flexible Premium Variable Life Account R Date Established: SEC Registration Number: 811-08579 2. Name: Lincoln Life Flexible Premium Variable Life Account M Date Established: SEC Registration Number: 811-08557 3. Name: Lincoln Life Flexible Premium Variable Account S Date Established: SEC Registration Number: 811-08579 4. Name: Lincoln Life Variable Annuity Account N Date Established: SEC Registration Number: 811-08517 18 SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST INVESTMENT ADVISER redacted 19 SCHEDULE D CONTRACTS OF THE COMPANY
- --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT 1 CONTRACT 2 CONTRACT 3 - --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT/PRODUCT SVUL I VUL I Lincoln VUL NAME - --------------------------- ------------------------------- -------------------------------- ------------------------------- REGISTERED (Y/N) Yes Yes Yes - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 811-08579 811-08557 811-08557 - --------------------------- ------------------------------- -------------------------------- ------------------------------- REPRESENTATIVE FORM LN650LL LN605LL LN660 NUMBERS LN615 LN615 LN660 LN605 - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE Variable Life Variable Life Separate ESTABLISHED Account R Account M Account M - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 333-43107 333-42479 333-42479 - --------------------------- ------------------------------- -------------------------------- ------------------------------- PORTFOLIOS AND CLASSES Redacted Redacted Redacted - -ADVISER - --------------------------- ------------------------------- -------------------------------- -------------------------------
20 SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY
- --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT 4 CONTRACT 5 CONTRACT 6 - --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT/PRODUCT CVUL Lincoln SVUL VUL(DB) NAME - --------------------------- ------------------------------- -------------------------------- ------------------------------- REGISTERED (Y/N) Yes Yes Yes - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 811-09241 811-08579 811-08557 - --------------------------- ------------------------------- -------------------------------- ------------------------------- REPRESENTATIVE FORM LN920 LN650 LN680 NUMBERS LN921 - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Variable Life Variable Life ESTABLISHED Account S Account R Account M - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 333-72875 333-43107 333-82663 - --------------------------- ------------------------------- -------------------------------- ------------------------------- PORTFOLIOS AND CLASSES Redacted Redacted Redacted - -ADVISER - --------------------------- ------------------------------- -------------------------------- -------------------------------
21 SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY
- --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT 7 CONTRACT 8 CONTRACT 9 - --------------------------- ------------------------------- -------------------------------- ------------------------------- CONTRACT/PRODUCT Lincoln ChoicePlus Lincoln ChoicePlus Access Lincoln ChoicePlus Bonus NAME Variable Annuity Variable Annuity Variable Annuity - --------------------------- ------------------------------- -------------------------------- ------------------------------- REGISTERED (Y/N) Yes Yes Yes - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 811-08517 811-08517 811-08517 - --------------------------- ------------------------------- -------------------------------- ------------------------------- REPRESENTATIVE FORM AN425LL 30296 30295 NUMBERS - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Variable Annuity Lincoln Life Variable NAME/DATE ESTABLISHED Account N Account N Annuity Account N - --------------------------- ------------------------------- -------------------------------- ------------------------------- SEC REGISTRATION NUMBER 333-40937 333-40937 333-40937 - --------------------------- ------------------------------- -------------------------------- ------------------------------- PORTFOLIOS AND CLASSES Redacted Redacted Redacted - -ADVISER - --------------------------- ------------------------------- -------------------------------- -------------------------------
22 SCHEDULE E OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS redacted 23 SCHEDULE F redacted 24 SCHEDULE G ADDRESSES FOR NOTICES To the Company: The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-40 Fort Wayne, Indiana 46802 Attn: Steven M. Kluever To the Trust: Franklin Templeton Variable Insurance Products Trust 777 Mariners Island Boulevard San Mateo, California 94404 Attention: Karen L. Skidmore To the Underwriter: Franklin Templeton Distributors, Inc. 777 Mariners Island Boulevard San Mateo, California 94404 Attention: Karen L. Skidmore 25 SCHEDULE H SHARED FUNDING ORDER Templeton Variable Products Series Fund, et al. File No. 812-11698 SECURITIES AND EXCHANGE COMMISSION Release No. IC-24018 1999 SEC LEXIS 1887 September 17, 1999 ACTION: Notice of application for an amended order of exemption pursuant to Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") 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. TEXT: Summary of Application: Templeton Variable Products Series Fund (the "Templeton Trust"), Franklin Templeton Variable Insurance Products Trust (formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the Templeton Trust, the "Funds"), Templeton Funds Annuity Company ("TFAC") or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor ("Future Funds") seek an amended order of the Commission to (1) add as parties to that order the VIP Trust and any Future Funds and (2) permit shares of the Funds and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context. Applicants: Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, Templeton Funds Annuity Company or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor (collectively, the "Applicants"). Filing Date: The application was filed on July 14, 1999, and amended and restated on September 17, 1999. Hearing or Notification of Hearing: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m., on October 12, 1999, and should be accompanied by proof of service on the Applicants in the form of an affidavit 26 or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission. Addresses: Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549-0609. Applicants: Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo, California 94404, Attn: Karen L. Skidmore, Esq. For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan M. Olson, Branch Chief, Office of Insurance Products, Division of Investment Management, at (202) 942-0670. Supplementary Information: The following is a summary of the application. The complete application is available for a fee from the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942-8090). Applicants' Representations: 1. Each of the Funds is registered under the 1940 Act as an open-end management investment company and was organized as a Massachusetts business trust. The Templeton Trust currently consists of eight separate series, and the VIP Trust consists of twenty-five separate series. Each Fund's Declaration of Trust permits the Trustees to create additional series of shares at any time. The Funds currently serve as the underlying investment medium for variable annuity contracts and variable life insurance policies issued by various insurance companies. The Funds have entered into investment management agreements with certain investment managers ("Investment Managers") directly or indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned company engaged in the financial services industry through its subsidiaries. 2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the sole insurance company in the Franklin Templeton organization, and specializes in the writing of variable annuity contracts. The Templeton Trust has entered into a Fund Administration Agreement with Franklin Templeton Services, Inc. ("FT Services"), which replaced TFAC in 1998 as administrator, and FT Services subcontracts certain services to TFAC. FT Services also serves as administrator to all series of the VIP Trust. TFAC and FT Services provide certain administrative facilities and services for the VIP and Templeton Trusts. 3. On November 16, 1993, the Commission issued an order granting exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (Investment Company Act Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants incorporate by reference into the application the Application for the Original Order and each amendment thereto, the Notice of Application for the Original Order, and the Original 27 Order, to the extent necessary, to supplement the representations made in the application in support of the requested relief. Applicants represent that all of the facts asserted in the Application for the Original Order and any amendments thereto remain true and accurate in all material respects to the extent that such facts are relevant to any relief on which Applicants continue to rely. The Original Order allows the Templeton Trust to offer its shares to insurance companies as the investment vehicle for their separate accounts supporting variable annuity contracts and variable life insurance contracts (collectively, the "Variable Contracts"). Applicants state that the Original Order does not (i) include the VIP Trust or Future Funds as parties, nor (ii) expressly address the sale of shares of the Funds or any Future Funds to qualified pension and retirement plans outside the separate account context including, without limitation, those trusts, plans, accounts, contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b), 408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as amended (the "Code"), and any other trust, plan, contract, account or annuity that is determined to be within the scope of Treasury Regulation 1.817.5(f)(3)(iii) ("Qualified Plans"). 4. Separate accounts owning shares of the Funds and their insurance company depositors are referred to in the application as "Participating Separate Accounts" and "Participating Insurance Companies," respectively. The use of a common management investment company as the underlying investment medium for both variable annuity and variable life insurance separate accounts of a single insurance company (or of two or more affiliated insurance companies) is referred to as "mixed funding." The use of a common management investment company as the underlying investment medium for variable annuity and/or variable life insurance separate accounts of unaffiliated insurance companies is referred to as "shared funding." Applicants' Legal Analysis: 1. Applicants request that the Commission issue an amended order pursuant to Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the Original Order and exempting scheduled premium variable life insurance separate accounts and flexible premium variable life insurance separate accounts of Participating Insurance Companies (and, to the extent necessary, any principal underwriter and depositor of such an account) and the Applicants from 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) (and any comparable rule) thereunder, respectively, to the extent necessary to permit shares of the Funds and any Future Funds to be sold to and held by Qualified Plans. Applicants submit that the exemptions requested are appropriate in the public interest, consistent with the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the 1940 Act. 2. The Original Order does not include the VIP Trust or Future Funds as parties nor expressly address the sale of shares of the Funds or any Future Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds be added as parties to the Original Order and the Funds and any Future Funds be permitted to offer and sell their shares to Qualified Plans. 3. Section 6(c) of the 1940 Act provides, in part, that the Commission, by order upon application, may conditionally or unconditionally exempt any person, security or transaction, or 28 any class or classes of persons, securities or transactions from any provisions of the 1940 Act or the rules or regulations thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. 4. In connection with the funding of scheduled premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a unit investment trust ("UIT"), Rule 6e-2(b)(15) provides partial exemptions from various provisions of the 1940 Act, including the following: (1) Section 9(a), which makes it unlawful for certain individuals to act in the capacity of employee, officer, or director for a UIT, by limiting the application of the eligibility restrictions in Section 9(a) to affiliated persons directly participating in the management of a registered management investment company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to the extent that those sections might be deemed to require "pass-through" voting with respect to an underlying fund's shares, by allowing an insurance company to disregard the voting instructions of contractowners in certain circumstances. 5. These exemptions are available, however, only where the management investment company underlying the separate account (the "underlying fund") offers its shares "exclusively to variable life insurance separate accounts of the life insurer, or of any affiliated life insurance company." Therefore, Rule 6e-2 does not permit either mixed funding or shared funding because the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to a variable annuity or a flexible premium variable life insurance separate account of the same company or of any affiliated life insurance company. Rule 6e-2(b)(15) also does not permit the sale of shares of the underlying fund to Qualified Plans. 6. In connection with flexible premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a UIT, Rule 6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. These exemptions, however, are available only where the separate account's underlying fund offers its shares "exclusively to separate accounts of the life insurer, or of any affiliated life insurance company, offering either scheduled contracts or flexible contracts, or both; or which also offer their shares to variable annuity separate accounts of the life insurer or of an affiliated life insurance company." Therefore, Rule 6e-3(T) permits mixed funding but does not permit shared funding and also does not permit the sale of shares of the underlying fund to Qualified Plans. As noted above, the Original Order granted the Templeton Trust exemptive relief to permit mixed and shared funding, but did not expressly address the sale of its shares to Qualified Plans. 7. Applicants note that if the Funds were to sell their shares only to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15) and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement plans or to a registered investment company's ability to sell its shares to such plans. 29 8. Applicants state that changes in the federal tax law have created the opportunity for each of the Funds to increase its asset base through the sale of its shares to Qualified Plans. Applicants state that Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), imposes certain diversification standards on the assets underlying Variable Contracts. Treasury Regulations generally require that, to meet the diversification requirements, all of the beneficial interests in the underlying investment company must be held by the segregated asset accounts of one or more life insurance companies. Notwithstanding this, Applicants note that the Treasury Regulations also contain an exception to this requirement that permits trustees of a Qualified Plan to hold shares of an investment company, the shares of which are also held by insurance company segregated asset accounts, without adversely affecting the status of the investment company as an adequately diversified underlying investment of Variable Contracts issued through such segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)). 9. Applicants state that the promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury Regulations. Thus, Applicants assert that the sale of shares of the same investment company to both separate accounts and Qualified Plans was not contemplated at the time of the adoption of Rules 6e-2(b)(15) and 6e-3(T)(b)(15). 10. Section 9(a) provides that it is unlawful for any company to serve as investment adviser or principal underwriter of any registered open-end investment company if an affiliated person of that company is subject to a disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and 6e-3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances, subject to the limitations on mixed and shared funding. These exemptions limit the application of the eligibility restrictions to affiliated individuals or companies that directly participate in the management of the underlying portfolio investment company. 11. Applicants state that the relief granted in Rule 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of monitoring of an insurer's personnel that would otherwise be necessary to ensure compliance with Section 9 to that which is appropriate in light of the policy and purposes of Section 9. Applicants submit that those Rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of Section 9(a) to the many individuals involved in an insurance company complex, most of whom typically will have no involvement in matters pertaining to investment companies funding the separate accounts. 12. Applicants to the Original Order previously requested and received relief from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent necessary to permit mixed and shared funding. Applicants maintain that the relief previously granted from Section 9(a) will in no way be affected by the proposed sale of shares of the Funds to Qualified Plans. Those individuals who participate in the management or administration of the Funds will remain the same regardless of which Qualified Plans use such Funds. Applicants maintain that more broadly applying the requirements of Section 9(a) because of investment by Qualified Plans would not serve any regulatory purpose. Moreover, Qualified Plans, unlike separate accounts, are not themselves investment companies and therefore are not subject to Section 9 of the 1940 Act. 30 13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide exemptions from the pass-through voting requirement with respect to several significant matters, assuming the limitations on mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard the voting instructions of its contractowners with respect to the investments of an underlying fund or any contract between a fund and its investment adviser, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard contractowners' voting instructions if the contractowners initiate any change in such company's investment policies, principal underwriter, or any investment adviser (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of the Rules). 14. Applicants assert that Qualified Plans, which are not registered as investment companies under the 1940 Act, have no requirement to pass-through the voting rights to plan participants. Applicants state that applicable law expressly reserves voting rights to certain specified persons. Under Section 403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan. Section 403(a) also provides that the trustee(s) must have exclusive authority and discretion to manage and control the Qualified Plan with two exceptions: (1) when the Qualified Plan expressly provides that the trustee(s) are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees are subject to proper directions made in accordance with the terms of the Qualified Plan and not contrary to ERISA; and (2) when the authority to manage, acquire or dispose of assets of the Qualified Plan is delegated to one or more investment managers pursuant to Section 402(c)(3) of ERISA. Unless one of the two above exceptions stated in Section 403(a) applies, Qualified Plan trustees have the exclusive authority and responsibility for voting proxies. Where a named fiduciary to a Qualified Plan appoints an investment manager, the investment manager has the responsibility to vote the shares held unless the right to vote such shares is reserved to the trustees or the named fiduciary. Where a Qualified Plan does not provide participants with the right to give voting instructions, Applicants do not see any potential for material irreconcilable conflicts of interest between or among variable contract holders and Qualified Plan investors with respect to voting of the respective Fund's shares. Accordingly, Applicants state that, unlike the case with insurance company separate accounts, the issue of the resolution of material irreconcilable conflicts with respect to voting is not present with respect to such Qualified Plans since the Qualified Plans are not entitled to pass-through voting privileges. 15. Even if a Qualified Plan were to hold a controlling interest in one of the Funds, Applicants believe that such control would not disadvantage other investors in such Fund to any greater extent than is the case when any institutional shareholder holds a majority of the voting securities of any open-end management investment company. In this regard, Applicants submit that investment in a Fund by a Qualified Plan will not create any of the voting complications occasioned by mixed funding or shared funding. Unlike mixed or shared funding, Qualified Plan investor voting rights cannot be frustrated by veto rights of insurers or state regulators. 31 16. Applicants state that some of the Qualified Plans, however, may provide for the trustee(s), an investment adviser (or advisers), or another named fiduciary to exercise voting rights in accordance with instructions from participants. Where a Qualified Plan provides participants with the right to give voting instructions, Applicants see no reason to believe that participants in Qualified Plans generally or those in a particular Qualified Plan, either as a single group or in combination with participants in other Qualified Plans, would vote in a manner that would disadvantage Variable Contract holders. In sum, Applicants maintain that the purchase of shares of the Funds by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding. 17. Applicants do not believe that the sale of the shares of the Funds to Qualified Plans will increase the potential for material irreconcilable conflicts of interest between or among different types of investors. In particular, Applicants see very little potential for such conflicts beyond that which would otherwise exist between variable annuity and variable life insurance contractowners. 18. As noted above, Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable contracts held in an underlying mutual fund. The Code provides that a variable contract shall not be treated as an annuity contract or life insurance, as applicable, for any period (and any subsequent period) for which the investments are not, in accordance with regulations prescribed by the Treasury Department, adequately diversified. 19. Treasury Department Regulations issued under Section 817(h) provide that, in order to meet the statutory diversification requirements, all of the beneficial interests in the investment company must be held by the segregated asset accounts of one or more insurance companies. However, the Regulations contain certain exceptions to this requirement, one of which allows shares in an underlying mutual fund to be held by the trustees of a qualified pension or retirement plan without adversely affecting the ability of shares in the underlying fund also to be held by separate accounts of insurance companies in connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus, Applicants believe that the Treasury Regulations specifically permit "qualified pension or retirement plans" and separate accounts to invest in the same underlying fund. For this reason, Applicants have concluded that neither the Code nor the Treasury Regulations or revenue rulings thereunder presents any inherent conflict of interest. 20. Applicants note that while there are differences in the manner in which distributions from Variable Contracts and Qualified Plans are taxed, these differences will have no impact on the Funds. When distributions are to be made, and a Separate Account or Qualified Plan is unable to net purchase payments to make the distributions, the Separate Account and Qualified Plan will redeem shares of the Funds at their respective net asset value in conformity with Rule 22c-1 under the 1940 Act (without the imposition of any sales charge) to provide proceeds to meet distribution needs. A Qualified Plan will make distributions in accordance with the terms of the Qualified Plan. 21. Applicants maintain that it is possible to provide an equitable means of giving voting rights to Participating Separate Account contractowners and to Qualified Plans. In connection with any meeting of shareholders, the Funds will inform each shareholder, including each Participating 32 Insurance Company and Qualified Plan, of information necessary for the meeting, including their respective share of ownership in the relevant Fund. Each Participating Insurance Company will then solicit voting instructions in accordance with Rules 6e-2 and 6e-3(T), as applicable, and its participation agreement with the relevant Fund. Shares held by Qualified Plans will be voted in accordance with applicable law. The voting rights provided to Qualified Plans with respect to shares of the Funds would be no different from the voting rights that are provided to Qualified Plans with respect to shares of funds sold to the general public. 22. Applicants have concluded that even if there should arise issues with respect to a state insurance commissioner's veto powers over investment objectives where the interests of contractowners and the interests of Qualified Plans are in conflict, the issues can be almost immediately resolved since the trustees of (or participants in) the Qualified Plans can, on their own, redeem the shares out of the Funds. Applicants note that state insurance commissioners have been given the veto power in recognition of the fact that insurance companies usually cannot simply redeem their separate accounts out of one fund and invest in another. Generally, time-consuming, complex transactions must be undertaken to accomplish such redemptions and transfers. Conversely, the trustees of Qualified Plans or the participants in participant-directed Qualified Plans can make the decision quickly and redeem their interest in the Funds and reinvest in another funding vehicle without the same regulatory impediments faced by separate accounts or, as is the case with most Qualified Plans, even hold cash pending suitable investment. 23. Applicants also state that they do not see any greater potential for material irreconcilable conflicts arising between the interests of participants under Qualified Plans and contractowners of Participating Separate Accounts from possible future changes in the federal tax laws than that which already exist between variable annuity contractowners and variable life insurance contractowners. 24. Applicants state that the sale of shares of the Funds to Qualified Plans in addition to separate accounts of Participating Insurance Companies will result in an increased amount of assets available for investment by the Funds. This may benefit variable contractowners by promoting economies of scale, by permitting increased safety of investments through greater diversification, and by making the addition of new portfolios more feasible. 25. Applicants assert that, regardless of the type of shareholders in each Fund, each Fund's Investment Manager is or would be contractually and otherwise obligated to manage the Fund solely and exclusively in accordance with that Fund's investment objectives, policies and restrictions as well as any guidelines established by the Board of Trustees of such Fund (the "Board"). The Investment Manager works with a pool of money and (except in a few instances where this may be required in order to comply with state insurance laws) does not take into account the identity of the shareholders. Thus, each Fund will be managed in the same manner as any other mutual fund. Applicants therefore see no significant legal impediment to permitting the sale of shares of the Funds to Qualified Plans. 26. Applicants state that the Commission has permitted the amendment of a substantially similar original order for the purpose of adding a party to the original order and has permitted open-end 33 management investment companies to offer their shares directly to Qualified Plan in addition to separate accounts of affiliated or unaffiliated insurance companies which issue either or both variable annuity contracts or variable life insurance contracts. Applicants state that the amended order sought in the application is identical to precedent with respect to the conditions Applicants propose should be imposed on Qualified Plans in connection with investment in the Funds. Applicants' Conditions: If the requested amended order is granted, Applicants consent to the following conditions: 1. A majority of the Board of each Fund shall consist of persons who are not "interested persons" thereof, as defined by Section 2(a)(19) of the 1940 Act, and the rules thereunder and as modified by any applicable orders of the Commission, except that if this condition is not met by reason of the death, disqualification or bona fide resignation of any Board Member or Members, then the operation of this condition shall be suspended: (a) for a period of 45 days if the vacancy or vacancies may be filled by the remaining Board Members; (b) for a period of 60 days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the Commission may prescribe by order upon application. 2. The Board will monitor their respective Fund for the existence of any material irreconcilable conflict among the interests of the Variable Contract owners of all Separate Accounts investing in the Funds and of the Qualified Plan participants investing in the Funds. The Board will determine what action, if any, shall be taken in response to such conflicts. A material irreconcilable 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 interpretive 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 the Funds are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, and trustees of Qualified Plans; (f) a decision by an insurer to disregard the voting instructions of Variable Contract owners; or (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of Qualified Plan participants. 3. Participating Insurance Companies, the Investment Managers, and any Qualified Plan that executes a fund participation agreement upon becoming an owner of 10 percent or more of the assets of an Fund (a "Participating Qualified Plan"), will report any potential or existing conflicts of which it becomes aware to the Board of any relevant Fund. Participating Insurance Companies, the Investment Managers and the Participating Qualified Plans will be responsible for assisting the Board in carrying out its responsibilities under these conditions by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This responsibility includes, but is not limited to, an obligation by each Participating Insurance Company to inform the Board whenever voting instructions of Contract owners are disregarded and, if pass-through voting is applicable, an obligation by each Participating Qualified Plan to inform the Board whenever it has determined to disregard Qualified Plan participant voting instructions. The responsibility to report such information and conflicts, and to assist the Board, will be contractual 34 obligations of all Participating Insurance Companies investing in the Funds under their agreements governing participation in the Funds, and such agreements shall provide that these responsibilities will be carried out with a view only to the interests of the Variable Contract owners. The responsibility to report such information and conflicts, and to assist the Board, will be contractual obligations of all Participating Qualified Plans under their agreements governing participation in the Funds, and such agreements will provide that their responsibilities will be carried out with a view only to the interests of Qualified Plan participants. 4. If it is determined by a majority of the Board of a Fund, or by a majority of the disinterested Board Members, that a material irreconcilable conflict exists, the relevant Participating Insurance Companies and Participating Qualified Plans will, at their own expense and to the extent reasonably practicable as determined by a majority of the disinterested Board Members, take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps could include: (a) in the case of Participating Insurance Companies, withdrawing the assets allocable to some or all of the Separate Account s from the Fund or any portfolio thereof and reinvesting such assets in a different investment medium, including another portfolio of an Fund or another Fund, or submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; (b) in the case of Participating Qualified Plans, withdrawing the assets allocable to some or all of the Qualified Plans from the Fund and reinvesting such assets in a different investment medium; and (c) establishing a new registered management investment company or managed Separate Account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the Fund's election, to withdraw the insurer's Separate Account investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Participating Qualified Plan's decision to disregard Qualified Plan participant voting instructions, if applicable, and that decision represents minority position or would preclude a majority vote, the Participating Qualified Plan may be required, at the Fund's election, to withdraw its investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take remedial action in the event of a determination by a Board of a material irreconcilable conflict and to bear the cost of such remedial action will be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds, and these responsibilities will be carried out with a view only to the interest of Variable Contract owners and Qualified Plan participants. 5. For purposes of Condition 4, a majority of the disinterested Board Members of the applicable Board will determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but in no event will the relevant Fund or the Investment Managers be required to establish a new funding medium for any Contract. No Participating Insurance Company shall be required by Condition 4 to establish a new funding medium for any Variable 35 Contract if any offer to do so has been declined by vote of a majority of the Variable Contract owners materially and adversely affected by the material irreconcilable conflict. Further, no Participating Qualified Plan shall be required by Condition 4 to establish a new funding medium for any Participating Qualified Plan if (a) a majority of Qualified Plan participants materially and adversely affected by the irreconcilable material conflict vote to decline such offer, or (b) pursuant to governing Qualified Plan documents and applicable law, the Participating Qualified Plan makes such decision without a Qualified Plan participant vote. 6. The determination of the Board of the existence of a material irreconcilable conflict and its implications will be made known in writing promptly to all Participating Insurance Companies and Participating Qualified Plans. 7. Participating Insurance Companies will provide pass-through voting privileges to Variable Contract owners who invest in registered Separate Accounts so long as and to the extent that the Commission continues to interpret the 1940 Act as requiring pass-through voting privileges for Variable Contract owners. As to Variable Contracts issued by unregistered Separate Accounts, pass-through voting privileges will be extended to participants to the extent granted by issuing insurance companies. Each Participating Insurance Company will also vote shares of the Funds held in its Separate Accounts for which no voting instructions from Contract owners are timely received, as well as shares of the Funds which the Participating Insurance Company itself owns, in the same proportion as those shares of the Funds for which voting instructions from contract owners are timely received. Participating Insurance Companies will be responsible for assuring that each of their registered Separate Accounts participating in the Funds calculates voting privileges in a manner consistent with other Participating Insurance Companies. The obligation to calculate voting privileges in a manner consistent with all other registered Separate Accounts investing in the Funds will be a contractual obligation of all Participating Insurance Companies under their agreements governing their participation in the Funds. Each Participating Qualified Plan will vote as required by applicable law and governing Qualified Plan documents. 8. All reports of potential or existing conflicts received by the Board of a Fund and all action by such Board with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Qualified Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the meetings of such Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request. 9. Each Fund will notify all Participating Insurance Companies that separate disclosure in their respective Separate Account prospectuses may be appropriate to advise accounts regarding the potential risks of mixed and shared funding. Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a funding vehicle for variable annuity and variable life insurance contracts offered by various insurance companies and for qualified pension and retirement plans; (b) due to differences of tax treatment and other considerations, the interests of various Contract owners participating in the Fund and/or the interests of Qualified Plans investing in the Fund may at some time be in conflict; and (c) the Board of such Fund will monitor events in order to identify the 36 existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. 10. Each Fund will comply with all provisions of the 1940 Act requiring voting by shareholders (which, for these purposes, will be the persons having a voting interest in the shares of the Funds), and, in particular, the Funds will either provide for annual shareholder meetings (except insofar as the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act, although the Funds are not the type of trust described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, each Fund will act in accordance with the Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of Board Members and with whatever rules the Commission may promulgate with respect thereto. 11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended, or proposed Rule 6e-3 under the 1940 Act 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 on terms and conditions materially different from any exemptions granted in the order requested in the application, then the Funds and/or Participating Insurance Companies and Participating Qualified Plans, as appropriate, shall take such steps as may be necessary to comply with such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to the extent that such Rules are applicable. 12. The Participating Insurance Companies and Participating Qualified Plans and/or the Investment Managers, at least annually, will submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out obligations imposed upon it by the conditions contained in the application. Such reports, materials and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participating Insurance Companies and Participating Qualified Plans to provide these reports, materials and data to the Board, when the Board so reasonably requests, shall be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds. 13. If a Qualified Plan should ever become a holder of ten percent or more of the assets of a Fund, such Qualified Plan will execute a participation agreement with the Fund that includes the conditions set forth herein to the extent applicable. A Qualified Plan will execute an application containing an acknowledgment of this condition upon such Qualified Plan's initial purchase of the shares of any Fund. Conclusion: Applicants assert that, for the reasons summarized above, the requested exemptions are appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. 37 For the Commission, by the Division of Investment Management, pursuant to delegated authority. 38 Templeton Variable Products Series Fund, et al. File No. 812-11698 SECURITIES AND EXCHANGE COMMISSION Release No. IC-24079 1999 SEC LEXIS 2177 October 13, 1999 ACTION: Order Granting Exemptions TEXT: Templeton Variable Products Series Fund ("Templeton Trust"), Franklin Templeton Variable Insurance Products Trust ("VIP Trust"), Templeton Funds Annuity Company ("TFAC") or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor ("Future Funds") filed an application on July 14, 1999, and an amendment on September 17, 1999 seeking an amended order of the Commission pursuant to Section 6(c) of the Investment Company Act of 1940 ("1940 Act") exempting them 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). The prior order (Rel. No. IC-19879) granted exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies. The proposed relief would amend the prior order to add as parties to that order the VIP Trust and any Future Funds and to permit shares of the Templeton Trust, the VIP Trust, and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context. A notice of the filing of the application was issued on September 17, 1999 (Rel. No. IC-24018). The notice gave interested persons an opportunity to request a hearing and stated that an order granting the application would be issued unless a hearing should be ordered. No request for a hearing has been filed, and the Commission has not ordered a hearing. The matter has been considered, and it is found that granting the requested exemptions is appropriate in the public interest and consistent with the protection of investors and the purposes intended by the policy and provisions of the 1940 Act. Accordingly, IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the requested exemptions from 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, be, and hereby are, granted, effective forthwith. 39 For the Commission, by the Division of Investment Management, pursuant to delegated authority. 40 AMENDMENT TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. The Lincoln National Life Insurance Company The participation agreement, dated as of May 1, 2000, by and among Franklin Templetion Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and The Lincoln National Life Insurance Company (the "Agreement") is hereby amended as follows: Section 4.4 of the Agreement is deleted in its entirety and replaced with the following provision: 4.4 At your option, we shall provide you, at our expense, with either: (i) for each Contract owner who is invested through the Account in a subaccount corresponding to a Portfolio ("designated subaccount"), one copy of each of the following documents on each occasion that such document is required by law or regulation to be delivered to such Contract owner who is invested in a designated subaccount: the Trust's current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, pertaining specifically to the Portfolios ("Designated Portfolio Documents"); or (ii) a camera ready copy of such Designated Portfolio Documents in a form suitable for printing and from which information relating to series of the Trust other than the Portfolios has been deleted to the extent practicable. In connection with clause (ii) of this paragraph, we will pay for proportional printing costs for such Designated Portfolio Documents in order to provide one copy for each Contract owner who is invested in a designated subaccount on each occasion that such document is required by law or regulation to be delivered to such Contract owner, and provided the appropriate documentation is provided and approved by us. We shall provide you with a copy of the Trust's current statement of additional information, including any amendments or supplements, in a form suitable for you to duplicate. The expenses of furnishing, including mailing, to Contract owners the documents refereed to in this paragraph shall he borne by you. For each of the documents provided to you in accordance with clause (i) of this paragraph 4.4, we shall provide you, upon your request and at your expense, additional copies. In no event shall we be responsible for the costs of printing or delivery of Designated Portfolio Documents to potential or new Contract owners or the delivery of Designated Portfolio Documents to existing contract owners. All other ten's and provisions of the Agreement not amended herein shall remain in full force and effect Effective Date as of May 1,2000.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST FRANKLIN TEMPLETON DISTRIBUTORS. INC. - ---------------------------------------------------- -------------------------------- By: /s/ Karen L. Skidmore By: /s/ Phil Kearns Name: Karen L. Skidmore Name: Phil Kearns Title: Assistant Vice President Title: Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY - ------------------------------------------- By: /s/ Steven M. Kluever Name: Steven M. Kluever Title: Second Vice President
AMENDMENT TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. The Lincoln National Life Insurance Company The participation agreement, dated as of May 1, 2000, by and among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and The Lincoln National Life Insurance Company (the "Agreement") is hereby amended as follows: Schedule D of the Agreement is hereby deleted in its entirety and replaced with the Schedule D attached hereto. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date as of July 15, 2001. FRANKLIN TEMPLETON VARIABLE FRANKLIN TEMPLETON DISTRIBUTORS, INC. INSURANCE PRODUCTS TRUST By: /s/ Karen L. Skidmore By: /s/ Philip Kearns --------------------- --------------------- Name: Karen L. Skidmore Name: Philip Kearns Title: Assistant Vice President Title: Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever --------------------- Name: Steven M. Kluever Title: Second Vice President SCHEDULE D CONTRACTS OF THE COMPANY
- ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 1 CONTRACT 2 CONTRACT 3 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME SVUL I VUL I Lincoln VUL REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-43107 333-42479 333-42479 REPRESENTATIVE FORM LN650LL LN605LL LN660 NUMBERS LN615 LN615 LN660 LN605 SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account R Variable Life Account M Separate Account M 12/2/97 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-08579 811-08557 811-08557 PORTFOLIOS AND CLASSES Templeton Asset Strategy Fund Templeton Asset Strategy Fund Templeton International - -ADVISER - Class 1 Templeton Global - Class 1 Templeton Global Securities Fund - Class 2 - Advisors Limited Advisors Limited Templeton Investment Counsel, Inc. Templeton International Templeton International Securities Fund - Class 1- Securities Fund - Class 1 - Templeton Growth Securities Templeton Investment Counsel, Templeton Investment Counsel, Fund - Class 2 - Templeton Inc. Inc. Global Advisors Limited Templeton Growth Securities Templeton Growth Securities Fund - Class 1 - Templeton Fund - Class 1 Global Advisors Limited Templeton Global Advisors Limited SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 4 CONTRACT 5 CONTRACT 6 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME CVUL Lincoln SVUL VUL(DB) CVUL III REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-72875 333-43107 333-82663 REPRESENTATIVE FORM LN920 LN650 LN680 NUMBERS LN921 SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account S Variable Life Account R Variable Life Account M 11/1/98 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-09241 811-08579 811-08557 PORTFOLIOS AND CLASSES Templeton Asset Strategy Fund Templeton International Templeton International - -ADVISER - Class 2 - Templeton Global Securities Fund - Class 2 - Securities Fund - Class 2 - Advisors Limited Templeton Investment Counsel, Templeton Investment Counsel, Inc. Inc. Templeton International Securities Fund - Class 2 - Templeton Growth Securities Templeton Growth Securities Templeton Investment Counsel, Fund - Class 2 - Templeton Fund - Class 2 - Templeton Inc. Global Advisors Limited Global Advisors Limited Templeton Growth Securities Fund - Class 2 - Templeton Global Advisors Limited Franklin Small Cap Fund - Class 2 - Franklin Advisers, Inc. SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 7 CONTRACT 8 CONTRACT 9 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME Lincoln ChoicePlus Variable Lincoln ChoicePlus Access Lincoln ChoicePlus Bonus Annuity Variable Annuity Variable Annuity REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-40937 333-36316 333-36304 REPRESENTATIVE FORM AN425LL 30296 30295 NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Variable Annuity Lincoln Life Variable NAME/DATE ESTABLISHED Account N Account N Annuity Account N 11/3/97 11/3/97 11/3/97 SEC REGISTRATION NUMBER 811-08517 811-08517 811-08517 PORTFOLIOS AND CLASSES Templeton International Templeton International Templeton International - -ADVISER Securities Fund - Class 2 Securities Fund - Class 2 Securities Fund - Class 2 -Templeton Investment -Templeton Investment Counsel, -Templeton Investment Counsel, Inc. Inc. Counsel, Inc. Mutual Shares Securities Fund Mutual Shares Securities Fund Mutual Shares Securities Fund - Class 2 - Franklin Mutual - Class 2 - Franklin Mutual - Class 2 - Franklin Mutual Advisers, LLC Advisers, LLC Advisers, LLC Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - Class 2 - Franklin Advisers, Class 2 - Franklin Advisers, Class 2 - Franklin Advisers, Inc. Inc. Inc. SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 10 CONTRACT 11 CONTRACT 12 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME Lincoln MoneyGuard VUL VUL(CV) VUL(CV2) REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER [333-_____] 333-42479 333-54338 REPRESENTATIVE FORM LN660 LN665 NUMBERS SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account M Variable Life Account M Variable Life Account M 12/2/97 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-08557 811-08557 811-08557 PORTFOLIOS AND CLASSES Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - - -ADVISER Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 1 - Templeton Fund - Class 2 - Templeton Fund - Class 1 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited Templeton International Securities Fund - Class 1 - Gempleton Investment Counsel, Inc. SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 13 CONTRACT 14 CONTRACT 15 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME MultiFund Individual GVA I, II, III Choice Plus II REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 33-25990 333-05827 333-40937 REPRESENTATIVE FORM 18829 GAC96-101 30070-B NUMBERS 25982 28645 SEPARATE ACCOUNT Lincoln National Variable Lincoln National Variable Lincoln Life Variable Annuity NAME/DATE ESTABLISHED Annuit Account C Annuity Account L Account N 6/3/81 4/29/96 11/3/97 SEC REGISTRATION NUMBER 811-03214 811-07645 811-08517 PORTFOLIOS AND CLASSES Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - - -ADVISER Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 16 CONTRACT 17 CONTRACT 18 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-36316 333-36304 333-61554 REPRESENTATIVE FORM 30070-B 30070-B 30070-B NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Variable Annuity Lincoln Life Variable Annuity NAME/DATE ESTABLISHED Account N Account N Account N SEC REGISTRATION NUMBER 811-08517 811-08517 811-08517 PORTFOLIOS AND CLASSES Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - - -ADVISER Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 19 CONTRACT 20 CONTRACT 21 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME MultiFund Group SVUL II Director(TM) REGISTERED (Y/N) Yes Yes No SEC REGISTRATION NUMBER 333-43373 333-33782 NA REPRESENTATIVE FORM 28883 LN655 19476 NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Flexible Premium Lincoln National Life NAME/DATE ESTABLISHED Account Q Variable Life Separate Account Insurance Company Separate 11/3/97 R Account 62 12/2/97 SEC REGISTRATION NUMBER 811-08569 811-08579 NA PORTFOLIOS AND CLASSES Franklin Small Cap Fund - Franklin Small Cap Fund - Templeton Growth Securities - -ADVISER Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Fund - Class 2 Inc. Inc. Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited SCHEDULE D (CONT.) CONTRACTS OF THE COMPANY - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT 22 - ---------------------------------------------------------------------------------------------------------------------------- CONTRACT/PRODUCT NAME Director(TM) REGISTERED (Y/N) No SEC REGISTRATION NUMBER NA REPRESENTATIVE FORM 19476 NUMBERS SEPARATE ACCOUNT Lincoln National Life NAME/DATE ESTABLISHED Insurance Company Separate Account 63 SEC REGISTRATION NUMBER NA PORTFOLIOS AND CLASSES Franklin Small Cap Fund - - -ADVISER Class 2
AMENDMENT TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. The Lincoln National Life Insurance Company The participation agreement, dated as of May 1, 2000, by and among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and The Lincoln National Life Insurance Company (the "Agreement") is hereby amended as follows: Section 3.11 is hereby added as follows: 3.11 Each party to this Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws. Schedule D of the Agreement is hereby deleted in its entirety and replaced with the Schedule D attached hereto. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date as of August 1, 2002.
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Karen L. Skidmore By: /s/ Philip Kearns ---------------------------- --------------------- Name: Karen L. Skidmore Name: Philip Kearns Title: Assistant Vice President Title: Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Steven M. Kluever Name: Steven M. Kluever Title: Second Vice President
SCHEDULE D CONTRACTS OF THE COMPANY
CONTRACT 1 CONTRACT 2 CONTRACT 3 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME SVUL I VUL I Lincoln VUL cv REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-43107 333-42479 333-42479 REPRESENTATIVE FORM LN650LL LN605LL LN660 NUMBERS LN615 LN615 LN660 LN605 SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account R Variable Life Account M Separate Account M 12/2/97 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-08579 811-08557 811-08557 PORTFOLIOS AND Templeton Global Asset Templeton Global Asset Templeton Foreign Securities CLASSES-ADVISER Allocation Fund - Class 1 Allocation Fund - Class 1 Fund - Class 2 - Templeton Templeton Global Advisors Templeton Global Advisors Investment Counsel, Inc. Limited Limited Templeton Foreign Securities Templeton Foreign Securities Templeton Growth Securities Fund - Class 1- Templeton Fund - Class 1 - Templeton Fund - Class 2 - Templeton Investment Counsel, Inc. Investment Counsel, Inc. Global Advisors Limited Templeton Growth Securities Templeton Growth Securities Franklin Small Cap Fund - Fund - Class 1 - Templeton Fund - Class 1 Class 1 - Franklin Advisors, Global Advisors Limited Templeton Global Advisors Inc. Limited
CONTRACT 4 CONTRACT 5 CONTRACT 6 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME CVUL Lincoln SVUL VUL(DB) CVUL III REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-72875 333-43107 333-82663 REPRESENTATIVE FORM LN920 LN650 LN680 NUMBERS LN921 SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account S Variable Life Account R Variable Life Account M 11/1/98 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-09241 811-08579 811-08557 PORTFOLIOS AND Templeton Global Asset Templeton Foreign Securities Templeton Foreign Securities CLASSES -ADVISER Allocation Fund - Class 2 - Fund - Class 2 - Templeton Fund - Class 2 - Templeton Templeton Global Advisors Investment Counsel, Inc. Investment Counsel, Inc. Limited Templeton Foreign Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Investment Counsel, Inc. Global Advisors Limited Global Advisors Limited Templeton Growth Securities Franklin Small Cap Fund - Franklin Small Cap Fund - Fund - Class 2 - Templeton Class 1 - Franklin Advisers, Class 1 - Franklin Advisers, Global Advisors Limited Inc. Inc. Franklin Small Cap Fund - Class 2 - Franklin Advisers, Inc.
CONTRACT 7 CONTRACT 8 CONTRACT 9 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME Lincoln ChoicePlus Variable Lincoln ChoicePlus Access Lincoln ChoicePlus Bonus Annuity Variable Annuity Variable Annuity REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-40937 333-36316 333-36304 REPRESENTATIVE FORM AN425LL 30296 30295 NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Variable Annuity Lincoln Life Variable NAME/DATE ESTABLISHED Account N Account N Annuity Account N 11/3/97 11/3/97 11/3/97 SEC REGISTRATION NUMBER 811-08517 811-08517 811-08517 PORTFOLIOS AND Templeton Foreign Securities Templeton Foreign Securities Templeton Foreign Securities CLASSES-ADVISER Fund - Class 2 -Templeton Fund - Class 2 -Templeton Fund - Class 2 -Templeton Investment Counsel, Inc. Investment Counsel, Inc. Investment Counsel, Inc. Mutual Shares Securities Fund Mutual Shares Securities Fund Mutual Shares Securities Fund - Class 2 - Franklin Mutual - Class 2 - Franklin Mutual - Class 2 - Franklin Mutual Advisers, LLC Advisers, LLC Advisers, LLC Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - Class 2 - Franklin Advisers, Class 2 - Franklin Advisers, Class 2 - Franklin Advisers, Inc. Inc. Inc.
CONTRACT 10 CONTRACT 11 CONTRACT 12 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME Lincoln MoneyGuard VUL VUL(CV2) VUL(CV2) REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-63940 333-54338 333-54338 REPRESENTATIVE FORM LN665 LN665 NUMBERS SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account M Variable Life Account M Variable Life Account M 12/2/97 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-08557 811-08557 811-08557 PORTFOLIOS AND CLASSES Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - - -ADVISER Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 1 - Templeton Fund - Class 2 - Templeton Fund - Class 1 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited Templeton Foreign Securities Fund - Class 2 - Templeton Investment Counsel, Inc.
CONTRACT 13 CONTRACT 14 CONTRACT 15 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME MultiFund Individual GVA I, II, III Choice Plus II REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 33-25990 333-05827 333-40937 REPRESENTATIVE FORM 18829 GAC96-101 30070-B NUMBERS 25982 28645 SEPARATE ACCOUNT Lincoln National Variable Lincoln National Variable Lincoln Life Variable Annuity NAME/DATE ESTABLISHED Annuit Account C Annuity Account L Account N 6/3/81 4/29/96 11/3/97 SEC REGISTRATION NUMBER 811-03214 811-07645 811-08517 PORTFOLIOS AND Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - CLASSES-ADVISER Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited
CONTRACT 16 CONTRACT 17 CONTRACT 18 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME ChoicePlus II Access ChoicePlus II Bonus ChoicePlus II Advance REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-36316 333-36304 333-61554 REPRESENTATIVE FORM 30070-B 30070-B 30070-B NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Annuity Lincoln Life Variable Annuity Lincoln Life Variable Annuity NAME/DATE ESTABLISHED Account N Account N Account N SEC REGISTRATION NUMBER 811-08517 811-08517 811-08517 PORTFOLIOS AND Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - CLASSES-ADVISER Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Class 2 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited
CONTRACT 19 CONTRACT 20 CONTRACT 21 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME MultiFund Group SVUL II Director(TM) REGISTERED (Y/N) Yes Yes No SEC REGISTRATION NUMBER 333-43373 333-33782 NA REPRESENTATIVE FORM 28883 LN655 19476 NUMBERS SEPARATE ACCOUNT Lincoln Life Variable Lincoln Life Flexible Premium Lincoln National Life NAME/DATE ESTABLISHED Annuity Account Q Variable Life Separate Insurance Company Separate 11/3/97 Account R Account 62 12/2/97 SEC REGISTRATION NUMBER 811-08569 811-08579 NA PORTFOLIOS AND Franklin Small Cap Fund - Franklin Small Cap Fund - Templeton Growth Securities CLASSES -ADVISER Class 2 -Franklin Advisers, Class 1 -Franklin Advisers, Fund - Class 2 Inc. Inc. Templeton Growth Securities Templeton Growth Securities Fund - Class 2 - Templeton Fund - Class 2 - Templeton Global Advisors Limited Global Advisors Limited Templeton Foreign Securities Fund - Class 2 - Templeton Investment Counsel, Inc.
CONTRACT 22 CONTRACT 23 CONTRACT 24 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME Director(TM) CVUL III (Elite Funds) VUL(DB) REGISTERED (Y/N) No Yes Yes SEC REGISTRATION NUMBER NA 333-72875 333-82663 REPRESENTATIVE FORM 19476 LN920 LN680 NUMBERS LN921 SEPARATE ACCOUNT Lincoln National Life Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Insurance Company Separate Variable Life Account S Variable Life Account M Account 63 11/1/98 12/2/97 SEC REGISTRATION NUMBER NA 811-09241 811-08557 PORTFOLIOS AND Franklin Small Cap Fund - Templeton Growth Securities Templeton Growth Securities CLASSES-ADVISER Class 2 Fund - Class 1- Templeton Fund - Class 1- Templeton Global Advisors Limited Global Advisors Limited Franklin Small Cap Fund - Franklin Small Cap Fund - Class 1 - Franklin Advisers, Class 1 - Franklin Advisers, Inc. Inc
CONTRACT 25 CONTRACT 26 CONTRACT 27 - ------------------------------------------------------------------------------------------------------------------------------------ CONTRACT/PRODUCT NAME SVUL II (Elite Funds) SVUL III VULcv III REGISTERED (Y/N) Yes Yes Yes SEC REGISTRATION NUMBER 333-33782 333-90432 333-84370 REPRESENTATIVE FORM LN655 LN656 LN670 NUMBERS SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Separate Variable Life Separate Variable Life Account M Account R Account R 12/2/97 12/2/97 12/2/97 SEC REGISTRATION NUMBER 811-08579 811-08579 811-08557 PORTFOLIOS AND Franklin Small Cap Fund - Franklin Small Cap Fund - Franklin Small Cap Fund - CLASSES-ADVISER Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Class 1 -Franklin Advisers, Inc. Inc. Inc. Templeton Growth Securities Templeton Growth Securities Templeton Growth Securities Fund - Class 1 - Templeton Fund - Class 1 - Templeton Fund - Class 1 - Templeton Global Advisors Limited Global Advisors Limited Global Advisors Limited
CONTRACT 28 - ------------------------------------------------------------ CONTRACT/PRODUCT NAME VULdb II REGISTERED (Y/N) Yes SEC REGISTRATION NUMBER 333-84360 REPRESENTATIVE FORM LN690 NUMBERS SEPARATE ACCOUNT Lincoln Life Flexible Premium NAME/DATE ESTABLISHED Variable Life Account M 12/2/97 SEC REGISTRATION NUMBER 811-08557 PORTFOLIOS AND Franklin Small Cap Fund - CLASSES-ADVISER Class 1 -Franklin Advisers, Inc. Templeton Growth Securities Fund - Class 1 - Templeton Global Advisors Limited
FORM OF AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. The Lincoln National Life Insurance Company [name of insurance company distributor] The participation agreement, dated as of May 1, 2000 by and among Franklin Templeton Variable Insurance Products Trust, Franklin Templeton Distributors, Inc. and The Lincoln National Life Insurance Company (the "Agreement"), is hereby amended as follows: 1. [name of insurance company distributor] is added as a party to the Agreement. 2. The following Section 2.1.12 is added to the Agreement: "2.1.12 As covered financial institutions we, only with respect to Portfolio shareholders, and you each undertake and agree to comply, and to take full responsibility in complying with any and all applicable laws, regulations, protocols and other requirements relating to money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT Act)." 3. The following paragraphs of Section 3 are hereby deleted in their entirety and replaced with the following paragraphs: "3.1 We will make shares of the Portfolios available to the Accounts for the benefit of the Contracts. The shares will be available for purchase at the net asset value per share next computed after we (or our agent) receive a purchase order, as established in accordance with the provisions of the then current prospectus of the Trust. Notwithstanding the foregoing, the Trust's Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person, or may suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees, they deem such action to be in the best interests of the shareholders of such Portfolio. Without limiting the foregoing, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors with short term trading activity and/or whose purchase and redemption activity follows a market timing pattern as defined in the prospectus for the Trust, and have authorized the Trust, the Underwriter and the Trust's transfer agent to adopt procedures and take other action (including, without limitation, rejecting specific purchase orders) as they deem necessary to reduce, discourage or eliminate such trading and/or market timing activity. You agree to cooperate with us to assist us in implementing the Trust's restrictions on excessive and/or short term trading activity and/or purchase and redemption activity that follows a market timing pattern. 1 3.4 You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios ("Instructions"). "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 SEC and its current prospectus. "Close of Trading" shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. eastern time. You represent and warrant that all Instructions transmitted to us for processing on or as of a given Business Day ("Day 1") shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1, provided that we receive such Instructions from you before 9 a.m. Eastern Time on the next Business Day ("Day 2"). Such Instructions shall receive the share price next calculated following the Close of Trading on Day 1. You represent and warrant that Instructions received in proper form and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to us as if received on Day 2. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 2. You represent and warrant that you have and will maintain systems in place reasonably designed to prevent Instructions received after the Close of Trading on Day 1 from being executed with Instructions received before the Close of Trading on Day 1. All Instructions we receive from you after 9 a.m. Eastern Time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the Close of Trading on Day 2." 4. Section 9 of the Agreement is hereby deleted in its entirety and replaced with the following Section 9: "9. TERMINATION 9.1 This Agreement may be terminated by mutual agreement at any time. If this Agreement is so terminated, we shall, at your option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement. 9.2 This Agreement may be terminated by any party in its entirety or with respect to one, some or all Portfolios for any reason by sixty (60) days' advance written notice delivered to the other parties. If this Agreement is so terminated, we may, at our option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement; alternatively, we may, at our option, redeem the Portfolio shares held by the Accounts, PROVIDED that such redemption shall not occur prior to six (6) months following written notice of termination, during which time we will cooperate with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means. 2 9.3 This Agreement may be terminated immediately by us upon written notice to you if you materially breach any of the representations and warranties made in this Agreement or you are materially in default in the performance of any of your duties or obligations under the Agreement, receive a written notice thereof and fail to remedy such default or breach to our reasonable satisfaction within 30 days after such notice. If this Agreement so terminates, the parties shall cooperate to effect an orderly windup of the business which may include, at our option, a redemption of the Portfolio shares held by the Accounts, PROVIDED that such redemption shall not occur prior to a period of up to six (6) months following written notice of termination, during which time we will cooperate reasonably with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means. 9.4 This Agreement may be terminated immediately by us upon written notice to you if, with respect to the representations and warranties made in sections 2.1.3, 2.1.5, 2.1.7 and 2.1.12 of this Agreement: (i) you materially breach any of such representations and warranties; or (ii) you inform us that any of such representations and warranties may no longer be true or might not be true in the future; or (iii) any of such representations and warranties were not true on the effective date of this Agreement, are at any time no longer true, or have not been true during any time since the effective date of this Agreement. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement. 9.5 This Agreement may be terminated by the Board of Trustees of the Trust, in the exercise of its fiduciary duties, either upon its determination that such termination is a necessary and appropriate remedy for a material breach of this Agreement which includes a violation of laws, or upon its determination to completely liquidate a Portfolio. Pursuant to such termination, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement; 9.6 This Agreement shall terminate immediately in the event of its assignment by any party without the prior written approval of the other parties, or as otherwise required by law. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement. 9.7 This Agreement shall be terminated as required by the Shared Funding Order, and its provisions shall govern. 9.8 The provisions of Sections 2 (Representations and Warranties) and 7 (Indemnification) shall survive the termination of this Agreement. All other applicable provisions of this Agreement shall survive the termination of this Agreement, as long as shares of the Trust are held on behalf of Contract owners, except that we shall have no further obligation to sell Trust shares with respect to Contracts issued after termination. 3 9.9 You shall not redeem Trust shares attributable to the Contracts (as opposed to Trust shares attributable to your assets held in the Account) except: (i) as necessary to implement Contract owner initiated or approved transactions; (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"); or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly furnish to us the opinion of your counsel (which counsel shall be reasonably satisfactory to us) to the effect that any redemption pursuant to clause (ii) of this Section 9.9 is a Legally Required Redemption. Furthermore, you shall not prevent Contract owners from allocating payments to any Portfolio that has been available under a Contract without first giving us ninety (90) days advance written notice of your intention to do so." 5. The following Section 10.13 is added to the Agreement: "10.13 We and you both agree that: (a) if the Trustees approve a revision of Section 3 of the form of Participation Agreement used by the Trust for the purpose of clarifying procedures and responsibilities regarding purchase and redemption of Portfolio shares to address recent regulatory concerns regarding late trading and market timing activity (the "Form"), then we and you will both negotiate in good faith and execute an amendment to Section 3 of this Agreement to achieve the purposes intended by such revision of the Form ("Amendment"); and (b) if an Amendment is not completed and fully executed by you and us by six months after the Trustees' approval of the revised Form, then this Agreement will terminate immediately at that time, notwithstanding any other termination provisions in this Agreement, and such termination shall be considered a termination by mutual agreement pursuant to Section 9.1 of this Agreement." 6. Schedules A, B, C, D, F and G of the Agreement are hereby deleted in their entirety and replaced with the Schedules A, B, C, D, F and G attached hereto, respectively. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date as of May 1, 2003. FRANKLIN TEMPLETON VARIABLE THE LINCOLN NATIONAL LIFE INSURANCE INSURANCE PRODUCTS TRUST COMPANY By: By: ---------------------------------- ---------------------------------- Name: Karen L. Skidmore Name: Rise C.M. Taylor Title: Assistant Vice President Title: Vice President 4 FRANKLIN TEMPLETON DISTRIBUTORS, [NAME OF INSURANCE COMPANY DISTRIBUTOR] INC. By: By: ---------------------------------- ---------------------------------- Name: Philip J. Kearns Name: Title: Vice President Title: 5 SCHEDULE A THE COMPANY AND ITS DISTRIBUTOR THE COMPANY The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-40 Fort Wayne, Indiana 46802 A life insurance company incorporated in the State of Indiana ITS DISTRIBUTOR [Name of Distributor] Address ____________ ______________________ A corporation organized under the laws of state of _________________. A SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: Lincoln Life Flexible Premium Variable Life Account R Date Established: December 2, 1997 SEC Registration Number: 811-08579 2. Name: Lincoln Life Flexible Premium Variable Life Account M Date Established: December 2, 1997 SEC Registration Number: 811-08557 3. Name: Lincoln Life Flexible Premium Variable Life Account S Date Established: November 1, 1998 SEC Registration Number: 811-09241 4. Name: Lincoln Life Flexible Premium Variable Life Account Z Date Established: July 30, 2003 SEC Registration Number: _____________ 5. Name: Lincoln Life Variable Annuity Account N Date Established: November 3, 1997 SEC Registration Number: 811-08517 6. Name: Lincoln Life Variable Annuity Account Q Date Established: November 3, 1997 SEC Registration Number: 811-08569 7. Name: Lincoln National Life Insurance Company Separate Account 62 Date Established: ____________ SEC Registration Number: Not registered 8. Name: Lincoln National Life Insurance Company Separate Account 63 Date Established: ____________ SEC Registration Number: Not registered 9. Name: Lincoln National Variable Annuity Account C Date Established: June 3, 1981 SEC Registration Number: 811-03214 10. Name: Lincoln National Variable Annuity Account L Date Established: April 29, 1996 SEC Registration Number: 811-07645 B SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST INVESTMENT ADVISER - ---------------------------------------------------- ------------------ Franklin Small Cap Fund, Class 2 Franklin Advisers, Inc. Templeton Foreign Securities Fund, Classes 1 and 2 Templeton Investment Counsel, LLC Templeton Global Asset Allocation Fund, Classes 1 Templeton Investment Counsel, and 2 LLC Templeton Growth Securities Fund, Classes 1 and 2 Templeton Global Advisors Ltd.
C SCHEDULE D CONTRACTS OF THE COMPANY
PRODUCT NAME SEPARATE ACCOUNT NAME REGISTERED Y/N REGISTRATION DATE # 1933 ACT #, STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------- 1 SVUL I Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account R Templeton Foreign Securities Fund 333-43107 December 2, 1997 Templeton Global Asset Allocation Fund LN650LL 811-08579 Templeton Growth Securities Fund 2 VUL I Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Templeton Foreign Securities Fund 333-42479 December 2, 1997 Templeton Global Asset Allocation Fund LN605LL 811-08557 Templeton Growth Securities Fund LN615 3 Lincoln VUL cv Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-42479 December 2, 1997 LN660 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 4 CVUL Lincoln Life Flexible Premium CLASS 2 SHARES: Yes Variable Life Account S Franklin Small Cap Fund 333-72875 November 1, 1998 Templeton Foreign Securities Fund LN920 811-09241 Templeton Global Asset Allocation Fund LN921 Templeton Growth Securities Fund 5 Lincoln SVUL Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account R Franklin Small Cap Fund 333-43107 December 2, 1997 LN650 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 6 VUL(DB) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-82663 December 2, 1997 LN680 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 7 Lincoln ChoicePlus Variable Lincoln Life Variable Annuity CLASS 2 SHARES: Annuity Account N Franklin Small Cap Fund Yes November 3, 1997 333-40937 811-08517 Templeton Growth Securities Fund AN425LL
D-1
PRODUCT NAME SEPARATE ACCOUNT NAME REGISTERED Y/N REGISTRATION DATE # 1933 ACT #, STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------- 8 Lincoln ChoicePlus Access Lincoln Life Variable Annuity CLASS 2 SHARES: Variable Annuity Account N Franklin Small Cap Fund Yes November 3, 1997 333-36316 811-08517 Templeton Growth Securities Fund 30296 9 Lincoln ChoicePlus Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: Variable Annuity Account N Franklin Small Cap Fund Yes November 3, 1997 333-36304 811-08517 Templeton Growth Securities Fund 30295 10 Lincoln MoneyGuard VUL Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-63940 December 2, 1997 Templeton Growth Securities Fund ________ 811-08557 11 VUL(CV2) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-54338 December 2, 1997 LN665 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 12 VUL(CV2) (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-54338 December 2, 1997 Templeton Growth Securities Fund LN665 811-08557 13 MultiFund Individual Lincoln National Variable CLASS 2 SHARES: Yes Annuity Account C Franklin Small Cap Fund 33-25990 June 3, 1981 Templeton Growth Securities Fund 18829 811-03214 25982 28645 14 GVA I, II, III Lincoln National Variable CLASS 2 SHARES: Yes Annuity Account L Franklin Small Cap Fund 333-05827 April 29, 1996 Templeton Growth Securities Fund GAC96-101 811-07645 15 Choice Plus II Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-40937 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 16 ChoicePlus II Access Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-36316 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517
D-2
PRODUCT NAME SEPARATE ACCOUNT NAME REGISTERED Y/N REGISTRATION DATE # 1933 ACT #, STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------- 17 ChoicePlus II Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-36304 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 18 ChoicePlus II Advance Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-61554 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 19 MultiFund Group Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account Q Franklin Small Cap Fund 333-43373 November 3, 1997 Templeton Growth Securities Fund 28883 811-08569 20 SVUL II Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account R Franklin Small Cap Fund 333-33782 December 2, 1997 LN655 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 21 Director (TM) Lincoln National Life Insurance CLASS 2 SHARES: No Copany Separate Account 62 Templeton Growth Securities Fund N/A N/A 19476 22 Director (TM) Lincoln National Life Insurance CLASS 2 SHARES: No Copany Separate Account 63 Franklin Small Cap Fund N/A N/A 19476 23 CVUL III (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account S Franklin Small Cap Fund 333-72875 November 1, 1998 Templeton Growth Securities Fund LN925 811-09241 LN926 24 VUL(DB) (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-82633 December 2, 1997 Templeton Growth Securities Fund LN680 811-08557 25 SVUL II (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account R Franklin Small Cap Fund 333-33782 December 2, 1997 Templeton Growth Securities Fund LN655 811-08579 26 SVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account R Franklin Small Cap Fund 333-90432 December 2, 1997 Templeton Growth Securities Fund LN656 811-08579
D-3
PRODUCT NAME SEPARATE ACCOUNT NAME REGISTERED Y/N REGISTRATION DATE # 1933 ACT #, STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------- 27 VUL(CV) III Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-84370 December 2, 1997 Templeton Growth Securities Fund LN670 811-08557 28 VULdb II Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account M Franklin Small Cap Fund 333-84360 December 2, 1997 Templeton Growth Securities Fund LN690 811-08557 29 ChoicePlus Assurance (B Lincoln Life Variable Annuity CLASS 2 SHARES: Shares) Account N Franklin Small Cap Fund Yes November 3, 1997 Templeton Growth Securities Fund 333-40937 811-08517 30070-B 30 ChoicePlus Assurance C Share) Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-36316 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 31 ChoicePlus Assurance (L Share) Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-61554 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 32 ChoicePlus Assurance (Bonus) Lincoln Life Variable Annuity CLASS 2 SHARES: Yes Account N Franklin Small Cap Fund 333-36304 November 3, 1997 Templeton Growth Securities Fund 30070-B 811-08517 33 LCV4 Lincoln Life Flexible Premium CLASS 1 SHARES: Yes Variable Life Account S Franklin Small Cap Fund 333-104719 November 1, 1998 Templeton Growth Securities Fund LN935 811-09241 34 CVUL III Lincoln Life Flexible Premium CLASS 2 SHARES: Yes Variable Life Account S Franklin Small Cap Fund 333-72875 November 1, 1998 Templeton Foreign Securities Fund LN925 811-09241 Templeton Global Asset Allocation Fund LN926 Templeton Growth Securities Fund 35 Lincoln Corporate Variable Lincoln Life Flexible Premium CLASS 2 SHARES: Private Solutions Variable Life Account Z Franklin Small Cap Fund Yes July 30, 2003 Templeton Growth Securities Fund ________ ________ LN930
D-4 SCHEDULE F RULE 12b-1 PLANS OF THE TRUST COMPENSATION SCHEDULE Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2.
PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE -------------- --------------------------- Franklin Small Cap Fund 0.25% Templeton Foreign Securities Fund 0.25% Templeton Global Asset Allocation Fund 0.25% Templeton Growth Securities Fund 0.25%
AGREEMENT PROVISIONS If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. F-1 You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio's Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. F-2 SCHEDULE G ADDRESSES FOR NOTICES To the Company: The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-40 Fort Wayne, Indiana 46802 Attention: Steven M. Kluever To the Distributor [Name of Distributor] Address ____________ _______________________ Attention: __________ To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway San Mateo, California 94403 Attention: Karen L. Skidmore Assistant Vice President To the Underwriter: Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, California 94403 Attention: Philip J. Kearns Vice President G AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us") and The Lincoln National Life Insurance Company ("you"), have previously entered into a Participation Agreement dated May 1, 2000 (the "Agreement"). The parties now desire to amend the Agreement in this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. A M E N D M E N T For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Section 2.1.6 of the Agreement is hereby amended to add the following sentence at the end of the section: "Without limiting the foregoing, you agree that in recommending to a Contract owner the purchase, sale or exchange of any subaccount units under the Contracts, you shall have reasonable grounds, based on representations from the broker/dealers in their signed agreements with you, for believing that the recommendation is suitable for such Contract owner." 2. A new Section 2.1.12 is hereby added to the Agreement as follows: "2.1.12 As covered financial institutions we, only with respect to Portfolio shareholders, and you each undertake and agree to comply, and to take full responsibility in complying with any and all applicable laws, regulations, protocols and other requirements relating to money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT Act)." 3. A new Section 2.1.13 is hereby added to the Agreement as follows: "2.1.13 You represent that you are also the principal underwriter for each of the Contracts, are registered as a broker-dealer pursuant to the Securities Exchange Act of 1934, 1 and that you will comply in all material respects with the 1933 and 1940 Acts and the rules and regulations thereunder." 4. Section 3 of the Agreement is hereby deleted in its entirety and replaced with the following Section 3: "3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES 3.1 AVAILABILITY OF TRUST PORTFOLIO SHARES 3.1.1 We will make shares of the Portfolios available to the Accounts for the benefit of the Contracts. The shares will be available for purchase at the net asset value per share next computed after we (or our agent, or you as our designee) receive a purchase order, as established in accordance with the provisions of the then current prospectus of the Trust. All orders are subject to acceptance by us and by the Portfolio or its transfer agent, and become effective only upon confirmation by us. Notwithstanding the foregoing, the Trust's Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person, or may suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees, they deem such action to be in the best interests of the shareholders of such Portfolio. 3.1.2 Without limiting the other provisions of this Section 3.1, among other delegations by the Trustees, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors with short term trading activity and/or whose purchase and redemption activity follows a market timing pattern as defined in the prospectus for the Trust, and have authorized the Trust, the Underwriter and the Trust's transfer agent to adopt procedures and take other action (including, without limitation, rejecting specific purchase orders in whole or in part) as they deem necessary to reduce, discourage, restrict or eliminate such trading and/or market timing activity. You agree that your purchases and redemptions of Portfolio shares are subject to, and that you will assist us in implementing, the Market Timing Trading Policy and Additional Policies (as described in the Trust's prospectus) and the Trust's restrictions on excessive and/or short term trading activity and/or purchase and redemption activity that follows a market timing pattern. 3.1.3 We agree that shares of the Trust will be sold only to life insurance companies which have entered into fund participation agreements with the Trust ("Participating Insurance Companies") and their separate accounts or to qualified pension and retirement plans in accordance with the terms of the Shared Funding Order. No shares of any Portfolio will be sold to the general public. 3.2 THIS SUBSECTION 3.2 IS NOT USED 3.3 PURCHASE AND REDEMPTION 2 3.3.1 You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios ("Instructions"). "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 SEC and its current prospectus. "Close of Trading" shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. New York time. You represent and warrant that all Instructions transmitted to us for processing on or as of a given Business Day ("Day 1") shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive such Instructions from you before 9:30 a.m. New York time on the next Business Day ("Day 2"). You represent and warrant that Instructions received in proper form and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to us as if received on Day 2. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 2. You represent and warrant that you have, maintain and periodically test, procedures and systems in place reasonably designed to prevent Instructions received after the Close of Trading on Day 1 from being executed with Instructions received before the Close of Trading on Day 1. All Instructions we receive from you after 9:30 a.m. New York time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the Close of Trading on Day 2. 3.3.2 We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall communicate these net asset values to you or your designated agent on a daily basis as soon as reasonably practical after the calculation is completed (normally by 6:30 p.m. New York time). 3.3.3 You shall submit payment for the purchase of shares of a Portfolio on behalf of an Account in federal funds transmitted by wire to the Trust or to its designated custodian, which must receive such wires no later than the close of the Reserve Bank, which is 6:00 p.m. New York time, on the Business Day following the Business Day as of which such purchases orders are made. 3.3.4 We will redeem any full or fractional shares of any Portfolio, when requested by you on behalf of an Account, at the net asset value next computed after receipt by us (or our agent or you as our designee) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. We shall make payment for such shares in the manner we establish from time to time, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. Payments for the purchase or redemption of shares by you may be netted against one another on any Business Day for the purpose of determining the amount of any wire transfer on that Business Day. 3 3.3.5 Issuance and transfer of the Portfolio shares will be by book entry only. Stock certificates will not be issued to you or the Accounts. Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 3.3.6 We shall furnish, on or before the ex-dividend date, notice to you of any income dividends or capital gain distributions payable on the shares of any Portfolio. You hereby elect to receive all such income dividends and capital gain distributions as are payable on shares of a Portfolio in additional shares of that Portfolio, and you reserve the right to change this election in the future. We will notify you of the number of shares so issued as payment of such dividends and distributions. 3.3.7 Each party to this Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws. 5. A new Section 6.8 is hereby added to the Agreement as follows: "6.8 You agree that any posting of Portfolio prospectuses on your website will result in the Portfolio prospectuses: (i) appearing identical to the hard copy printed version; (ii) being clearly associated with the particular Contracts in which they are available and posted in close proximity to the applicable Contract prospectuses; (iii) having no less prominence than prospectuses of any other underlying funds available under the Contracts; and (iv) being used in an authorized manner. Notwithstanding the above, you understand and agree that you are responsible for ensuring that participation in the Portfolios, and any website posting, or other use, of the Portfolio prospectuses is in compliance with this Agreement and applicable state and federal securities and insurance laws and regulations, including as they relate to paper or electronic use of fund prospectuses. The format of such presentation, the script and layout for any website that mentions the Trust, the Underwriter, an Adviser or the Portfolios shall be routed to us as sales literature or other promotional materials, pursuant to Section 6 of this Agreement. In addition, you agree to be solely responsible for maintaining and updating the Portfolio prospectuses' PDF files (including prospectus supplements) and removing and/or replacing promptly any outdated prospectuses, as necessary, ensuring that any accompanying instructions by us, for using or stopping use are followed. You agree to designate and make available to us a person to act as a single point of communication contact for these purposes. We are not responsible for any additional costs or additional liabilities that may be incurred as a result of your election to place the Portfolio prospectuses on your website. We reserve the right to revoke this authorization, at any time and for any reason, although we may instead make our authorization subject to new procedures." 4 6. A new Section 6.9 is hereby added to the Agreement as follows: "6.9 Each of your and your distributor's registered representatives, agents, independent contractors and employees, as applicable, will have access to our websites at franklintempleton.com, and such other URLs through which we may permit you to conduct business concerning the Portfolios from time to time (referred to collectively as the "Site") as provided herein: (i) upon registration by such individual on a Site; (ii) if you cause a Site Access Request Form (an "Access Form") to be signed by your authorized supervisory personnel and submitted to us, as a Schedule to, and legally a part of, this Agreement; or (iii) if you provide such individual with the necessary access codes or other information necessary to access the Site through any generic or firm-wide authorization we may grant you from time to time. Upon receipt by us of a completed registration submitted by an individual through the Site or a signed Access Form referencing such individual, we shall be entitled to rely upon the representations contained therein as if you had made them directly hereunder and we will issue a user identification, express number and/or password (collectively, "Access Code"). Any person to whom we issue an Access Code or to whom you provide the necessary Access Codes or other information necessary to access the Site through any generic or firm-wide authorization we may grant you from time to time shall be an "Authorized User." We shall be entitled to assume that such person validly represents you and that all instructions received from such person are authorized, in which case such person will have access to the Site, including all services and information to which you are authorized to access on the Site. All inquiries and actions initiated by you (including your Authorized Users) are your responsibility, are at your risk and are subject to our review and approval (which could cause a delay in processing). You agree that we do not have a duty to question information or instructions you (including Authorized Users) give to us under this Agreement, and that we are entitled to treat as authorized, and act upon, any such instructions and information you submit to us. You agree to take all reasonable measures to prevent any individual other than an Authorized User from obtaining access to the Site. You agree to inform us if you wish to restrict or revoke the access of any individual Access Code. If you become aware of any loss or theft or unauthorized use of any Access Code, you agree to contact us immediately. You also agree to monitor your (including Authorized Users') use of the Site to ensure the terms of this Agreement are followed. You also agree that you will comply with all policies and agreements concerning Site usage, including without limitation the Terms of Use Agreement(s) posted on the Site ("Site Terms"), as may be revised and reposted on the Site from time to time, and those Site Terms (as in effect from time to time) are a part of this Agreement. Your duties under this section are considered "services" required under the terms of this Agreement. You acknowledge that the Site is transmitted over the Internet on a reasonable efforts basis and we do not warrant or guarantee their accuracy, timeliness, completeness, reliability or non-infringement. Moreover, you acknowledge that the Site is provided for informational purposes only, and is not intended to comply with any requirements established by any regulatory or governmental agency." 5 7. A new paragraph is added at the end of Section 10.8 of the Agreement as follows: "Each party to this Agreement agrees to limit the disclosure of nonpublic personal information of Contract owners consistent with its policies on privacy with respect to such information and Regulation S-P of the SEC. Each party hereby agrees that it will comply with all applicable requirements under the regulations implementing Title V of the Gramm-Leach-Bliley Act and any other applicable federal and state consumer privacy acts, rules and regulations. Each party further represents that it has in place, and agrees that it will maintain, information security policies and procedures for protecting nonpublic personal customer information adequate to conform to applicable legal requirements." 8. Schedules A, B, C, D, F and G of the Agreement are hereby deleted in their entirety and replaced with the Schedules A, B, C, D, F and G attached hereto, respectively. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. This Amendment is executed effective as of May 1, 2003. FRANKLIN TEMPLETON VARIABLE INSURANCE THE LINCOLN NATIONAL LIFE INSURANCE PRODUCTS TRUST COMPANY By: /s/ Karen L. Skidmore By: /s/ Rise C. M. Taylor --------------------------------- ---------------------------------- Name: Karen L. Skidmore Name: Rise C. M. Taylor Title: Assistant Vice President Title: Vice President FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Philip J. Kearns --------------------------------- Name: Philip J. Kearns Title: Vice President 6 SCHEDULE A THE COMPANY AND ITS DISTRIBUTOR The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-17 Fort Wayne, Indiana 46802 A life insurance company incorporated in the State of Indiana A SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: Lincoln Life Flexible Premium Variable Life Account R Date Established: December 2, 1997 SEC Registration Number: 811-08579 2. Name: Lincoln Life Flexible Premium Variable Life Account M Date Established: December 2, 1997 SEC Registration Number: 811-08557 3. Name: Lincoln Life Flexible Premium Variable Life Account S Date Established: November 1, 1998 SEC Registration Number: 811-09241 4. Name: Lincoln Life Flexible Premium Variable Life Account Z Date Established: July 30, 2003 SEC Registration Number: Not Registered 5. Name: Lincoln Life Variable Annuity Account N Date Established: November 3, 1997 SEC Registration Number: 811-08517 6. Name: Lincoln Life Variable Annuity Account Q Date Established: November 3, 1997 SEC Registration Number: 811-08569 7. Name: Lincoln National Life Insurance Company Separate Account 62 Date Established: July 1, 2001 SEC Registration Number: Not registered 8. Name: Lincoln National Life Insurance Company Separate Account 63 Date Established: July 1, 2001 SEC Registration Number: Not registered 9. Name: Lincoln National Variable Annuity Account C Date Established: June 3, 1981 SEC Registration Number: 811-03214 10. Name: Lincoln National Variable Annuity Account L Date Established: April 29, 1996 SEC Registration Number: 811-07645
B SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST INVESTMENT ADVISER - ---------------------------------------------------- ------------------ Franklin Small Cap Fund, Classes 1 and 2 Franklin Advisers, Inc. Templeton Foreign Securities Fund, Classes 1 and 2 Templeton Investment Counsel, LLC Templeton Global Asset Allocation Fund, Classes 1 and 2 Templeton Investment Counsel, LLC Templeton Growth Securities Fund, Classes 1 and 2 Templeton Global Advisors Ltd.
C SCHEDULE D CONTRACTS OF THE COMPANY
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT# CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 1 The Lincoln SVUL I Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Templeton Foreign Securities Fund Insurance 333-43107 December 2, 1997 Templeton Global Asset Allocation Fund Company LN650LL 811-08579 Templeton Growth Securities Fund 2 The Lincoln VUL I Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Templeton Foreign Securities Fund Insurance 333-42479 December 2, 1997 Templeton Global Asset Allocation Fund Company LN605LL 811-08557 Templeton Growth Securities Fund LN615 3 The Lincoln Lincoln VUL cv Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-42479 December 2, 1997 Company LN660 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 4 The Lincoln CVUL Lincoln Life Flexible Premium CLASS 2 SHARES: National Life Yes Variable Life Account S Franklin Small Cap Fund Insurance 333-72875 November 1, 1998 Templeton Foreign Securities Fund Company LN920 811-09241 Templeton Global Asset Allocation Fund LN921 Templeton Growth Securities Fund 5 The Lincoln Lincoln SVUL Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small Cap Fund Insurance 333-43107 December 2, 1997 Company LN650 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 6 The Lincoln VUL(DB) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-82663 December 2, 1997 Company LN680 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 7 The Lincoln Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Company 333-40937 811-08517 Templeton Growth Securities Fund AN425LL
D-1
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT# CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 8 The Lincoln Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Access Variable Annuity Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Company 333-36316 811-08517 Templeton Growth Securities Fund 30296 9 The Lincoln Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Bonus Variable Annuity Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Company 333-36304 811-08517 Templeton Growth Securities Fund 30295 10 The Lincoln Lincoln MoneyGuard VUL Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-63940 December 2, 1997 Templeton Growth Securities Fund Company ________ 811-08557 11 The Lincoln VUL(CV2) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-54338 December 2, 1997 Company LN665 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 12 The Lincoln VUL(CV2) (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-54338 December 2, 1997 Templeton Growth Securities Fund Company LN665 811-08557 13 The Lincoln MultiFund Individual Lincoln National Variable CLASS 2 SHARES: National Life Yes Annuity Account C Franklin Small Cap Fund Insurance 33-25990 June 3, 1981 Templeton Growth Securities Fund Company 18829 811-03214 25982 28645 14 The Lincoln GVA I, II, III Lincoln National Variable CLASS 2 SHARES: National Life Yes Annuity Account L Franklin Small Cap Fund Insurance 333-05827 April 29, 1996 Templeton Growth Securities Fund Company GAC96-101 811-07645 15 The Lincoln Choice Plus II Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small Cap Fund Insurance 333-40937 November 3, 1997 Templeton Growth Securities Fund Company 30070-B 811-08517
D-2
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT# CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 16 The Lincoln ChoicePlus II Access Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small Cap Fund Insurance 333-36316 November 3, 1997 Templeton Growth Securities Fund Company 30070-B 811-08517 17 The Lincoln ChoicePlus II Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small Cap Fund Insurance 333-36304 November 3, 1997 Templeton Growth Securities Fund Company 30070-B 811-08517 18 The Lincoln ChoicePlus II Advance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small Cap Fund Insurance 333-61554 November 3, 1997 Templeton Growth Securities Fund Company 30070-B 811-08517 19 The Lincoln MultiFund Group Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account Q Franklin Small Cap Fund Insurance 333-43373 November 3, 1997 Templeton Growth Securities Fund Company 28883 811-08569 20 The Lincoln SVUL II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small Cap Fund Insurance 333-33782 December 2, 1997 Company LN655 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 21 The Lincoln Director(TM) Lincoln National Life Insurance CLASS 2 SHARES: National Life No Company Separate Account 62 Templeton Growth Securities Fund Insurance N/A Company 19476 N/A 22 The Lincoln Director(TM) Lincoln National Life Insurance CLASS 2 SHARES: National Life No Company Separate Account 63 Franklin Small Cap Fund Insurance N/A Company 19476 N/A 23 The Lincoln CVUL III (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Franklin Small Cap Fund Insurance 333-72875 November 1, 1998 Templeton Growth Securities Fund Company LN925 811-09241 LN926 24 The Lincoln VUL(DB) (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-82633 December 2, 1997 Templeton Growth Securities Fund Company LN680 811-08557 25 The Lincoln SVUL II (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small Cap Fund Insurance 333-33782 December 2, 1997 Templeton Growth Securities Fund Company LN655 811-08579
D-3
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT# CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 26 The Lincoln SVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small Cap Fund Insurance 333-90432 December 2, 1997 Templeton Growth Securities Fund Company LN656 811-08579 27 The Lincoln VUL(CV) III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-84370 December 2, 1997 Templeton Growth Securities Fund Company LN670 811-08557 28 The Lincoln VULdb II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-84360 December 2, 1997 Templeton Growth Securities Fund Company LN690 811-08557 29 The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (B Shares) Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Templeton Growth Securities Fund Company 333-40937 811-08517 30070-B 30 The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life C Share) Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Templeton Growth Securities Fund Company 333-36316 811-08517 30070-B 31 The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (L Share) Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Templeton Growth Securities Fund Company 333-61554 811-08517 30070-B 32 The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (Bonus) Account N Franklin Small Cap Fund Insurance Yes November 3, 1997 Templeton Growth Securities Fund Company 333-36304 811-08517 30070-B 33 The Lincoln LCV4 Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Franklin Small Cap Fund Insurance 333-104719 November 1, 1998 Templeton Growth Securities Fund Company LN935 811-09241 34 The Lincoln CVUL III Lincoln Life Flexible Premium CLASS 2 SHARES: National Life Yes Variable Life Account S Franklin Small Cap Fund Insurance 333-72875 November 1, 1998 Templeton Foreign Securities Fund Company LN925 811-09241 Templeton Global Asset Allocation Fund LN926 Templeton Growth Securities Fund
D-4
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT# CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 35 The Lincoln Lincoln Corporate Lincoln Life Flexible Premium CLASS 2 SHARES: National Life Variable Private Variable Life Account Z Franklin Small Cap Fund Insurance Solutions July 30, 2003 Templeton Growth Securities Fund Company No N/A N/A LN930 36 The Lincoln Momentum VUL(ONE) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-111128 December 2, 1997 Templeton Growth Securities Fund Company 811-08557 37 The Lincoln VUL(ONE) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small Cap Fund Insurance 333-111137 December 2, 1997 Templeton Growth Securities Fund Company 811-08557
D-5 SCHEDULE F RULE 12b-1 PLANS OF THE TRUST COMPENSATION SCHEDULE Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2.
PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE -------------- --------------------------- Franklin Small Cap Fund 0.25% Templeton Foreign Securities Fund 0.25% Templeton Global Asset Allocation Fund 0.25% Templeton Growth Securities Fund 0.25%
AGREEMENT PROVISIONS If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. F-1 You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio's Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. F-2 SCHEDULE G ADDRESSES FOR NOTICES To the Company: The Lincoln National Life Insurance Company 1300 South Clinton Street, 2H-17 Fort Wayne, Indiana 46802 Attention: Rise C. M. Taylor, Vice President To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway, Bldg. 920 2nd Floor San Mateo, California 94403 Attention: Karen L. Skidmore Assistant Vice President With a copy to: Murray Simpson, General Counsel To the Underwriter: Franklin Templeton Distributors, Inc. One Franklin Parkway, Bldg. 910 1st Floor San Mateo, California 94403 Attention: Philip J. Kearns Vice President With a copy to: Murray Simpson, General Counsel AMENDMENT NO. 4 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us") and The Lincoln National Life Insurance Company ("you"), have previously entered into a Participation Agreement dated May 1, 2000 (the "Agreement"). The parties now desire to amend the Agreement in this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule D of the Agreement is hereby deleted in its entirety and replaced with the Schedule D attached hereto. 2. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. This Amendment is executed effective as of May 2, 2005. FRANKLIN TEMPLETON VARIABLE THE LINCOLN NATIONAL LIFE INSURANCE PRODUCTS TRUST INSURANCE COMPANY By: /s Karen L. Skidmore By: /s/ Rise C.M. Taylor --------------------------- ----------------------------- Name: Karen L. Skidmore Name: Rise C. M. Taylor Title: Assistant Vice President Title: Vice President FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Scott M. Lee ----------------------- Name: Scott M. Lee Title: Senior Vice President SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: Lincoln Life Flexible Premium Variable Life Account R Date Established: December 2, 1997 SEC Registration Number: 811-08579 2. Name: Lincoln Life Flexible Premium Variable Life Account M Date Established: December 2, 1997 SEC Registration Number: 811-08557 3. Name: Lincoln Life Flexible Premium Variable Life Account S Date Established: November 1, 1998 SEC Registration Number: 811-09241 4. Name: Lincoln Life Flexible Premium Variable Life Account Z Date Established: July 30, 2003 SEC Registration Number: Not Registered 5. Name: Lincoln Life Variable Annuity Account N Date Established: November 3, 1997 SEC Registration Number: 811-08517 6. Name: Lincoln National Life Insurance Company Separate Account 62 Date Established: July 1, 2001 SEC Registration Number: Not registered 7. Name: Lincoln National Life Insurance Company Separate Account 63 Date Established: July 1, 2001 SEC Registration Number: Not registered 8. Name: Lincoln National Variable Annuity Account C Date Established: June 3, 1981 SEC Registration Number: 811-03214 2 9. Name: Lincoln National Life Insurance Company Separate Account 86 Date Established: SEC Registration Number: Not registered 3 SCHEDULE D CONTRACTS OF THE COMPANY
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 1. The Lincoln SVUL I Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Templeton Foreign Securities Fund Insurance 333-43107 Account R Templeton Global Asset Allocation Company LN650LL December 2, 1997 Fund 811-08579 Templeton Growth Securities Fund 2. The Lincoln VUL I Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Templeton Foreign Securities Fund Insurance 333-42479 Account M Templeton Global Asset Allocation Company LN605LL December 2, 1997 Fund LN615 811-08557 Templeton Growth Securities Fund 3. The Lincoln VUL(CV) Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Franklin Small-Mid Cap Growth Insurance 333-42479 Account M Securities Fund Company LN660 December 2, 1997 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 4. The Lincoln CVUL Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Templeton Global Income Securities Insurance 333-72875 Account S Fund Company LN920 November 1, 1998 LN921 811-09241 CLASS 2 SHARES: Franklin Small-Mid Cap Growth Securities Fund Templeton Foreign Securities Fund Templeton Global Asset Allocation Fund Templeton Growth Securities Fund 5. The Lincoln SVUL Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Franklin Small-Mid Cap Growth Insurance 333-43107 Account R Securities Fund Company LN650 December 2, 1997 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 6. The Lincoln VUL(DB) Lincoln Life Flexible CLASS 1 SHARES: National Life Yes Premium Variable Life Franklin Small-Mid Cap Growth Insurance 333-82663 Account M Securities Fund Company LN680 December 2, 1997 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 7. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-40937 811-08517 Templeton Growth Securities Fund AN425LL Templeton Global Income Securities Fund 8. The Lincoln ChoicePlus Access Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-36316 811-08517 Templeton Growth Securities Fund 30296 Templeton Global Income Securities Fund 9. The Lincoln ChoicePlus Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-36304 811-08517 Templeton Growth Securities Fund 30295 Templeton Global Income Securities Fund 10. The Lincoln MoneyGuard Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VUL Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account M Securities Fund Company 333-63940 December 2, 1997 Templeton Growth Securities Fund 811-08557 11. The Lincoln VUL(CV) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-54338 Account M Securities Fund Company LN665 December 2, 1997 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 12. The Lincoln VUL(CV) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VUL Flex Variable Life Franklin Small-Mid Cap Growth Insurance (Elite Funds) Account M Securities Fund Company Yes December 2, 1997 Templeton Growth Securities Fund 333-54338 811-08557 Templeton Global Income Securities LN665 Fund 13. The Lincoln Choice Plus II Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Insurance 333-40937 November 3, 1997 Securities Fund Company 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund 14. The Lincoln ChoicePlus II Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Access Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-36316 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 15. The Lincoln ChoicePlus II Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Insurance 333-36304 November 3, 1997 Securities Fund Company 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund 16. The Lincoln ChoicePlus II Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Advance Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-61554 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund 17. The Lincoln SVUL II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-33782 Account R Securities Fund Company LN655 December 2, 1997 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 18. The Lincoln Director (TM) Lincoln National Life CLASS 2 SHARES: National Life No Insurance Company Separate Templeton Growth Securities Fund Insurance N/A Account 62 Company 19476 N/A 19. The Lincoln Director (TM) Lincoln National Life CLASS 2 SHARES: National Life No Insurance Company Separate Franklin Small-Mid Cap Growth Insurance N/A Account 63 Securities Fund Company 19476 N/A 20. The Lincoln CVUL III (Elite Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Funds) Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account S Securities Fund Company 333-72875 November 1, 1998 Templeton Global Income Securities LN925 811-09241 Fund LN926 Templeton Growth Securities Fund 21. The Lincoln VUL(DB) (Elite Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Funds) Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account M Securities Fund Company 333-82633 December 2, 1997 Templeton Growth Securities Fund LN680 811-08557 22. The Lincoln SVUL II (Elite Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Funds) Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account R Securities Fund Company 333-33782 December 2, 1997 Templeton Global Income Securities LN655 811-08579 Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 23. The Lincoln SVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-90432 Account R Securities Fund Company LN656 December 2, 1997 Templeton Growth Securities Fund 811-08579 24. The Lincoln VUL(CV) III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-84370 Account M Securities Fund Company LN670 December 2, 1997 Templeton Growth Securities Fund 811-08557 25. The Lincoln VUL(DB) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-84360 Account M Securities Fund Company LN690 December 2, 1997 Templeton Growth Securities Fund 811-08557 26. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Assurance (B Share) Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-40937 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund 27. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Assurance (C Share) Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-36316 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund 28. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Assurance (L Share) Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-61554 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund 29. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Assurance (Bonus) Account N Franklin Small-Mid Cap Growth Insurance Yes November 3, 1997 Securities Fund Company 333-36304 811-08517 Templeton Global Income Securities 30070-B Fund Templeton Growth Securities Fund 30. The Lincoln LCV4 Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-104719 Account S Securities Fund Company LN935 November 1, 1998 Templeton Global Income Securities 811-09241 Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 31. The Lincoln CVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Templeton Global Income Securities Insurance 333-72875 Account S Fund Company LN925 November 1, 1998 LN926 811-09241 CLASS 2 SHARES: Franklin Small-Mid Cap Growth Securities Fund Templeton Foreign Securities Fund Templeton Global Asset Allocation Fund Templeton Growth Securities Fund 32. The Lincoln Lincoln Corporate Lincoln Life Flexible Premium CLASS 2 SHARES: National Life Variable Private Variable Life Franklin Small-Mid Cap Growth Insurance Solutions Account Z Securities Fund Company No July 30, 2003 Templeton Growth Securities Fund N/A N/A LN930 33. The Lincoln Momentum Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VULONE Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account M Securities Fund Company 333-111128 December 2, 1997 Templeton Global Income Securities 811-08557 Fund Templeton Growth Securities Fund 34. The Lincoln VULONE Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-111137 Account M Securities Fund Company December 2, 1997 Templeton Global Income Securities 811-08557 Fund Templeton Growth Securities Fund 35. The Lincoln ChoicePlus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Momentum Income Account N Franklin Small-Mid Cap Growth Insurance Option November 3, 1997 Securities Fund Company Yes 811-08517 Templeton Global Income Securities 333-119165 Fund AN501 9/04 Templeton Growth Securities Fund 36. The Lincoln VUL(DB) IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-118477 Account M Securities Fund Company LN690 December 2, 1997 Templeton Global Income Securities 811-08557 Fund Templeton Growth Securities Fund 37. The Lincoln VUL(CV) IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-118478 Account M Securities Fund Company LN670 December 2, 1997 Templeton Global Income Securities 811-08557 Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME COMPANY 1933 ACT #, STATE REGISTRATION DATE # NAME FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - -------------------------------------------------------------------------------------------------------------------- 38. The Lincoln SVUL IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-115882 Account R Securities Fund Company LN656 December 2, 1997 Templeton Global Income Securities 811-08579 Fund Templeton Growth Securities Fund 39. The Lincoln VULONE2005 Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Franklin Small-Mid Cap Growth Insurance 333-111137 Account M Securities Fund Company LN694 December 2, 1997 Templeton Global Income Securities 811-08557 Fund Templeton Growth Securities Fund 40. The Lincoln Momentum Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VULONE2005 Variable Life Franklin Small-Mid Cap Growth Insurance Yes Account M Securities Fund Company 333-111128 December 2, 1997 Templeton Global Income Securities LN695 811-08557 Fund Templeton Growth Securities Fund 41. The Lincoln MultiFund 5 Lincoln National Variable CLASS 2 SHARES: National Life Yes Annuity Account C Templeton Global Income Securities Insurance 333-68842 June 3, 1981 Fund Company 30070-B 811-03214 42. The Lincoln Director(TM) Lincoln National Life CLASS 1 SHARES: National Life No Insurance Company Separate Templeton Global Income Securities Insurance N/A Account 86 Fund Company 19476 N/A
AMENDMENT NO. 5 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us") and The Lincoln National Life Insurance Company ("you"), have previously entered into a Participation Agreement dated May 1, 2000 (the "Agreement"). The parties now desire to amend the Agreement in this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Section 2.3.2 is amended and restated in its entirety as follows: "2.3.2 Each investment adviser (each, an "Adviser") of a Portfolio, as indicated in the current prospectus of the Portfolio, is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended or exempt from such registration." 2. Schedules B, C, D and F of the Agreement are hereby deleted in their entirety and replaced with the Schedules B, C, D and F attached hereto, respectively. 3. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. This Amendment is executed effective as of April 1, 2006. FRANKLIN TEMPLETON VARIABLE THE LINCOLN NATIONAL LIFE INSURANCE PRODUCTS TRUST INSURANCE COMPANY By: /s/ Karen L. Skidmore By: /s/ Rise C.M. Taylor ------------------------------------ ------------------------------- Name: Karen L. Skidmore Name: Rise C. M. Taylor Title: Assistant Vice President Title: Vice President FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /S/ Robert C. Hays ------------------------------------ Name: Robert C. Hays Title: Senior Vice President SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: Lincoln Life Flexible Premium Variable Life Account R Date Established: December 2, 1997 SEC Registration Number: 811-08579 2. Name: Lincoln Life Flexible Premium Variable Life Account M Date Established: December 2, 1997 SEC Registration Number: 811-08557 3. Name: Lincoln Life Flexible Premium Variable Life Account S Date Established: November 1, 1998 SEC Registration Number: 811-09241 4. Name: Lincoln Life Flexible Premium Variable Life Account Z Date Established: July 30, 2003 SEC Registration Number: Not Registered 5. Name: Lincoln Life Variable Annuity Account N Date Established: November 3, 1997 SEC Registration Number: 811-08517 6. Name: Lincoln National Life Insurance Company Separate Account 62 Date Established: July 1, 2001 SEC Registration Number: Not registered 7. Name: Lincoln National Life Insurance Company Separate Account 63 Date Established: July 1, 2001 SEC Registration Number: Not registered 8. Name: Lincoln National Variable Annuity Account C Date Established: June 3, 1981 SEC Registration Number: 811-03214 9. Name: Lincoln National Life Insurance Company Separate Account 86 Date Established: June 1, 2005 SEC Registration Number: Not registered 10. Name: Lincoln National Life Insurance Company Separate Account 4k Date Established: March 20, 2006 SEC Registration Number: Not registered SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST 1. Franklin Income Securities Fund, Class 2 2. Franklin Small Cap Value Securities Fund, Class 2 3. Franklin Small-Mid Cap Growth Securities Fund, Classes 1 and 2 4. Mutual Shares Securities Fund, Class 2 5. Templeton Foreign Securities Fund, Classes 1 and 2 6. Templeton Global Asset Allocation Fund, Classes 1 and 2 7. Templeton Global Income Securities Fund, Classes 1 and 2 8. Templeton Growth Securities Fund, Classes 1 and 2 SCHEDULE D CONTRACTS OF THE COMPANY
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 1. The Lincoln SVUL I Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Templeton Foreign Securities Fund Insurance Company 333-43107 December 2, 1997 Templeton Global Asset Allocation Fund LN650LL 811-08579 Templeton Growth Securities Fund 2. The Lincoln VUL I Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Templeton Foreign Securities Fund Insurance Company 333-42479 December 2, 1997 Templeton Global Asset Allocation Fund LN605LL 811-08557 Templeton Growth Securities Fund LN615 3. The Lincoln VUL(CV) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-42479 December 2, 1997 Fund LN660 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 4. The Lincoln CVUL Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Templeton Global Income Securities Fund Insurance Company 333-72875 November 1, 1998 LN920 811-09241 CLASS 2 SHARES: LN921 Franklin Small-Mid Cap Growth Securities Fund Templeton Foreign Securities Fund Templeton Global Asset Allocation Fund Templeton Growth Securities Fund 5. The Lincoln SVUL Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small-Mid Cap Growth Securities Insurance Company 333-43107 December 2, 1997 Fund LN650 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 6. The Lincoln VUL(DB) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-82663 December 2, 1997 Fund LN680 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 7. The Lincoln ChoicePlus Variable Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Annuity Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-40937 811-08517 Templeton Growth Securities Fund AN425LL Templeton Global Income Securities Fund 8. The Lincoln ChoicePlus Access Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-36316 811-08517 Templeton Growth Securities Fund 30296 Templeton Global Income Securities Fund 9. The Lincoln ChoicePlus Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Variable Annuity Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-36304 811-08517 Templeton Growth Securities Fund 30295 Templeton Global Income Securities Fund 10. The Lincoln MoneyGuard VUL Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-63940 December 2, 1997 Fund 811-08557 Templeton Growth Securities Fund 11. The Lincoln VUL(CV) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-54338 December 2, 1997 Fund LN665 811-08557 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 12. The Lincoln VUL(CV) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VUL Flex Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company (Elite Funds) December 2, 1997 Fund Yes 811-08557 Templeton Growth Securities Fund 333-54338 Templeton Global Income Securities Fund LN665 13. The Lincoln Choice Plus II Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Securities Insurance Company 333-40937 November 3, 1997 Fund 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund 14. The Lincoln ChoicePlus II Access Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Securities Insurance Company 333-36316 November 3, 1997 Fund 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 15. The Lincoln ChoicePlus II Bonus Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Securities Insurance Company 333-36304 November 3, 1997 Fund 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund 16. The Lincoln ChoicePlus II Advance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Yes Account N Franklin Small-Mid Cap Growth Securities Insurance Company 333-61554 November 3, 1997 Fund 30070-B 811-08517 Templeton Global Income Securities Fund Templeton Growth Securities Fund 17. The Lincoln SVUL II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small-Mid Cap Growth Securities Insurance Company 333-33782 December 2, 1997 Fund LN655 811-08579 CLASS 2 SHARES: Templeton Foreign Securities Fund Templeton Growth Securities Fund 18. The Lincoln Director (TM) Lincoln National Life Insurance CLASS 2 SHARES: National Life No Company Separate Account 62 Templeton Growth Securities Fund Insurance Company N/A N/A 19476 19. The Lincoln Director (TM) Lincoln National Life Insurance CLASS 2 SHARES: National Life No Company Separate Account 63 Franklin Small-Mid Cap Growth Securities Insurance Company N/A N/A Fund 19476 20. The Lincoln CVUL III (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Franklin Small-Mid Cap Growth Securities Insurance Company 333-72875 November 1, 1998 Fund LN925 811-09241 Templeton Global Income Securities Fund LN926 Templeton Growth Securities Fund 21. The Lincoln VUL(DB) (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-82633 December 2, 1997 Fund LN680 811-08557 Templeton Growth Securities Fund 22. The Lincoln SVUL II (Elite Funds) Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small-Mid Cap Growth Securities Insurance Company 333-33782 December 2, 1997 Fund LN655 811-08579 Templeton Global Income Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 23. The Lincoln SVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small-Mid Cap Growth Securities Insurance Company 333-90432 December 2, 1997 Fund LN656 811-08579 Templeton Growth Securities Fund 24. The Lincoln VUL(CV) III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-84370 December 2, 1997 Fund LN670 811-08557 Templeton Growth Securities Fund 25. The Lincoln VUL(DB) II Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-84360 December 2, 1997 Fund LN690 811-08557 Templeton Growth Securities Fund 26. The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (B Share) Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-40937 811-08517 Templeton Global Income Securities Fund 30070-B Templeton Growth Securities Fund 27. The Lincoln ChoicePlus Assurance C Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Share) Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-36316 811-08517 Templeton Global Income Securities Fund 30070-B Templeton Growth Securities Fund 28. The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (L Share) Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-61554 811-08517 Templeton Global Income Securities Fund 30070-B Templeton Growth Securities Fund 29. The Lincoln ChoicePlus Assurance Lincoln Life Variable Annuity CLASS 2 SHARES: National Life (Bonus) Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-36304 811-08517 Templeton Global Income Securities Fund 30070-B Templeton Growth Securities Fund 30. The Lincoln LCV4 Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Franklin Small-Mid Cap Growth Securities Insurance Company 333-104719 November 1, 1998 Fund LN935 811-09241 Templeton Global Income Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 31. The Lincoln CVUL III Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account S Templeton Global Income Securities Fund Insurance Company 333-72875 November 1, 1998 LN925 811-09241 CLASS 2 SHARES: LN926 Franklin Small-Mid Cap Growth Securities Fund Templeton Foreign Securities Fund Templeton Global Asset Allocation Fund Templeton Growth Securities Fund 32. The Lincoln Lincoln Corporate Lincoln Life Flexible Premium CLASS 2 SHARES: National Life Variable Private Variable Life Account Z Franklin Small-Mid Cap Growth Securities Insurance Company Solutions July 30, 2003 Fund No N/A Templeton Growth Securities Fund N/A LN930 33. The Lincoln Momentum Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VULONE Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company Yes December 2, 1997 Fund 333-111128 811-08557 Templeton Global Income Securities Fund Templeton Growth Securities Fund 34. The Lincoln VULONE Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-111137 December 2, 1997 Fund 811-08557 Templeton Global Income Securities Fund Templeton Growth Securities Fund 35. The Lincoln ChoicePlus Momentum Lincoln Life Variable Annuity CLASS 2 SHARES: National Life Income Option Account N Franklin Small-Mid Cap Growth Securities Insurance Company Yes November 3, 1997 Fund 333-119165 811-08517 Templeton Global Income Securities Fund AN501 9/04 Templeton Growth Securities Fund 36. The Lincoln VUL(DB) IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-118477 December 2, 1997 Fund LN690 811-08557 Templeton Global Income Securities Fund Templeton Growth Securities Fund 37. The Lincoln VUL(CV) IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-118478 December 2, 1997 Fund LN670 811-08557 Templeton Global Income Securities Fund Templeton Growth Securities Fund
PRODUCT NAME REGISTERED Y/N SEPARATE ACCOUNT NAME 1933 ACT #, REGISTRATION DATE # COMPANY NAME STATE FORM ID 1940 ACT # CLASSES OF SHARES AND PORTFOLIOS - ------------------------------------------------------------------------------------------------------------------------------- 38. The Lincoln SVUL IV Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account R Franklin Small-Mid Cap Growth Securities Insurance Company 333-115882 December 2, 1997 Fund LN656 811-08579 Templeton Global Income Securities Fund Templeton Growth Securities Fund 39. The Lincoln VULONE2005 Lincoln Life Flexible Premium CLASS 1 SHARES: National Life Yes Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company 333-111137 December 2, 1997 Fund LN694 811-08557 Templeton Global Income Securities Fund Templeton Growth Securities Fund 40. The Lincoln Momentum Lincoln Life Flexible Premium CLASS 1 SHARES: National Life VULONE2005 Variable Life Account M Franklin Small-Mid Cap Growth Securities Insurance Company Yes December 2, 1997 Fund 333-111128 811-08557 Templeton Global Income Securities Fund LN695 Templeton Growth Securities Fund 41. The Lincoln MultiFund 5 Lincoln National Variable Annuity CLASS 2 SHARES: National Life Yes Account C Templeton Global Income Securities Fund Insurance Company 333-68842 June 3, 1981 30070-B 811-03214 42. The Lincoln Director (TM) Lincoln National Life Insurance CLASS 1 SHARES: National Life No Company Separate Account 86 Templeton Global Income Securities Fund Insurance Company N/A N/A 19476 43. The Lincoln Lincoln American Lincoln National Life Insurance CLASS 2 SHARES: National Life Legacy Retirement Company Separate Account 4k Franklin Income Securities Fund Insurance Company Group Variable Annuity N/A Franklin Small Cap Value Securities Fund No Mutual Shares Securities Fund N/A Templeton Growth Securities Fund 19476
SCHEDULE F RULE 12b-1 PLANS OF THE TRUST COMPENSATION Each Class 2 Portfolio named on Schedule C of this Agreement is eligible to receive a maximum annual payment rate of 0.25% stated as a percentage per year of that Portfolio's Class 2 average daily net assets, pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan. AGREEMENT PROVISIONS If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") that are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio's Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. AMENDMENT NO. 6 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us"), and The Lincoln National Life Insurance Company ("you"), on your behalf and on behalf of certain Accounts, have previously entered into a Participation Agreement dated May 1, 2000 and amended July 15, 2001, August 1, 2002, May 1, 2003, May 2, 2005, and April 1, 2006 (the "Agreement"). The parties now desire to amend the Agreement in this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedules A, B, D and G of the Agreement are deleted and replaced in their entirety with the Schedules A, B, D and G attached hereto, respectively. 2. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties has caused its duly authorized officers to execute this Amendment effective as of June 1, 2006. FRANKLIN TEMPLETON VARIABLE THE LINCOLN NATIONAL LIFE INSURANCE PRODUCTS TRUST INSURANCE COMPANY By: /s/ Karen L. Skidmore By: /s/ Kelly D. Clevenger --------------------------------- --------------------------------- Name: Karen L. Skidmore Name: Kelly D. Clevenger Title: Vice President Title: Vice President FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Robert C. Hays --------------------------------- Name: Robert C. Hays Title: Senior Vice President SCHEDULE A THE COMPANY AND ITS DISTRIBUTOR THE COMPANY The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 An insurance company organized under the laws of the State of Indiana. THE DISTRIBUTOR The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 An insurance company organized under the laws of the State of Indiana. SCHEDULE B ACCOUNTS OF THE COMPANY
# NAME OF ACCOUNT SEC REGISTRATION YES/NO --------------- ----------------------- 1. Lincoln Life Flexible Premium Variable Life Account M Yes 2. Lincoln Life Flexible Premium Variable Life Account R Yes 3. Lincoln Life Flexible Premium Variable Life Account S Yes 4. Lincoln Life Flexible Premium Variable Life Account Z No 5. Lincoln Life Separate Account 4k No 6. Lincoln Life Variable Annuity Account N Yes 7. Lincoln National Life Insurance Company Separate Account 62 No 8. Lincoln National Life Insurance Company Separate Account 63 No 9. Lincoln National Life Insurance Company Separate Account 86 No 10. Lincoln National Variable Annuity Account C Yes
SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST 1. Franklin Income Securities Fund, Classes 1 and 2 2. Franklin Small Cap Value Securities Fund, Class 2 3. Franklin Small-Mid Cap Growth Securities Fund, Classes 1 and 2 4. Mutual Shares Securities Fund, Classes 1 and 2 5. Templeton Foreign Securities Fund, Classes 1 and 2 6. Templeton Global Asset Allocation Fund, Classes 1 and 2 7. Templeton Global Income Securities Fund, Classes 1 and 2 8. Templeton Growth Securities Fund, Classes 1 and 2 SCHEDULE D CONTRACTS OF THE COMPANY 1. MultiFund(R) 5 2. VUL I 3. ChoicePlus 4. VUL(DB) 5. ChoicePlus Access 6. VUL(DB) II 7. ChoicePlus Bonus 8. VUL(DB) IV 9. ChoicePlus II 10. VUL(CV) 11. ChoicePlus II Access 12. VUL(CV) II 13. ChoicePlus II Bonus 14. VUL(CV) III 15. ChoicePlus II Advance 16. VUL(CV) IV 17. ChoicePlus Assurance (B Share) 18. VUL Flex 19. ChoicePlus Assurance (C Share) 20. MoneyGuard VUL 21. ChoicePlus Assurance (L Share) 22. VULONE 23. ChoicePlus Assurance (Bonus) 24. VULONE 2005 25. ChoicePlus Momentum Income Plus 26. Momenutm VULONE 27. Director 28. Momentum VULONE 2005 29. Lincoln American Legacy Retirement GVA 30. SVUL 31. CVUL 32. SVUL I 33. CVUL III 34. SVUL II 35. LCV4 36. SVUL III 37. LCV5 38. SVUL IV 39. Lincoln Corporate Variable Private Solution 40. SVULONE 41. Momentum SVULONE SCHEDULE G ADDRESSES FOR NOTICES To the Company: The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attention: Kelly D. Clevenger, Vice President To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway, Bldg. 920 2nd Floor San Mateo, California 94403 Attention: Karen L. Skidmore, Vice President To the Underwriter: Franklin/Templeton Distributors, Inc. 140 Fountain Parkway, 8th Floor St. Petersburg, FL 33716 Attention: Peter Jones, President If to the Trust or Underwriter with a copy to: Franklin Templeton Investments One Franklin Parkway, Bldg. 920 2nd Floor San Mateo, California 94403 Attention: General Counsel AMENDMENT NO. 7 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us"), and The Lincoln National Life Insurance Company ("you"), on your behalf and on behalf of certain Accounts, have previously entered into a Participation Agreement dated May 1, 2000 and amended July 15, 2001, August 1, 2002, May 1, 2003, May 2, 2005, April 1, 2006 and June 1, 2006 (the "Agreement"). The parties now desire to amend the Agreement in this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule D of the Agreement is deleted and replaced in its entirety with the Schedule D attached hereto. 2. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties has caused its duly authorized officers to execute this Amendment effective as of October 1, 2006. FRANKLIN TEMPLETON VARIABLE THE LINCOLN NATIONAL LIFE INSURANCE PRODUCTS TRUST INSURANCE COMPANY By: /s/ Karen L. Skidmore By: /s/ Kelly D. Clevenger --------------------------------- ----------------------------- Name: Karen L. Skidmore Name: Kelly D. Clevenger Title: Vice President Title: Vice President FRANKLIN TEMPLETON DISTRIBUTORS, INC. By: /s/ Thomas Regner --------------------------------- Name: Thomas Regner Title: Senior Vice President SCHEDULE D CONTRACTS OF THE COMPANY 1. ChoicePlus 2. ChoicePlus Access 3. ChoicePlus Assurance (A Share) 4. ChoicePlus Assurance (B Share) 5. ChoicePlus Assurance (Bonus) 6. ChoicePlus Assurance (C Share) 7. ChoicePlus Assurance (L Share) 8. ChoicePlus Bonus 9. ChoicePlus Design 10. ChoicePlus II 11. ChoicePlus II Access 12. ChoicePlus II Advance 13. ChoicePlus II Bonus 14. ChoicePlus Momentum Income Plus 15. CVUL 16. CVUL III 17. CVUL III (Elite Funds) 18. Director 19. LCV4 20. LCV5 21. Lincoln American Legacy Retirement Group Variable Annuity 22. Lincoln Corporate Variable Private Solution 23. Momentum SVULONE 24. Momentum VULONE 2005 25. Momenutm VULONE 26. MoneyGuard VUL 27. MultiFund(R) 5 28. SVUL 29. SVUL I 30. SVUL II 31. SVUL II (Elite Funds) 32. SVUL III 33. SVUL IV 34. SVULONE 35. VUL I 36. VUL(CV) 37. VUL(CV) II 38. VUL(CV) II /VUL Flex (Elite Funds) 39. VUL(CV) III 40. VUL(CV) IV 41. VUL(DB) 42. VUL(DB) (Elite Funds) 43. VUL(DB) II 44. VUL(DB) IV 45. VULONE 46. VULONE 2005 AMENDMENT NO. 8 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us"), and The Lincoln National Life Insurance Company ("you"), on your behalf and on behalf of certain Accounts, have previously entered into a Participation Agreement dated May 1, 2000 and amended July 15, 2001, August 1, 2002, May 1, 2003, May 2, 2005, April 1, 2006, June 1, 2006 and October 1, 2006 (the "Agreement"). The parties now desire to amend the Agreement by this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. A M E N D M E N T For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Section 1 and Section 2.2.1 are hereby each amended to reflect that Franklin Templeton Variable Insurance Products Trust (the "Trust") is organized as a statutory trust under the laws of the State of Delaware. 2. Section 3.1.3 is amended and restated in its entirety as follows: "3.1.3 We agree that shares of the Trust will be sold only to: (i) life insurance companies which have entered into fund participation agreements with the Trust ("Participating Insurance Companies") and their separate accounts or to qualified pension and retirement plans in accordance with the terms of the Shared Funding Order; and (ii) investment companies in the form of funds of funds. No shares of any Portfolio will be sold to the general public." 3. Section 5.2 is amended and restated in its entirety as follows: "5.2 If and to the extent required by law, you shall: (i) solicit voting instructions from Contract owners; (ii) vote the Trust shares in accordance with the instructions received from Contract owners; and (iii) vote Trust shares owned by subaccounts for which no instructions have been received from Contract owners in the same proportion as Trust shares of such Portfolio for which instructions have been received from Contract owners; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. You reserve the right to vote Trust shares held in any Account in your own right, to the extent permitted by law." 4. Schedule C of the Agreement is deleted and replaced in its entirety with the Schedule C attached hereto. 5. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties has caused its duly authorized officers to execute this Amendment effective as of May 1, 2007. The Trust: FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ONLY ON BEHALF OF EACH PORTFOLIO LISTED ON SCHEDULE C OF THE AGREEMENT. By: /s/ Karen L. Skidmore ----------------------------------- Name: Karen L. Skidmore Title: Vice President The Underwriter: FRANKLIN/TEMPLETON DISTRIBUTORS, INC. By: /s/ Thomas Regner ----------------------------------- Name: Thomas Regner Title: Senior Vice President The Company: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ----------------------------------- Name: Kelly D. Clevenger Title: Vice President SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST 1. Franklin Income Securities Fund, Classes 1 and 2 2. Franklin U.S. Government Fund, Class 1 3. Franklin Small Cap Value Securities Fund, Class 2 4. Franklin Small-Mid Cap Growth Securities Fund, Classes 1 and 2 5. Mutual Shares Securities Fund, Classes 1 and 2 6. Templeton Foreign Securities Fund, Classes 1 and 2 7. Templeton Global Asset Allocation Fund, Class 1 8. Templeton Global Income Securities Fund, Classes 1 and 2 9. Templeton Growth Securities Fund, Classes 1 and 2 AMENDED AND RESTATED AMENDMENT NO. 8 TO PARTICIPATION AGREEMENT Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. The Lincoln National Life Insurance Company Lincoln Financial Distributors, Inc. Franklin Templeton Variable Insurance Products Trust (the "Trust"), Franklin/Templeton Distributors, Inc. (the "Underwriter," and together with the Trust, "we" or "us"), and The Lincoln National Life Insurance Company ("you"), on your behalf and on behalf of certain Accounts, have previously entered into a Participation Agreement dated May 1, 2000 and amended July 15, 2001, August 1, 2002, May 1, 2003, May 2, 2005, April 1, 2006, June 1, 2006 and October 1, 2006 (the "Agreement"). The parties now desire to amend the Agreement by this amendment (the "Amendment"). Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment. A M E N D M E N T For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Lincoln Financial Distributors, Inc. is hereby added as a party to this Agreement (the "Distributor"). 2. Section 1 and Section 2.2.1 are hereby each amended to reflect that Franklin Templeton Variable Insurance Products Trust (the "Trust") is organized as a statutory trust under the laws of the State of Delaware. 3. Section 3.1.3 is amended and restated in its entirety as follows: "3.1.3 We agree that shares of the Trust will be sold only to: (i) life insurance companies which have entered into fund participation agreements with the Trust ("Participating Insurance Companies") and their separate accounts or to qualified pension and retirement plans in accordance with the terms of the Shared Funding Order; and (ii) investment companies in the form of funds of funds. No shares of any Portfolio will be sold to the general public." 4. Section 5.2 is amended and restated in its entirety as follows: "5.2 If and to the extent required by law, you shall: (i) solicit voting instructions from Contract owners; (ii) vote the Trust shares in accordance with the instructions received from Contract owners; and (iii) vote Trust shares owned by subaccounts for which no instructions have been received from Contract owners in the same proportion as Trust shares of such Portfolio for which instructions have been received from Contract owners; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. You reserve the right to vote Trust shares held in any Account in your own right, to the extent permitted by law." 5. Schedule C of the Agreement is deleted and replaced in its entirety with the Schedule C attached hereto. 6. All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties has caused its duly authorized officers to execute this Amendment effective as of May 1, 2007. The Trust: FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ONLY ON BEHALF OF EACH PORTFOLIO LISTED ON SCHEDULE C OF THE AGREEMENT. By: /s/ Karen L. Skidmore ------------------------------------ Name: Karen L. Skidmore Title: Vice President The Underwriter: FRANKLIN/TEMPLETON DISTRIBUTORS, INC. By: /s/ Thomas Regner ------------------------------------ Name: Thomas Regner Title: Senior Vice President The Company: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ------------------------------------ Name: Kelly D. Clevenger Title: Vice President The Distributor: LINCOLN FINANCIAL DISTRIBUTORS, INC. By: /s/ James J. Ryan ------------------------------------ Name: James Ryan Title: Vice President SCHEDULE A THE COMPANY AND ITS DISTRIBUTOR THE COMPANY The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 An insurance company organized under the laws of the State of Indiana. THE DISTRIBUTOR Lincoln Financial Distributors, Inc. 2001 Market Street, 4th Floor Philadelphia, PA 19103 An insurance company organized under the laws of the State of Connecticut. SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST 1. Franklin Income Securities Fund, Classes 1 and 2 2. Franklin U.S. Government Fund, Class 1 3. Franklin Small Cap Value Securities Fund, Class 2 4. Franklin Small-Mid Cap Growth Securities Fund, Classes 1 and 2 5. Mutual Shares Securities Fund, Classes 1 and 2 6. Templeton Foreign Securities Fund, Classes 1 and 2 7. Templeton Global Asset Allocation Fund, Class 1 8. Templeton Global Income Securities Fund, Classes 1 and 2 9. Templeton Growth Securities Fund, Classes 1 and 2 SCHEDULE D CONTRACTS OF THE COMPANY 1. MultiFund(R) 5 2. VUL I 3. ChoicePlus 4. VUL(DB) 5. ChoicePlus Access 6. VUL(DB) II 7. ChoicePlus Bonus 8. VUL(DB) IV 9. ChoicePlus II 10. VUL(CV) 11. ChoicePlus II Access 12. VUL(CV) II 13. ChoicePlus II Bonus 14. VUL(CV) III 15. ChoicePlus II Advance 16. VUL(CV) IV 17. ChoicePlus Assurance (B Share) 18. VUL Flex 19. ChoicePlus Assurance (C Share) 20. MoneyGuard VUL 21. ChoicePlus Assurance (L Share) 22. VULONE 23. ChoicePlus Assurance (Bonus) 24. VULONE 2005 25. ChoicePlus Momentum Income Plus 26. Momenutm VULONE 27. Director 28. Momentum VULONE 2005 29. Lincoln American Legacy Retirement GVA 30. SVUL 31. CVUL 32. SVUL I 33. CVUL III 34. SVUL II 35. LCV4 36. SVUL III 37. LCV5 38. SVUL IV 39. Lincoln Corporate Variable Private Solution 40. SVULONE Lincoln ChoicePlus Assurance (A Share) 41. Momentum SVULONE
SCHEDULE G ADDRESSES FOR NOTICES To the Company: The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attention: Kelly D. Clevenger, Vice President To the Distributor: Lincoln Financial Distributors, Inc. 2001 Market Street, 4th Floor Philadelphia, PA 19103 Attention: Jim Ryan, Vice President To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway, Bldg. 920 2nd Floor San Mateo, California 94403 Attention: Karen L. Skidmore, Vice President To the Underwriter: Franklin/Templeton Distributors, Inc. 140 Fountain Parkway, 8th Floor St. Petersburg, FL 33716 Attention: Peter Jones, President If to the Trust or Underwriter with a copy to: Franklin Templeton Investments One Franklin Parkway, Bldg. 920 2nd Floor San Mateo, California 94403 Attention: General Counsel
EX-99 15 a2182660zex-99_1.txt 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: /s/ Bonnie Howe Name: Bonnie Howe Title: Assistant Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President -15- 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: /s/ Steven M. Kluever ---------------------------- Name: Steven M. Kluever Title: Second Vice President JANUS ASPEN SERIES By: /s/ Bonnie M. Howe ---------------------------- 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) 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 July 15, 2001. 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: /s/ Steven M. Kluever -------------------------------- Name: Steven M. Kluever Title: Second Vice President JANUS ASPEN SERIES By: /s/ Bonnie M. Howe -------------------------------- Name: Bonnie M. Howe Title: Vice President SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND THE DATE ESTABLISHED BY BOARD OF DIRECTORS CONTRACTS FUNDED 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 Variable Annuity Company Separate Account 34 Lincoln National Life Insurance (Service Shares only) Company Separate Account 64 Lincoln National Life Insurance (Service Shares only) Company Separate Account 70 Lincoln Life Flexible Premium Lincoln VUL Variable Life Account M Lincoln VUL(DB) Lincoln VUL(CV) (Service Shares only) Lincoln VUL(CV2) (Service Shares only) Money Guard (Service Shares only) Lincoln Life Flexible Premium Lincoln SVUL Variable Life Separate Account R Lincoln SVUL II Lincoln Life Flexible Premium Lincoln CVUL Variable Life Account S Lincoln CVUL Series III Lincoln National Variable Annuity Multi Fund Individual Account 53 Variable Annuity (non-registered) Lincoln Life Variable Annuity Lincoln ChoicePlus II (Service Shares only) Account N Lincoln ChoicePlus II Access (Service Shares only) Lincoln ChoicePlus II Bonus (Service Shares only) Lincoln ChoicePlus II Advance (Service Shares only)
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 __________, 2002. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Article I Sale of Trust Shares is amended by adding the following language to the end of Section 1.7: If the Trust provides the Company with materially incorrect share net asset value, dividend or capital gain information, the Trust shall make an adjustment to the number of shares purchased or redeemed for the Accounts to reflect the correct net asset value per share or correct dividends and capital gains received. Any material error in the calculation or reporting of net asset value per share, dividend or capital gains information shall be reported promptly upon discovery to the Company. 1. Article VII Notices shall be replaced as follows: If to the Company: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 S. Clinton Street Fort Wayne, IN 46802 Attn: Steven M. Kluever 2. Schedule A of this Agreement shall be deleted and replaced with the attached Schedule A. 4. 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: Vice President SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND THE DATE ESTABLISHED BY BOARD OF DIRECTORS CONTRACTS FUNDED BY SEPARATE ACCOUNT - -------------------------------------- ------------------------------------ Lincoln National Variable Multi-Fund(R) Individual Variable Annuity Annuity Account C eAnnuity Variable Annuity (Established June 3, 1981) Multi-Fund(R) 5 Individual Variable Annuity Lincoln National Variable Group Variable Annuity I, II, & III Annuity Account L (Established April 19, 1996) Lincoln Life Variable Annuity Account Q Multi-Fund(R)Group Variable Annuity (Established November 3, 1997) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 34 (Institutional Shares only) (Established August 27, 1999) Lincoln National Life Insurance Director Group Variable Annuity (Service Shares only) Company Separate Account 64 (Established August 20, 2001) Lincoln National Life Insurance Director Group Variable Annuity (Service Shares only) Company Separate Account 70 (Established August 20, 2001) Lincoln Life Flexible Premium Lincoln VUL Variable Life Separate Account M Lincoln VUL(DB) (Established December 2, 1997) Lincoln VUL(DB) II Lincoln VUL(CV) Lincoln VUL(CV)-II Lincoln VUL(CV)-III MoneyGuard(R) VUL (Service Shares only) Lincoln Life Flexible Premium Lincoln SVUL Variable Life Separate Account R Lincoln SVUL II (Established December 2, 1997) Lincoln SVUL III Lincoln Life Flexible Premium Lincoln CVUL Variable Life Separate Account S Lincoln CVUL Series III (Service Shares only) Lincoln Life Variable Annuity Lincoln ChoicePlus II (Service Shares only) Account N Lincoln ChoicePlus II Access (Service Shares only) (Established November 3, 1997) Lincoln ChoicePlus II Bonus (Service Shares only) Lincoln ChoicePlus II Advance (Service Shares only)
FORM OF 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, 2003. 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: Rise C. M. Taylor Title: Vice President JANUS ASPEN SERIES By: -------------------------------- Name: Title: SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND THE DATE ESTABLISHED BY BOARD OF DIRECTORS CONTRACTS FUNDED BY SEPARATE ACCOUNT - -------------------------------------- ------------------------------------ Lincoln National Variable Multi-Fund(R) Individual Variable Annuity (Institutional) Annuity Account C eAnnuity Variable Annuity (Institutional) (Established June 3, 1981) Multi-Fund(R) 5 Individual Variable Annuity (Institutional) Lincoln National Variable Group Variable Annuity I, II, & III Annuity Account L (Institutional Shares only) (Established April 19, 1996) Lincoln Life Variable Annuity Account Q Multi-Fund(R) Group Variable Annuity (Established November 3, 1997) (Institutional Shares only) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 34 (Institutional Shares only) (Established August 27, 1999) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 64 (Service Shares only) (Established August 20, 2001) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 70 (Service Shares only) (Established August 20, 2001) Lincoln Life Flexible Premium Lincoln VUL(DB) (both Shares) Variable Life Separate Account M Lincoln Elite VUL(DB) (Service Shares only) (Established December 2, 1997) Lincoln VUL(DB)-II (Service Shares only) Lincoln VUL(CV) (both Shares) Lincoln VUL(CV) -II (both Shares) Lincoln Elite VUL(CV) -II (Service Shares only) Lincoln VUL(CV) -III (Service Shares only) Money Guard(R) VUL (Service Shares only) Lincoln Life Flexible Premium Lincoln SVUL (both Shares) Variable Life Separate Account R Lincoln Elite SVUL (Service Shares only) (Established December 2, 1997) Lincoln SVUL II (both Shares) Lincoln Elite SVUL II (Service Shares only) Lincoln SVUL III (Service Shares only) Lincoln Life Flexible Premium Lincoln CVUL (both share classes) Variable Life Separate Account S Lincoln CVUL Series III (both share classes) Lincoln Elite CVUL Series III (Service Shares only) Lincoln Corporate Variable 4 (Service Shares only)
Lincoln Life Variable Annuity Lincoln ChoicePlus II (Service Shares only) Account N Lincoln ChoicePlus II Access (Service Shares only) (Established November 3, 1997) Lincoln ChoicePlus II Bonus (Service Shares only) Lincoln ChoicePlus II Advance (Service Shares only) Lincoln ChoicePlus (Service Shares only) Lincoln ChoicePlus Assurance (B Share) (Service Shares only) Lincoln ChoicePlus Assurance (C Share) (Service Shares only) Lincoln ChoicePlus Assurance (L Share) (Service Shares only) Lincoln ChoicePlus Assurance (Bonus) (Service Shares only)
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, 2004. 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: /s/ Risee C. M. Taylor -------------------------- Name: Rise C. M. Taylor Title: Vice President JANUS ASPEN SERIES By: /s/ Bonnie Howe ------------------- Name: Bonnie M. Howe Title: Vice President SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND THE DATE ESTABLISHED BY BOARD OF DIRECTORS CONTRACTS FUNDED BY SEPARATE ACCOUNT - --------------------------------------- ------------------------------------------------------------- Lincoln National Variable Multi-Fund(R) Individual Variable Annuity (Institutional) Annuity Account C eAnnuity Variable Annuity (Institutional) (Established June 3, 1981) Multi-Fund(R) 5 Individual Variable Annuity (Institutional) Lincoln National Variable Group Variable Annuity I, II, & III Annuity Account L (Institutional Shares only) (Established April 19, 1996) Lincoln Life Variable Annuity Account Q Multi-Fund(R) Group Variable Annuity (Established November 3, 1997) (Institutional Shares only) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 34 (Institutional Shares only) (Established August 27, 1999) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 64 (Service Shares only) (Established August 20, 2001) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 70 (Service Shares only) (Established August 20, 2001) Lincoln Life Flexible Premium Lincoln VUL(DB) (both Shares) Variable Life Separate Account M Lincoln Elite VUL(DB) (Service Shares only) (Established December 2, 1997) Lincoln VUL(DB) II (Service Shares only) Lincoln VUL(DB) IV (Service Shares only) Lincoln VUL(CV) (both Shares) Lincoln VUL(CV) II (both Shares) Lincoln Elite VUL(CV) II (Service Shares only) Lincoln VUL(CV) III (Service Shares only) Lincoln VUL(CV) IV (Service Shares only) Money Guard(R) VUL (Service Shares only) Lincoln VUL(ONE) (Service Shares only) Lincoln Momentum VUL(ONE) (Service Shares only) Lincoln Life Flexible Premium Lincoln SVUL (both Shares) Variable Life Separate Account R Lincoln Elite SVUL (Service Shares only) (Established December 2, 1997) Lincoln SVUL II (both Shares) Lincoln Elite SVUL II (Service Shares only) Lincoln SVUL III (Service Shares only) Lincoln SVUL IV (Service Shares only) Lincoln Life Flexible Premium Lincoln CVUL (both share classes) Variable Life Separate Account S Lincoln CVUL Series III (both share classes) Lincoln Elite CVUL Series III (Service Shares only) Lincoln Corporate Variable 4 (Service Shares only) Lincoln Life Variable Annuity Lincoln ChoicePlus II (Service Shares only) Account N Lincoln ChoicePlus II Access (Service Shares only) (Established November 3, 1997) Lincoln ChoicePlus II Bonus (Service Shares only) Lincoln ChoicePlus II Advance (Service Shares only) Lincoln ChoicePlus (Service Shares only) Lincoln ChoicePlus Assurance (B Share) (Service Shares only) Lincoln ChoicePlus Assurance (C Share) (Service Shares only) Lincoln ChoicePlus Assurance (L Share) (Service Shares only) Lincoln ChoicePlus Assurance (Bonus) (Service Shares only) Lincoln ChoicePlus Momentum Income Option (Service Shares only)
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, 2006. 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: /s/ Kelly D. Clevenger ----------------------- Name: Kelly D. Clevenger Title: Vice President JANUS ASPEN SERIES By: /s/ Kelley Abbott Howes ------------------------ Name: Kelley Abbott Howes Title: President and CEO SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND THE DATE ESTABLISHED BY BOARD OF DIRECTORS CONTRACTS FUNDED BY SEPARATE ACCOUNT - -------------------------------------- ------------------------------------ Lincoln National Variable Multi-Fund(R) Individual Variable Annuity* (Institutional) Annuity Account C eAnnuity Variable Annuity (Institutional) (Established June 3, 1981) Multi-Fund(R) 5 Individual Variable Annuity (Institutional) Lincoln National Variable Group Variable Annuity I, II, & III Annuity Account L (Institutional Shares only) (Established April 19, 1996) Lincoln Life Variable Annuity Account Q Multi-Fund(R) Group Variable Annuity* (Established November 3, 1997) (Institutional Shares only) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 34 (Institutional Shares only) (Established August 27, 1999) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 64 (Service Shares only) (Established August 20, 2001) Lincoln National Life Insurance Director Group Variable Annuity Company Separate Account 70 (Service Shares only) (Established August 20, 2001) Lincoln Life Flexible Premium Lincoln VUL(DB) (both Shares) Variable Life Separate Account M Lincoln Elite VUL(DB) (Service Shares only) (Established December 2, 1997) Lincoln VUL(DB) II (Service Shares only) Lincoln VUL(DB) IV (Service Shares only) Lincoln VUL(CV) (both Shares) Lincoln VUL(CV) II (both Shares) Lincoln Elite VUL(CV) II (Service Shares only) Lincoln VUL(CV) III (Service Shares only) Lincoln VUL(CV) IV (Service Shares only) Money Guard(R) VUL (Service Shares only) Lincoln VUL(ONE) (Service Shares only) Lincoln Momentum VUL(ONE) (Service Shares only) Lincoln Life Flexible Premium Lincoln SVUL (both Shares) Variable Life Separate Account R Lincoln Elite SVUL (Service Shares only) (Established December 2, 1997) Lincoln SVUL II (both Shares) Lincoln Elite SVUL II (Service Shares only) Lincoln SVUL III (Service Shares only) Lincoln SVUL IV (Service Shares only) Lincoln Life Flexible Premium Lincoln CVUL (both share classes) Variable Life Separate Account S Lincoln CVUL Series III (both share classes) Lincoln Elite CVUL Series III (Service Shares only) Lincoln Corporate Variable 4 (Service Shares only) Lincoln Corporate Variable 5 (Service Shares only)
Lincoln Life Variable Annuity Lincoln ChoicePlus II (Service Shares only) Account N Lincoln ChoicePlus II Access (Service Shares only) (Established November 3, 1997) Lincoln ChoicePlus II Bonus (Service Shares only) Lincoln ChoicePlus II Advance (Service Shares only) Lincoln ChoicePlus (Service Shares only) Lincoln ChoicePlus Assurance (B Share) (Service Shares only) Lincoln ChoicePlus Assurance (C Share) (Service Shares only) Lincoln ChoicePlus Assurance (L Share) (Service Shares only) Lincoln ChoicePlus Assurance (Bonus) (Service Shares only) Lincoln ChoicePlus Momentum Income Option (Service Shares only) Lincoln Life Flexible Premium Variable Lincoln Corporate Variable Private Solution (Service Shares only) Life Account Z (Established July 30, 2003)
* No Janus funds will be available in this product after on or about June 9, 2006.
EX-99 16 a2182650zex-99_1.txt "FORM OF" FUND PARTICIPATION AGREEMENT BETWEEN THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AND LINCOLN VARIABLE INSURANCE PRODUCTS TRUST THIS AGREEMENT, made and entered into this ____ day of March, 2003, by and between LINCOLN VARIABLE INSURANCE PRODUCTS TRUST, an open-end management investment company organized as a Delaware business trust (the "Trust"), and THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana insurance corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule 1 to this Agreement as in effect at the time this Agreement is executed and such other separate accounts that may be added to Schedule 1 from time to time in accordance with the provisions of Article XI of this Agreement (each such account referred to as the "Account"; collectively, the "Accounts"). WHEREAS, the Trust 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 Trust ("Participating Insurance Companies"); and WHEREAS, the Trust filed with the Securities and Exchange Commission (the "SEC") and the SEC has declared effective a registration statement (referred to herein as the "Trust Registration Statement" and the prospectus contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as the "Trust Prospectus") on Form N-lA to register itself as an open-end management investment company (File No. 811-08090) under the Investment Company Act of 1940, as amended (the "1940 Act"), and the Trust shares (File No. 33-70742) under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the beneficial interest in the Trust is divided into several series of shares, each designated a "Fund," which are set forth in Schedule 2, and representing the interest in a particular managed portfolio of securities and other assets; and WHEREAS, the Company has filed or will file 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 (such policies and contracts shall be referred to herein collectively as the "Contracts"); 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 Trust 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 Trust agree as follows: ARTICLE I. SALE OF TRUST SHARES 1.1. The Trust 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 Trust 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 Trust shall use its best efforts to calculate and deliver such net asset value by 7:00 p.m., New York time., on each such Business Day. Notwithstanding any other provision in this Agreement to the contrary, the Board of Directors of the Trust (the "Trust 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 Trust 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 Trust agrees to redeem, at the Company's request, any full or fractional shares of the Trust held by the 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 Trust 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 Trust Prospectus. Notwithstanding the foregoing, the Trust may delay redemption of Trust shares to the extent permitted by the 1940 Act, any rules, regulations or orders thereunder, or the then currently effective Trust Prospectus. 1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall be the agent of the Trust 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 Trust prior to the time prescribed in the current Trust Prospectus (which as of the date of execution of this Agreement is 4 p.m., New York time) shall constitute receipt by the Trust on that same Business Day, provided that the Trust receives notice of such redemption or purchase request by 9:00 a.m., New York time on the next following Business Day. For purposes of this Agreement, "Business Day" shall mean any day on which the New York Stock exchange is open for trading. (b) The Company shall pay for the shares on the same day that it places an order with the Trust to purchase those Trust shares for an Account. Payment for Trust shares will be made by the Account or the Company in Federal Funds transmitted to the Trust by wire to be received by 11:00 a.m., New York time on the day the Trust is properly notified of the purchase order for shares. The Trust will confirm receipt of each trade and these confirmations will be received by the Company via Fax or Email by 3:00 p.m. New York time If Federal Funds are not received on time, such funds will be invested, and shares purchased thereby will be issued, as soon as practicable. (c) Payment for shares redeemed by the Account or the Company will be made in Federal Trusts transmitted to the Company by wire on the same day the Trust is notified of the redemption order of shares, except that the Trust 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 Trust 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 Trust shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Trust shares will be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. 1.6. The Trust 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 Trust. 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 use its best efforts to make the net asset value per share available to the Company by 7:00 p.m., New York Time each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share is calculated, and shall calculate such net asset value in accordance with the then currently effective Trust Prospectus. The Trust will notify Company when and if Trust does not communicate the net asset value per share by 7:00 p.m. New York time. 1.8 If the Trust provides the Company with materially incorrect share net asset value information through no fault of the Company, the 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 to the Company. The Trust 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 Trust. In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the Company for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make Contract owners whole and reasonable administrative costs necessary to correct the error. 1.9. The Company may withdraw the Account's investment in the Trust only: (i) as necessary to facilitate Contract owner requests; (ii) upon a determination by a majority of the Trust Board, or a majority of disinterested Trust 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 Trust; (iii) upon requisite vote of the Contractowners having an interest in the Trust 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. 1.10. The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive and that the Trust shares may be sold to other insurance companies (subject to Section 1.12 hereof) and the cash value of the Contracts may be invested in other investment companies. 1.11. The Company shall not, without prior notice to the Trust (unless otherwise required by applicable law), take any action to operate the Accounts as management investment companies under the 1940 Act. 1.12. The Trust agrees that Trust shares will be sold only to Participating Insurance Companies and their separate accounts. The Trust will not sell Trust 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 Trust 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 Trust represents and warrants that Trust 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 Trust is and shall remain registered under the 1940 Act for so long as the Trust shares are sold. The Trust further represents and warrants that it is a corporation duly organized and in good standing under the laws of Delaware. 2.3. The Trust 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 Trust 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 Trust 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 Trust 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 Trust represents that the Trust'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 Trust, 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 Trust of any investment restrictions imposed by state insurance law and applicable to the Trust. 2.7. The Trust represents and warrants that it has and maintains a fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Trust 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 Trust shall provide the Company with as many copies of the current Trust Prospectus as the Company may reasonably request. If requested by the Company in lieu thereof, the Trust at its expense shall provide to the Company a camera-ready copy, and electronic version, of the current Trust 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 Trust Prospectus in one document. See Article V for a detailed explanation of the responsibility for the cost of printing and distributing Trust prospectuses. 3.2. The Trust Prospectus shall state that the Statement of Additional Information for the Trust is available from the Trust and the Trust 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 Trust at its expense shall provide to the Company a camera-ready copy of the Trust'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 Trust shall be responsible for the costs of printing and distributing these materials to Contract owners. (b) The Trust 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 Trust for this purpose. 3.4. The Company shall furnish to the Trust, prior to its use, each piece of sales literature or other promotional material in which the Trust is named. No such material shall be used, except with the prior written permission of the Trust. The Trust agrees to respond to any request for approval on a prompt and timely basis. Failure of the Trust 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 Trust. 3.5. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust other than the information or representations contained in the Trust Registration Statement or Trust Prospectus, as such Registration Statement and Prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust, except with the prior written permission of the Trust. The Trust agrees to respond to any request for permission on a prompt and timely basis. If the Trust 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 Trust. 3.6. The Trust 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 Trust, then the Trust is relieved of the obligation to obtain the prior written permission of the Company. 3.7. The Trust will provide to the Company at least one complete copy of all Trust Registration Statements, Trust 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 Trust or Trust 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 Trust 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 Trust shall solicit voting instructions from Contract owners; 4.2 Subject to applicable law and the requirements of Article VII, the Company shall: (a) vote Trust shares attributable to Contract owners in accordance with instructions or proxies received in timely fashion from such Contract owners; (b) vote Trust shares attributable to Contract owners for which no instructions have been received in the same proportion as Trust shares of such Series for which instructions have been received in timely fashion; and (c) vote Trust 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 Trust 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 Trust under this Agreement (including expenses expressly assumed by the Trust pursuant to this Agreement) shall be paid by the Trust 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 Trust shares under Federal and any state securities law, preparation and filing of the Trust Prospectus and Trust 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 Trust shares, and any expenses permitted to be paid or assumed by the Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The Trust is responsible for the cost of printing and distributing Trust Prospectuses and SAIs to existing Contractowners. (If for this purpose the Company decided to print the Trust Prospectuses and SAIs in a booklet or separate booklets containing disclosure for the Contracts and for underlying funds other than those of the Trust, then the Trust 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 Trust 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 Trust undertakes to comply with Subchapter M and Section 817(h) of the Code, and all regulations issued thereunder. 6.2. The Company shall amend the Contracts Registration Statements under the 1933 Act and the Account's Registration Statement under the 1940 Act from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale to the extent required by applicable securities laws of the various states. 6.3. The Trust shall amend the Trust Registration Statement under the 1933 Act and the 1940 Act from time to time as required in order to effect for so long as Trust shares are sold the continuous offering of Trust shares as described in the then currently effective Trust Prospectus. The Trust shall register and qualify Trust 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 Trust undertakes to have a Trust Board of Directors, a majority of whom are not interested persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 6.6. (a) When appropriate in order to inform the Trust of any applicable state-mandated investment restrictions with which the Trust must comply, the Company shall arrange with the Trust to amend Schedule 3, pursuant to the requirements of Article XI. (b) Should the Trust become aware of any restrictions which may be appropriate for inclusion in Schedule 3, the Company shall be informed immediately of the substance of those restrictions. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Company agrees to report to the Board of Directors of the Trust (the "Board") any potential or existing conflicts between the interests of Product Owners of all separate accounts investing in the Trust, and to assist the Board in carrying out its responsibilities under Section 6e-3(T) of the 1940 Act, by providing all information reasonably necessary for the Board to consider any issues raised, including information as to a decision to disregard voting instructions of variable contract owners. 7.2. If a majority of the Board, or a majority of disinterested Board Members, determines that a material irreconcilable conflict exists, the Board shall give prompt notice to all Participating Insurance Companies. (a) If a majority of the whole Board, after notice to the Company and a reasonable opportunity for the Company to appear before it and present its case, determines that the Company is responsible for said conflict, and if the Company agrees with that determination, the Company shall, at its sole cost and expense, take whatever steps are necessary to remedy the material irreconcilable conflict. These steps could include: (i) withdrawing the assets allocable to some or all of the affected Accounts from the Trust 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 Trust and to seek reimbursement from the Trust 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 Trust, 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 Trust or another was responsible for the conflict, then the Board shall notify the Company immediately of that determination. The Trust shall assure the Company that it (the Trust) 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 Trust, if the Trust 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 Trust 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 Trust and each person who controls or is associated with the Trust (other than another Participating Insurance Company) within the meaning of such terms under the federal securities laws and any officer, trustee, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid with the prior written consent of the Company in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission or such alleged statement or alleged omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Trust (or a person authorized in writing to do so on behalf of the Trust) 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 Trust 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 Trust Registration Statement, Trust Prospectus or sales literature or other promotional material of the Trust 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 Trust shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Trust Registration Statement, Trust Prospectus or sales literature or other promotional material of the Trust or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the 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 Trust 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 Trust 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 Trust with inaccurate information, which causes the Trust 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 TRUST. The Trust 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 Trust 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 Trust Registration Statement, Trust Prospectus (or any amendment or supplement thereto) or sales literature or other promotional material of the Trust, 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 Trust for use in the Trust Registration Statement, Trust Prospectus (or any amendment or supplement thereto) or sales literature for the Trust or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by the Trust (other than statements or representations contained in the Trust Registration Statement, Trust Prospectus or sales literature or other promotional material of the Trust not supplied by the Distributor or the Trust or persons under their control) or wrongful conduct of the Trust or persons under its control with respect to the sale or distribution of the Contracts or Trust 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 Trust to the Company (or a person authorized in writing to do so on behalf of the Trust); or (d) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement (including, but not by way of limitation, a failure, whether unintentional or in good faith or otherwise: (i) to comply with the diversification requirements specified in Sections 2.4 and 6.1 in Article VI of this Agreement; and (ii) to provide the Company with accurate information sufficient for it to calculate its accumulation and/or annuity unit values in timely fashion as required by law and by the Contracts Prospectuses); or (e) arise out of any material breach by the Trust of this Agreement. This indemnification will be in addition to any liability which the Trust 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 A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VIII shall survive any termination of this Agreement. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Indiana, without giving effect to the principles of conflicts of law. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon 120 days advance written notice to the other parties; or (b) at the option of the Company if shares of the Trust 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 Trust 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 Trust shares; (d) at the option of the Company upon institution of formal proceedings against the Trust, 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 Trust (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 Trust in accordance with the terms of the Contracts; or (f) at the option of the Trust 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 Trust upon a determination by a majority of the Trust Board, or a majority of disinterested Trust 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 Trust; or (h) at the option of the Company if the Trust 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 Trust may fail to so qualify; or (i) at the option of the Company if the Trust 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 Trust if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Trust reasonably believes that the Contracts may fail to so qualify; or (k) at the option of the Trust if the Trust 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 Trust; or (l) at the option of the Company, if the Company shall determine, in its sole judgment exercised in good faith, that: (1) the Trust shall have suffered a material adverse change in its business or financial condition; or (2) the Trust 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 Trust, as the case may be. 10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no termination of this Agreement shall be effective unless and until the party terminating this Agreement gives prior written notice to the other party of its intent to terminate, which notice shall set forth the basis for such termination. Furthermore: (a) In the event that any termination is based upon the provisions of Article VII or the provisions of Section 10.1(a) of this Agreement, such prior written notice shall be given in advance of the effective date of termination as required by such provisions; and (b) in the event that any termination is based upon the provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice shall be given at least ninety (90) days before the effective date of termination, or sooner if required by law or regulation. 10.3. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, the Trust will, at the option of the Company, continue to make available additional Trust 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 Trust 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 Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. (b) If Trust 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 Trust 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 Trust, 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 Trust. 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 Trust: Lincoln Variable Insurance Products Trust 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Secretary If to the Company: The Lincoln National Life Insurance Company. 1300 South Clinton Street Fort Wayne, Indiana 46802 Attn: Rise C. M. Taylor 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 Fund Participation Agreement, as of its effective date, hereby supersedes any and all prior agreements to purchase shares between Company and the Trust. 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 VARIABLE INSURANCE PRODUCTS TRUST (Trust) Signature:__________________________________ Name:_______________________________________ Title:______________________________________ THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Company) Signature:__________________________________ Name:_______________________________________ Title:______________________________________ Schedule 1 ---------- Lincoln Variable Insurance Products Trust Separate Accounts of Lincoln National Life Insurance Company Investing in the Trust Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account D Lincoln Life Flexible Premium Variable Life Account G Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Separate Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account W Lincoln National Life Insurance Company Separate Account 33 Lincoln National Variable Annuity Account 53 Schedule 2 ---------- Funds ----- Aggressive Growth Fund Bond Fund Capital Appreciation Fund Equity-Income Fund Global Asset Allocation Fund Growth and Income Fund International Fund Managed Fund Money Market Fund Social Awareness Fund Special Opportunities Fund Schedule 3 ---------- Lincoln Variable Insurance Products Trust State-mandated Investment Restrictions Applicable to the Trust 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. Schedule 1 Lincoln Variable Insurance Products Trust Separate Accounts of Lincoln National Life Insurance Company Investing in the Trust As of May 1, 2003 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account D Lincoln Life Flexible Premium Variable Life Account G Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Separate Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z 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. LINCOLN VARIABLE INSURANCE PRODUCTS TRUST Date: 10/1/03 By: /s/ Kelly D. Clevenger ----------------------------- ----------------------------------- Kelly D. Clevenger Chairman and President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY Date: 10/3/03 By: /s/ Rise C. M. Taylor ----------------------------- ----------------------------------- Rise C. M. Taylor Vice President AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated the 1st day of May, 2003, by and between Lincoln Variable Insurance Products Trust, an open-end management investment company organized as a Delaware statutory trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana insurance company (the "Company") is effective as of May 1, 2005. AMENDMENT --------- For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN VARIABLE INSURANCE PRODUCTS TRUST (Trust) Date: 7/11/05 By: /s/ KELLY D. CLEVENGER ---------------------- ------------------------------------------------ Kelly D. Clevenger President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Company) Date: 7/11/05 By: /s/ RISE C. M. TAYLOR ---------------------- ------------------------------------------------- Rise C.M. Taylor Second Vice President
SCHEDULE 2 FUNDS AS OF MAY 1, 2005 Aggressive Growth Fund Aggressive Profile Fund Bond Fund Capital Appreciation Fund Conservative Profile Fund Core Fund Equity-Income Fund Global Asset Allocation Fund Growth Fund Growth and Income Fund Growth Opportunities Fund International Fund Managed Fund Moderate Profile Fund Moderately Aggressive Profile Fund Money Market Fund Social Awareness Fund Special Opportunities Fund AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated the 1st day of May, 2003, by and between Lincoln Variable Insurance Products Trust, an open-end management investment company organized as a Delaware statutory trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana insurance company (the "Company") is effective as of November 1, 2006. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule 1 of this Agreement shall be deleted and replaced with the attached Schedule 1. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN VARIABLE INSURANCE PRODUCTS TRUST (Trust) Date: 11/1/06 By: /s/ Kelly D. Clevenger - ------------- ------------------------ President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Company) Date: 11/1/06 By: /s/ Kelly D. Clevenger - ------------- ------------------------ Vice President SCHEDULE 1 Lincoln Variable Insurance Products Trust Separate Accounts of Lincoln National Life Insurance Company Investing in the Trust As of November 1, 2006 Lincoln National Variable Annuity Account C Lincoln Life Flexible Premium Variable Life Account D Lincoln Life Flexible Premium Variable Life Account G Lincoln Life Flexible Premium Variable Life Account K Lincoln National Variable Annuity Account L Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Variable Annuity Account N Lincoln Life Variable Annuity Account Q Lincoln Life Flexible Premium Variable Life Separate Account R Lincoln Life Flexible Premium Variable Life Account S Lincoln Life Variable Annuity Account T Lincoln Life Variable Annuity Account W Lincoln Life Flexible Premium Variable Life Account Z Lincoln National Life Insurance Company Separate Account 33 Lincoln National Variable Annuity Account 53 Lincoln Life Separate Account 4k Lincoln National Life Insurance Company Separate Account 95 Lincoln National Life Insurance Company Separate Account 96 Lincoln National Life Insurance Company Separate Account 97 Lincoln National Life Insurance Company Separate Account 98 AMENDMENT TO FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement ("Agreement") dated the 1st day of May, 2003, by and between Lincoln Variable Insurance Products Trust, an open-end management investment company organized as a Delaware statutory trust (the "Trust"), and The Lincoln National Life Insurance Company, an Indiana insurance company (the "Company") is effective as of May 1, 2007. AMENDMENT For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows: 1. Schedule 2 of this Agreement shall be deleted and replaced with the attached Schedule 2. 2. All other terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN VARIABLE INSURANCE PRODUCTS TRUST (Trust) Date: 4/20/07 By: /s/ Kelly D. Clevenger -------------- ----------------------------------- President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (Company) Date: 4/20/07 By: /s/ Kelly D. Clevenger -------------- ----------------------------------- Vice President SCHEDULE 2 FUNDS AS OF MAY 1, 2007 LVIP Baron Growth Opportunities Fund LVIP Capital Growth Fund LVIP Cohen & Steers Global Real Estate Fund LVIP Delaware Bond Fund LVIP Delaware Growth and Income Fund LVIP Delaware Managed Fund LVIP Delaware Social Awareness Fund LVIP Delaware Special Opportunities Fund LVIP FI Equity-Income Fund LVIP Janus Capital Appreciation Fund LVIP Marsico International Growth Fund LVIP MFS Value Fund LVIP Mid-Cap Growth Fund LVIP Mid-Cap Value Fund LVIP Mondrian International Value Fund LVIP Money Market Fund LVIP S&P 500 Index Fund LVIP Small-Cap Index Fund LVIP T. Rowe Price Growth Stock Fund LVIP T. Rowe Price Structured Mid-Cap Growth Fund LVIP Templeton Growth Fund LVIP UBS Global Asset Allocation Fund LVIP Value Opportunities Fund LVIP Wilshire Aggressive Profile Fund LVIP Wilshire Conservative Profile Fund LVIP Wilshire Moderate Profile Fund LVIP Wilshire Moderately Aggressive Profile Fund LVIP Wilshire 2010 Profile Fund LVIP Wilshire 2020 Profile Fund LVIP Wilshire 2030 Profile Fund LVIP Wilshire 2040 Profile Fund
EX-99 17 a2182666zex-99_1.txt Exhibit 99.1 M FUND, INC. PARTICIPATION AGREEMENT WITH THE LINCOLN NATIONAL LIFE INSURANCE COMPANY THIS AGREEMENT, made and entered into this 1st day of May, 2003, by and among M FUND, INC., a corporation organized and existing under the laws of the State of Maryland (the "Fund"), M FINANCIAL INVESTMENT ADVISERS, INC., a corporation organized and existing under the laws of the State of Colorado (the "Adviser") and The LINCOLN NATIONAL LIFE INSURANCE COMPANY, a life insurance company organized and existing under the laws of the State of Indiana (the "Company"), on its own behalf and on behalf of each separate account of the Company identified herein. WHEREAS, the Fund is a series-type mutual fund offering shares of beneficial interest (the "Fund shares") consisting of one or more series ("Series") of shares ("Series shares"), each such Series share representing an interest in a particular managed portfolio of securities and other assets; and WHEREAS, the Fund was established for the purpose of serving as an investment vehicle for insurance company separate accounts supporting variable annuity contracts and variable life insurance policies to be offered by insurance companies; and WHEREAS, the Company desires that the Fund serve as an investment vehicle for certain separate account(s) of the Company; WHEREAS, the Adviser is duly registered as an investment adviser pursuant to the Investment Advisers Act of 1940; NOW, THEREFORE, in consideration of their mutual promises, the Fund, the Adviser, and the Company agree as follows: ARTICLE I. ADDITIONAL DEFINITIONS 1.1. "Account" -- each separate account of the Company described more specifically in Schedule 1 to this Agreement (as may be amended from time to time). 1.2. "Business Day" -- each day that the New York Stock Exchange is open for trading. 1.3. "Code" -- the Internal Revenue Code of 1986, as amended. 1.4. "Contracts" -- the class or classes of variable annuity contracts and variable life insurance policies issued by the Company and described more specifically on Schedule 2 to this Agreement (as may be amended from time to time). 1.5. "Contract Owners" -- the owners of the Contracts, as distinguished from all Product Owners. 1.6. "NASD" -- National Association of Securities Dealers, Inc. 1.7. "Participating Account" -- a separate account investing all or a portion of its assets in the Fund, including the Account. 1.8. "Participating Insurance Company" -- any insurance company investing in the Fund on its behalf or on behalf of a Participating Account, including the Company. 1.9. "Products" -- variable annuity contracts and variable life insurance policies supported by Participating Accounts investing assets attributable thereto in the Fund, including the Contracts. 1.10. "Product Owners" -- owners of Products, including Contract Owners. 1.11. "Prospectus" -- with respect to the Fund shares or a class of Contracts, each version of the definitive prospectus therefor or supplement thereto filed with the Securities and Exchange Commission (SEC) pursuant to Rule 497 under the 1933 Act. With respect to any provision of this Agreement requiring a party to take action in accordance with a Prospectus, such reference thereto shall be deemed to be to the version last so filed prior to the taking of such action. For purposes of Section 4.6 and Article VIII, the term "Prospectus" shall include any statement of additional information incorporated therein. 1.12. "Registration Statement" -- with respect to the Fund shares or a class of Contracts, the registration statement filed with the SEC to register the securities issued thereby under the 1933 Act, or the most recently filed amendment thereto, in either case in the form in which it was declared or became effective. The Contracts Registration Statement (if any) is described more specifically on Schedule 2 to this Agreement. The Fund Registration Statement was filed on Form N-1A (File No. 33-95472). 1.13. "1940 Act Registration Statement" -- with respect to the Fund or the Account, the registration statement filed with the SEC to register such person as an investment company under the 1940 Act, or the most recently filed amendment thereto. Each Account's 1940 Act Registration Statement (if any) is described more specifically on Schedule 2 to this Agreement. The Funds 1940 Act Registration Statement was filed on Form N-1A (File No. 811-9082). 2 1.14. "Statement of Additional Information" -- with respect to the Fund or a class of Contracts, each version of the definitive statement of additional information or supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act. 1.15. "SEC" -- the Securities and Exchange Commission. 1.16. "1933 Act" -- the Securities Act of 1933, as amended. 1.17. "1940 Act" -- the Investment Company Act of 1940, as amended. ARTICLE II. SALE OF FUND SHARES 2.1. The Fund shall make shares of those Series listed on Schedule 3 to this Agreement available for purchase by the Company on its own behalf or on behalf of the Account, such purchases to be effected at net asset value in accordance with Section 2.3 of this Agreement. Notwithstanding the foregoing, (i) Fund Series in existence now or that may be established in the future and not listed on Schedule 3 will be made available to the Company only as the Adviser may so provide, and (ii) the Board of Directors of the Fund (the "Fund Board") may suspend or terminate the offering of Fund shares of any Series or class thereof, 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 or in the best interests of the shareholders of any Series (it being understood that "shareholders" for this purpose shall mean Product Owners). 2.2. The Fund shall redeem, at the Company's request, any full or fractional shares of the Fund held by the Company on behalf of the Account, such redemptions to be effected at net asset value in accordance with Section 2.3 of this Agreement. Notwithstanding the foregoing, the Fund may delay redemption of Fund shares of any Series to the extent permitted by the 1940 Act or any rules, regulations or orders thereunder. 2.3. PURCHASE AND REDEMPTION PROCEDURES (a) The Fund hereby appoints the Company as an agent of the Fund for the limited purpose of receiving purchase and redemption requests for shares of the Fund based on allocations of amounts to the Account or subaccounts thereof under the Contracts and other transactions arising out of the Contracts. Receipt of any such request (or relevant transactional information therefor) on any Business Day by the Company as such limited agent of the Fund prior to 4:00 p.m. New York Time ("NYT") shall constitute receipt by the Fund on that same Business Day, provided that the Fund receives notice of such request by 10:00 am NYT on the next following Business Day. 3 (b) The Fund will confirm receipt of each trade (ending share balance by Account and Fund) and these confirmations will be made available to Company by 1:00 pm New York time on the day the Fund is properly notified of the trade, using a mutually agreed upon format. The Company, which in addition to being a life insurance company is a broker/dealer and member of the NASD, shall pay for the shares on the same day that it places an order with the Fund to purchase those Fund shares for an Account. Payment for Fund shares will be made by each Account or the Company in Federal Funds to the Fund, prior to the close of the Federal Reserve wire system on the day the Fund is properly notified of the purchase order for shares. If payment is not received by the Fund on the same Business Day, the Company shall, upon Fund's request, promptly reimburse the Fund for any charges, costs, fees, interest or other expenses incurred in connection with advances, borrowing and overdrafts. If the banking system is closed, payment will be initiated the next day the banking system is open for business. The Fund will confirm receipt of each trade and these confirmations will be received on time, such funds will be invested, and shares purchased thereby will be issued, as soon as practicable. Payment for shares redeemed by each Account or the Company will be made in Federal Funds to the Company, prior to the close of the Federal Reserve wire system on the same day the Fund is properly notified of the redemption order or shares, except that the Fund reserves the right to delay payment of redemption proceeds as permitted under Section 22(e) of the 1940 Act. If payment is not received by Company the same Business Day, the Fund shall, upon Company's request, promptly reimburse the Company for any charges, costs, fees, interest or other expenses incurred in connection with advances, borrowing, and overdrafts. If the banking system is closed, payment will be initiated the next day the banking system is open for business. Neither the Fund nor the Adviser shall bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds if securities are redeemed; the Company alone shall be responsible for such action. (c) Any purchase or redemption requests for Fund shares that do not result directly from transactions relating to the Contracts or the Account shall be effected at the net asset value per share next determined after the Fund's receipt of such request, provided that, in the case of a purchase request, payment for Fund shares so requested is received by the Fund in federal funds prior to close of business for determination of such value, as defined from time to time in the Fund Prospectus. 2.4. The Fund shall use its best efforts to calculate and make the net asset value per share for each Series available to the Company by 5:30 p.m. NYT each Business Day, and in any event, as soon as reasonably practicable after the net asset value per share for such Series is calculated, and shall calculate such net asset value in accordance with the Fund Prospectus. Neither the Fund, any Series, the Adviser, nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement to the extent such information 4 is based on incorrect information supplied by the Company or any other Participating Insurance Company or Qualified Person (as defined in Section 2.8 of this Agreement) to the Fund or the Adviser. In the event that Fund is unable to meet 5:30 p.m. time stated herein, it shall provide additional time for the Company to place orders for the purchase and redemption of shares. Such additional time shall be equal to the additional time which the Fund takes to make the net asset value available to the Company. Also, the Fund will notify the Company when and if the Fund is unable to provide the net asset value per share by 5:30 p.m. NYT. If the Fund provides the Company with materially incorrect share net asset value information through no fault of the Company, the 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 to the Company. Neither the Company, nor any of its affiliates shall be liable for any information provided to the Fund or its affiliates or designees pursuant to this Agreement which information is based on incorrect information supplied by the Fund to the Company. In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the Company for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make contract owners whole and reasonable administrative costs necessary to correct the error. 2.5. The Fund shall furnish notice to the Company (by fax, or telephone followed by written confirmation) as soon as reasonably practicable of any income dividends or capital gain distributions payable on any Series shares. The Company, on its behalf and on behalf of the Account, hereby elects to receive all such dividends and distributions as are payable on any Series shares in the form of additional shares of that Series. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends and distributions in cash. The Fund shall notify the Company promptly of the number of Series shares so issued as payment of such dividends and distributions. 2.6. Issuance and transfer of Fund shares shall be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Fund shares shall be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. 2.7. (a) The Company may withdraw the Account's investment in the Fund or a Series of 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 (x) the interests of all Product Owners or (y) the interests of the Participating Insurance Companies investing in the Fund; (iii) upon requisite vote of the Contract Owners having an interest in the 5 affected Series; (iv) as required by state and/or federal laws or regulations or judicial or other legal precedent of general implication; (v) upon sixty (60) days advance written notice; (vi) from a Series, upon a change in the Portfolio Manager for that Series; or (vii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. (b) The Company shall not, without the prior written consent of the Adviser (unless otherwise required by applicable law), solicit, induce or encourage Contract Owners to change or modify the Fund or change the Fund's investment adviser. 2.8. The Fund shall sell Fund shares only to Participating Insurance Companies and their separate accounts and to persons or plans ("Qualified Persons") that qualify to purchase and hold shares of the Fund under Section 817(h) of the Code. The Fund shall not sell Fund shares to any insurance company, separate account or Qualified Person unless an agreement containing provisions substantially similar to Articles II, V, and VII of this Agreement is in effect to govern such sales (to the extent required in order to comply with the "Exemptive Order" referred to in Section 7.1 below). ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1. The Company represents and warrants that: (i) the Company is an insurance company duly organized, validly existing under Indiana insurance law; (ii) the Account is (or will be prior to the purchase by the Company of Fund shares for the Account) a validly existing separate account, duly established and maintained in accordance with applicable law; (iii) the Contracts will be issued in compliance in all material respects with all applicable federal and state laws; (iv) the Contracts currently are 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; and (v) the Company and the Account qualify (or will qualify prior to the purchase by the Company of Fund shares for the Account) to purchase and hold shares of the Fund under Section 817(h) of the Code. 3.2. The Fund represents and warrants that: (i) the Fund is a corporation duly organized, validly existing and in good standing under Maryland law; (ii) the Fund's 1940 Act Registration Statement has been filed with the SEC in accordance with the provisions of the 1940 Act and the Fund is and shall remain duly registered as an open-end management investment company thereunder; (iii) the Fund Registration Statement has been declared effective by the SEC (or will be declared effective before the sale by the Fund of its shares pursuant to this Agreement); (iv) Fund shares sold pursuant to this Agreement have been duly authorized for issuance in accordance with applicable law; (v) the Fund is and shall remain qualified as a "regulated investment company" under Subchapter M of the Code and is and shall remain in compliance with Section 817(h) of the Code; (vi) the Fund's investment policies are in material compliance with any investment restrictions set forth on Schedule 4 to this Agreement; and 6 (vii) the Fund does and will comply in all material respects with the 1940 Act. 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. 3.3. The Adviser represents and warrants that it is and will remain registered in all material respects as an investment adviser under federal and all applicable state securities laws, and shall perform its obligations hereunder in compliance in all material respects with any such applicable state and federal laws. The Adviser represents that it will manage the Fund consistent with the Fund's investment objectives, policies, and restrictions. 3.4. 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. 3.5. The Fund represents and warrants that all of its directors, officers, and employees 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. 3.6. The Company represents and warrants that all of its directors, officers, and employees 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 entities subject to the requirements of 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. ARTICLE IV. FILINGS, INFORMATION AND EXPENSES 4.1. The Fund shall amend the Fund Registration Statement and the Fund's 1940 Act Registration Statement from time to time as required in order to effect the continuous offering of Fund shares and to maintain the Fund's registration under the 1940 Act for so long as Fund shares are sold. The Fund shall file, register, qualify and obtain approval of the Fund shares for sale under state securities laws to the extent deemed advisable by the Adviser. 4.2. Unless other arrangements are made, the Fund shall provide the Company with: (i) a copy, in PDF and hard copy in final form no later than 15 calendar days before they 7 must be mailed: Reports- February 13th and August 14th, Prospectuses-April 15th or otherwise suitable for printing or duplication, of each Fund Prospectus and any supplement thereto and each Fund Statement of Additional Information and any supplement thereto; and (ii) copies of the Fund's proxy materials, reports to shareholders, and other communications to shareholders in such quantity as the Company shall reasonably require for distributing to Contract Owners. 4.3. The Company shall amend the Contracts' Registration Statement (if any) and the Account's 1940 Act Registration Statement (if any) 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 file, register, qualify and obtain approval of the Contracts for sale to the extent required by applicable insurance and securities laws of the various states. 4.4. The Company shall inform the Fund of any investment restrictions imposed by state insurance law that may become applicable to the Fund from time to time as a result of the Account's investment therein (including, but not limited to, restrictions with respect to fees and expenses and investment policies), other than those set forth on Schedule 4 to this Agreement. Upon receipt of such information from the Company, the Fund shall determine whether it is in the best interests of shareholders to comply with any such restrictions. If the Fund determines that it is not in the best interests of shareholders (it being understood that "shareholders" for this purpose shall mean Product Owners), the Fund shall so inform the Company, and the Fund and the Company shall discuss alternative accommodations in the circumstances. If the Fund determines that it is in the best interests of shareholders to comply with such restrictions, the Fund and the Company shall amend Schedule 4 to this Agreement to reflect such restrictions. 4.5. The Company shall provide Contracts, Contracts and Fund Prospectuses, Contracts and Fund Statements of Additional Information, reports, solicitations for voting instructions including any related Fund proxy solicitation materials, and all amendments or supplements to any of the foregoing, to Contract Owners and prospective Contract Owners, all in accordance with the federal and any applicable state securities laws. 4.6. All expenses incident to each party's performance under this Agreement (including expenses expressly assumed by such party pursuant to this Agreement) shall be paid by such party to the extent permitted by law. (a) Expenses assumed by the Fund include, but are not limited to, the costs of: (i) registration and qualification of the Fund shares under the federal securities laws; (ii) preparation and filing with the SEC of the Fund Prospectus, Fund Registration Statement, Fund proxy materials and shareholder reports, and preparation of a PDF copy thereof; (iii) preparation of all statements and notices required for the Fund by any federal or state securities law; (iv) printing and mailing to Contract Owners of all proxy materials, prospectuses (including supplements) and reports required to be provided by the Fund to its shareholders; (v) all taxes on the issuance or transfer of Fund shares; and 8 (vi) 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 otherwise shall pay no fee or other compensation to the Company under this Agreement, unless the parties otherwise agree, except that if the Fund or any Series adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses, then payments may be made to the Company in accordance with such plan. The Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or in contravention of such rule, although it may make payments pursuant to Rule 12b-1 in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a 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. (b) Expenses assumed by the Company include, but are not limited to, the costs of: (i) registration and qualification of the Contracts under the federal and any applicable state securities laws; (ii) preparation and filing with the SEC of the Contracts Prospectus and Contracts Registration Statement; and (iii) preparation and dissemination of all statements and notices to Contract Owners required by any federal or state insurance law other than those paid for by the Fund. 4.7. Any piece of advertising or sales literature or other promotional material in which the Fund is named and which will be used by the Company shall be furnished by the Company to the Fund not less than 10 days prior to its use. No such material shall be used if the Fund or its designee objects to such use within 10 days after receipt of such material, provided that it may be used earlier than the end of such 10 day period if the Fund or its designee consents in writing to its use. The Fund may delegate its rights and responsibilities under this provision to the Adviser. 4.8. Any piece of advertising or sales literature or other promotional material in which the Company or the Account is named and which will be used by the Fund or the Adviser shall be furnished by the Fund or the Adviser, as applicable, to the Company not less than 10 days prior to its use. No such material shall be used if the Company or its designee objects to such use within 10 days after receipt of such material, provided that it may be used earlier than the end of such 10 day period if the Company or its designee consents in writing to its use. 4.9. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund to the public (including current and prospective Contract owners) in connection with the sale of the Contracts other than the information or representations contained in the Fund Registration Statement or Fund Prospectus (as such Registration Statement or 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 in accordance with Section 4.7 of this Agreement, except with the prior written consent of the Fund. 9 4.10. The Fund and the Adviser 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 or Prospectus may be amended or supplemented from time to time) or approved in writing by the Company for distribution to Contract Owners, or in sales literature or other promotional material approved in accordance with Section 4.8 of this Agreement except with the prior written consent of the Company. 4.11. The Fund and the Company shall provide to the other upon request at least one complete copy of all Registration Statements, Prospectuses, Statements of Additional Information, periodic and other shareholder or Contract Owner reports, proxy statements, solicitations of 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, that relate to the Fund, the Contracts or the Account, as the case may be, promptly after the filing by or on behalf of such party of such document with the SEC or other regulatory authorities. 4.12. Each party shall provide to the other upon request copies of draft versions of any Registration Statements, Prospectuses, Statements of Additional Information, periodic and other shareholder or Contract Owner 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 reasonably 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. 4.13. Each party hereto shall cooperate with the other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit each other and such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. However, such access shall not extend to attorney-client privileged information. 4.14. The Company reserves the right to modify any of the Contracts in any respect whatsoever. The Company reserves the right in its sole discretion to suspend the sale of any of the Contracts, in whole or in part, or to accept or reject any application for the sale of a Contract. The Company agrees to notify the Fund and the Adviser promptly upon the occurrence of any event the Company believes might necessitate a material MODIFICATION OR SUSPENSION. 10 4.15. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, any material constituting sales literature or advertising under the NASD rules, the 1940 Act or the 1933 Act. ARTICLE V. VOTING OF FUND SHARES 5.1. With respect to any matter put to vote by the holders of Fund shares or Series shares ("Voting Shares"), to the extent required by law (including the Exemptive Order referred to in Section 7.1 below) the Company shall: (a) solicit voting instructions from Contract Owners to which Voting Shares are attributable; (b) vote Voting Shares of each Series attributable to Contract Owners in accordance with instructions or proxies timely received from such Contract Owners; (c) vote Voting Shares of each Series attributable to Contract Owners for which no instructions have been received in the same proportion as Voting Shares of such Series for which instructions have been timely received; and (d) vote Voting Shares of each Series held by the Company on its own behalf or on behalf of the Account that are not attributable to Contract Owners in the same proportion as Voting Shares of such Series for which instructions have been timely received; provided, however, that if the SEC changes its interpretations of voting privileges for variable contracts the Company may vote such shares in its own right. The Company shall be responsible for assuring that voting privileges for the Account are calculated in a manner consistent with the provisions set forth above. 5.2. 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 VI. COMPLIANCE WITH CODE 11 6.1. The Fund shall comply with Section 817(h) of the Code, and all regulations issued thereunder and shall 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. 6.2. The Fund shall maintain its qualification as a regulated investment company (under Subchapter M of the Code or any successor or similar provision), and shall 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. 6.3. The Company shall maintain the treatment of the Contracts as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code and shall notify the Fund and the Adviser immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The parties to this Agreement acknowledge that the Fund has obtained (or will obtain) an order of exemption from the SEC (the "Exemptive Order," File No. 812-9674) granting relief from various provisions of the 1940 Act and the rules thereunder to the extent necessary to permit Fund shares to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and other Qualified Persons (as defined in Section 2.8). The Fund hereby notifies the Company that Contracts Prospectus disclosure regarding potential risks of such mixed and shared funding may be appropriate. 7.2. The Fund Board shall monitor the existence of any material irreconcilable conflict between the interests of Product Owners. The Fund Board shall promptly inform the Company if it determines that a material irreconcilable conflict exists and the implications thereof. 7.3. (a) The Company shall report any potential or existing conflicts promptly to the Fund Board, and in particular whenever Contract Owner voting instructions are disregarded, and recognizes that it shall be responsible for assisting the Fund Board in carrying out its responsibilities in connection with the Exemptive Order. The Company agrees to carry out such responsibilities with a view only to the interests of Contract Owners. (b) The Company shall at least annually submit to the Fund Board such reports, materials or data as the Fund Board may reasonably request so that the Fund Board and the Fund may fully carry out the obligations imposed upon them by the 12 conditions of the Exemptive Order, and such reports, material and data shall be submitted more frequently if deemed appropriate by the Fund Board. 7.4. If a majority of the Fund Board, or a majority of its directors who are not "interested persons" as defined in the 1940 Act ("Disinterested Directors"), determines that a material irreconcilable conflict exists with regard to Contract Owner investments in the Fund, the Fund Board shall give prompt notice to all Participating Insurance Companies. If the Fund Board determines that the Company is responsible in full or in part for causing or creating said conflict, the Company (and other responsible Participating Insurance Companies) shall at no cost and expense to the Fund, and to the extent reasonably practicable (as determined by a majority of the Disinterested Directors), 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: (a) Withdrawing the assets allocable to the Account from the Fund or any portfolio thereof 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 other Product Owners) 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. 7.5. If a material irreconcilable conflict arises as a result of a decision by the Company to disregard Contract Owner voting instructions and said decision represents a minority position or would preclude a majority vote by all Contract Owners having an interest in the Fund, the Company may be required, at the Fund Board's election, to withdraw the 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 Directors. Any such withdrawal and termination must take place within six (6) months or whenever a substitution order has been approved by the SEC, after the Fund gives written notice that this provision is being implemented, and until the end of that six month period or whenever a substitution order has been approved by the SEC, the Adviser and fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund (subject to Section 2.1 above). No charge or penalty will be imposed as a result of such withdrawal. 7.6. 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 or whenever a substitution order has been approved by the SEC after the Board informs the Company in writing 13 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 Directors. Until the end of the foregoing six month period or whenever a substitution order has been approved by the SEC, the Adviser and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund (subject to Section 2.1 above). 7.7. For purposes of this Article, a majority of the Disinterested Directors shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event shall the Fund be required to bear the expense of establishing a new funding medium for any Contract. The Company shall not be required by this Article to establish a new funding medium for any Contract. 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 or whenever a substitution order has been approved by the SEC 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 Directors. 7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provisions of the 1940 Act or the rules promulgated thereunder with respect to mixed and shared funding on terms and conditions materially different from those contained in the Exemptive Order, then (a) the Fund and/or the Company, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the extent such rules are applicable, and (b) Sections 7.2 through 7.7 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and hold harmless the Fund, the Adviser and each person who controls the Fund or the Adviser within the meaning of such terms under the 1933 Act (but not any Participating Insurance Companies or Qualified Plans) 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 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 are related to the sale or acquisition of the Fund's shares or the Contracts and: 14 (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 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 or on behalf of the Fund or Adviser for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature or promotional material for the Contracts (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (b) 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 or supplement to any of the foregoing), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading 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 in writing to the Fund or the Adviser by or on behalf of the Company; or (c) arise out of or are based upon any wrongful conduct of the Company or persons under its control (or subject to its authorization) with respect to the sale or distribution of the Contracts or Fund shares; 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 as required under this Agreement; or (e) arise out of any material breach by the Company of this Agreement. This indemnification will be in addition to any liability that 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 wilful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.2. INDEMNIFICATION BY THE FUND. The Fund shall indemnify and hold harmless the Company and each person who controls the Company within the meaning of such terms under the 1933 Act 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 written 15 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 are related to the sale or acquisition of the Fund's shares or the Contracts and: (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 sales literature or other promotional material of the Fund (or any amendment or supplement to any of the foregoing), or 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 to the Fund by or on behalf of the Company for use in the Fund Registration Statement, Fund Prospectus or sales literature or promotional material for the Fund (or any amendment or supplement to any of the foregoing); or (b) 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 to any of the foregoing), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading 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 or on behalf of the Fund to the Company; or (c) arise out of or are based upon wrongful conduct of the Fund or persons under its control (or subject to its authorization) with respect to the sale of Fund shares; or (d) arise as a result of any failure by the Fund to provide the services and furnish the materials required under the terms of this Agreement; or (e) arise out of any material breach by the Fund of this Agreement (including any breach of Article VI of this Agreement). This indemnification will be in addition to any liability that 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 wilful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 16 8.3. INDEMNIFICATION BY THE ADVISER. The Adviser shall indemnify and hold harmless the Company and each person who controls the Company within the meaning of such term under the 1933 Act 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 written consent of the Adviser 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 are related to the sale or acquisition of the Fund's shares or the Contract and: (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 sales literature or other promotional material of the Fund (or any amendment or supplement to any of the foregoing), or 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 or on behalf of the Company to the Fund or the Adviser for use in the Fund Registration Statement, Fund Prospectus or sales literature or promotional material for the Fund (or any amendment or supplement to any of the foregoing); or (b) 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 to any of the foregoing), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading 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 or on behalf of the Adviser to the Company; or (c) arise out of or are based upon wrongful conduct of the Fund or the Adviser with respect to the sale of Fund shares; or (d) arise as a result of any failure by the Fund or the Adviser to provide the services and furnish the materials required under the terms of this Agreement; or (e) arise out of any material breach by the Fund or the Adviser of this Agreement (including any breach of Article VI of this Agreement). This indemnification will be in addition to any liability that the Adviser may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage 17 or liability is due to the wilful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 8.4. 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 and to participate in the defense of such proceeding, 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 against the indemnified party, 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 Maryland, without giving effect to the principles of conflicts of law. 9.2. This Agreement shall be subject to the provisions of the 1933 Act, 1940 Act and Securities Exchange Act of 1934, as amended, 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. 18 ARTICLE X. TERMINATION 10.1 This Agreement shall not terminate until the Fund is dissolved, liquidated, or merged into another entity, or, as to any Series of the Fund, the Account no longer invests in that Series. However, this Agreement may be terminated (a) by either party at any time, without the payment of any penalty, on not less than 90 days' written notice to the other party, or (b) certain obligations of, or restrictions on, the parties to this Agreement may terminate as provided in Sections 10.2 and 10.3, and the Company may be required to redeem shares pursuant to Section 10.4 or in the circumstances contemplated by Article VII. 10.2. TERMINATION OF THE FUND'S OBLIGATION TO SELL. The obligation of the Fund to sell shares to the Company pursuant to Article II of this Agreement shall terminate at the option of the Fund upon notice to the Company as provided below: (a) the Fund Board has terminated the offering of Fund shares or Series shares pursuant to Section 2.1 of this Agreement; or (b) 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 meet and perform the Company's obligations and duties hereunder; or (c) in the event any of the Contracts are not registered, issued or sold in accordance with applicable federal and/or state law; or (d) if the Fund or the Adviser, 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 since the date of this Agreement 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 Adviser; or (e) upon the Company's assignment of this Agreement (including, without limitation, any transfer of any Contract or the Account to another insurance company pursuant to an assumption reinsurance agreement) unless the Fund consents thereto; or (f) upon termination pursuant to Section 10.1 or notice from the Company pursuant to Section 10.3. 19 Termination of the Fund's obligation shall take effect immediately upon the giving of such notice upon the occurrence of an event described in clauses (b) or (c) above, and 10 (ten) days after the giving of such notice in all other cases. In exercising its option to terminate its obligation to sell shares to the Company, the Fund will continue to make Fund shares available to the extent necessary to permit owners of Contracts in effect on the effective date of such termination (hereinafter referred to as "Existing Contracts") 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, unless the Existing Contracts are the basis for the termination. In that case, the Fund may nonetheless elect to continue to make Fund shares available for Existing Contracts and if it so elects, shall promptly notify the Company whether the Fund is electing to make Fund shares available after termination. 10.3. AS TO THE COMPANY. The restrictions on the Company under Section 2.7(a) of this Agreement shall terminate at the option of the Company upon 10 days' notice to the Fund: (a) if shares of any Series are not reasonably available to meet the requirements of the Contracts as determined by the Company, and the Fund, after receiving written notice from the Company of such non-availability, fails to make available a sufficient number of Fund shares to meet the requirements of the Contracts within 10 days after receipt thereof; or (b) upon institution of formal proceedings against the Fund by the NASD, the SEC or any state securities or insurance commission or any other regulatory body; or (c) 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 the Fund may fail to so qualify, and the Fund, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure; or (d) if the Fund fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder, and the Fund, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure; or (e) if the Fund informs the Company pursuant to Section 4.4 that the Fund will not comply with investment restrictions as requested by the Company, and the Fund and the Company are unable to agree upon any reasonable alternative accommodations; or (f) upon receipt by the Company of any necessary regulatory approvals and the vote of the Contract Owners having an interest in the Account (or any subaccount) to substitute the shares of another investment company for the corresponding 20 Portfolio shares of the Fund in accordance with the terms of the Contracts for which those Portfolio shares had been selected to serve as the underlying investment media. The Company will give 30 days' prior written notice to the Fund of the date of any proposed vote or other action taken to replace the Fund's shares; or (g) upon a material breach of any provision of this Agreement by either the Fund or the Adviser; or (h) if the Company determines in its sole judgment exercised in good faith, that either the Fund or the Adviser has suffered a material adverse change in its business, operations, or financial conditions since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company. 10.4. COMPANY REQUIRED TO REDEEM. The parties understand and acknowledge that it is essential for compliance with Section 817(h) of the Code that the Contracts qualify as annuity contracts or life insurance policies, as applicable, under the Code. Accordingly, if any of the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Fund reasonably believes that any such Contracts may fail to so qualify and the Company fails to provide reasonable assurance that it will take action to cure or correct such failure, the Fund shall have the right to require the Company to redeem Shares attributable to such Contracts upon ten (10) days written notice to the Company and the Company shall so redeem such Shares in order to ensure that the Fund complies with the provisions of Section 817(h) of the Code applicable to ownership of Fund Shares. Notice to the Company shall specify the period of time the Company has to redeem the Shares or to make other arrangements satisfactory to the Fund and its counsel, such period of time to be determined with reference to the requirements of Section 817(h) of the Code. In addition, the Company may be required to redeem Shares pursuant to action taken or request made by the Fund Board in accordance with an order of the SEC as described in Article VII, or other SEC rule, regulation or order that may be adopted after the date hereof. The Company agrees to redeem Shares in such circumstances and to comply with applicable terms and provisions. 21 ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTRACTS The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect, as appropriate, changes in or relating to the Contracts, or Series or funding vehicles thereof, additions of new classes of Contracts to be issued by the Company and separate accounts therefor investing in the Fund. The provisions of this Agreement shall be equally applicable to each such class of Contracts, Series and Accounts, effective as of the date of amendment of such Schedule, unless the context otherwise requires. ARTICLE XII. NOTICE, REQUEST OR CONSENT Any notice, request or consent to be provided pursuant to this Agreement is to be made in writing and shall be given: If to the Fund prior to June 1, 2003: M Fund, Inc. River Park Center 205 S.E. Spokane Street Portland, Oregon 97202 Attn: President If to the Fund after June 1, 2003: M Fund, Inc. M Financial Plaza 1125 NW Couch Street Portland, OR 97209 Attn: President If to the Adviser prior to June 1, 2003: M Financial Investment Advisers, Inc. River Park Center 205 S.E. Spokane Street Portland, Oregon 97202 Attn: President 22 If to the Adviser after June 1, 2003: M Financial Investment Advisers, Inc. M Financial Plaza 1125 NW Couch Street Portland, OR 97209 Attn: President If to the Company: Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802 Attn: Director - Funds Management or at such other address as such party may from time to time specify in writing to the other party. Each such notice, request or consent to a party shall be sent by registered or certified United States mail with return receipt requested, by overnight delivery with a nationally recognized courier or by electronically transmitted facsimile, and shall be effective upon receipt or three days after mailing. 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 this Agreement shall not be affected thereby. 13.4. Subject to the requirement of legal process and regulatory authority, each party hereto shall treat as if 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. 13.5. 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. 23 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. LINCOLN NATIONAL LIFE INSURANCE COMPANY (Company) Date: 5/1/03 By: /s/ Rise C. M. Taylor Name: Rise C. M. Taylor Title: Vice President M FUND, INC. (Fund) Date: 5/1/03 By: /s/ Daniel F. Byrne Name: Daniel F. Byrne Title: President M FINANCIAL INVESTMENT ADVISERS, INC. (Adviser) Date: 5/1/03 By: /s/ Daniel F. Byrne Name: Daniel F. Byrne Title: President 24 SCHEDULE 1 Accounts of the Company Investing in the Fund Effective as of the date the Agreement was executed, the following separate accounts of the Company are subject to the Agreement:
DATE ESTABLISHED BY SEC 1940 ACT NAME OF ACCOUNT AND BOARD OF DIRECTORS OF THE REGISTRATION NUMBER TYPE OF PRODUCT SUBACCOUNTS COMPANY (IF APPLICABLE) SUPPORTED BY ACCOUNT - --------------------------------------------------------------------------------------------------------- Lincoln Life Flexible December 2, 1997 811-08557 Variable Life Premium Variable Life Account M Lincoln Life Flexible December 2, 1997 811-08579 Variable Life Premium Variable Life Account R
SCHEDULE 2 Classes of Contracts Supported by Separate Accounts Listed on Schedule 1 Effective as of the date the Agreement was executed, the following classes of Contracts are subject to the Agreement:
SEC 1933 ACT REGISTRATION NUMBER NAME OF SUPPORTING POLICY MARKETING NAME (IF APPLICABLE) ACCOUNT ANNUITY OR LIFE - ----------------------------------------------------------------------------------- VULCV-III 333-084370 Lincoln Account M Life VULDb-II 333-084360 Lincoln Account M Life SVUL-III 333-090432 Lincoln Account R Life
SCHEDULE 3 Fund Series and Other Funding Vehicles Available Under Each Class of Contracts Effective as of the date the Agreement was executed, the following Fund Series are available under the Contracts: M Fund, Inc. Fund Series: Brandes International Equity Fund Frontier Capital Appreciation Fund Turner Core Growth Fund Business Opportunity Value Fund SCHEDULE 4 Investment Restrictions Applicable to the Fund Effective as of the date the Agreement was executed, the following investment restrictions are applicable to the Fund: The California Department of Insurance has established the following Guidelines for an underlying portfolio of a Separate Account: Borrowing. Borrowing limits for any variable contract separate account portfolio are (1) 10% of net asset value when borrowing for any general purpose; and (2) 25% of net asset value when borrowing as a temporary measure to facilitate redemptions. Net asset value of a portfolio is the market value of all investments or assets owned less outstanding liabilities of the portfolio at the time that any new or additional borrowing is undertaken. Foreign Investments- Diversification. 1. A portfolio will be invested in a minimum of five different foreign countries at all times. However, this minimum is reduced to four when foreign investments comprise less than 80% of the portfolio's net asset value; to three when less than 60% of that value; to two when less than 40%; and to one when less than 20%. 2. Except as set forth in item 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 scurities 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 the United States issuers are not subject to the foreign country diversification guidelines. Effective as of July 1, 2003, the following separate accounts of the Company are hereby added to this Schedule 1 and made subject to the Agreement:
DATE ESTABLISHED BY SEC 1940 ACT NAME OF ACCOUNT AND BOARD OF DIRECTORS OF THE REGISTRATION NUMBER TYPE OF PRODUCT SUBACCOUNTS COMPANY (IF APPLICABLE) SUPPORTED BY ACCOUNT - ------------------------------------------------------------------------------------------------------ Lincoln Life Flexible November 2, 1998 811-09241 Variable Life Premium Variable Life Account S 811- 811-
IN WITNESS WHEREOF, the Fund, the Adviser, and the Company hereby amend this Schedule 1 in accordance with Article XI of the Agreement. M FUND, INC. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Daniel F. Byrne By: /s/ Rise C. M. Taylor Name: Daniel F. Byrne Name: Rise C. M. Taylor Title: President Title: Vice President M FINANCIAL INVESTMENT ADVISERS, INC. By: /s/ Daniel F. Byrne Name: Daniel F. Byrne Title: President Effective as of July 1, 2003, the following classes of Contracts are hereby added to this Schedule 2 and made subject to the Agreement:
SEC 1933 ACT REGISTRATION NUMBER NAME OF SUPPORTING POLICY MARKETING NAME (IF APPLICABLE) ACCOUNT ANNUITY OR LIFE - ------------------------------------------------------------------------------------- Lincoln Corporate 333-104719 Lincoln Life Flexible Life Variable 4 Premium Variable Life Account S 33- 33-
IN WITNESS WHEREOF, the Fund, the Adviser, and the Company hereby amend this Schedule 2 in accordance with Article XI of the Agreement. M FUND, INC. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Daniel F. Byrne By: /s/ Rise C. M. Taylor Name: Daniel F. Byrne Name: Rise C. M. Taylor Title: President Title: Vice President M FINANCIAL INVESTMENT ADVISERS, INC. By: /s/ Daniel F. Byrne Name: Daniel F. Byrne Title: President Effective as of May 1, 2004, the following separate accounts of the Company are hereby added to this Schedule 1 and made subject to the Agreement:
DATE ESTABLISHED BY SEC 1940 ACT NAME OF ACCOUNT AND BOARD OF DIRECTORS OF THE REGISTRATION NUMBER TYPE OF PRODUCT SUBACCOUNTS COMPANY (IF APPLICABLE) SUPPORTED BY ACCOUNT - ---------------------------------------------------------------------------------------------- Lincoln Life Variable November 3, 1997 811-08517 Variable Annuity Annuity Account N 811- 811-
IN WITNESS WHEREOF, the Fund, the Adviser, and the Company hereby amend this Schedule 1 in accordance with Article XI of the Agreement. M FUND, INC. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Dan Byrne By: /s/ Rise C. M. Taylor Name: Dan Byrne Name:Rise C. M. Taylor Title: President Title: Vice President M FINANCIAL INVESTMENT ADVISERS, INC. By: /s/ Dan Byrne Name: Dan Byrne Title: President Effective as of May 1, 2004, the following classes of Contracts are hereby added to this Schedule 2 and made subject to the Agreement:
SEC 1933 ACT REGISTRATION NUMBER NAME OF SUPPORTING POLICY MARKETING NAME (IF APPLICABLE) ACCOUNT ANNUITY OR LIFE - --------------------------------------------------------------------------------------------- Lincoln ChoicePlus 333-119165 Lincoln Life Variable Annuity Momentum Income(SM) Annuity Account N Option Variable Annuity Lincoln VUL(DB) IV 333-118477 Lincoln Life Flexible Life Premium Variable Life Account M Lincoln VUL(CV) IV 333-118478 Lincoln Life Flexible Life Premium Variable Life Account M Lincoln Momentum VUL(ONE) 333-111128 Lincoln Life Flexible Life Premium Variable Life Account M Lincoln SVUL IV 333-115882 Lincoln Life Flexible Life Premium Variable Life Account R
IN WITNESS WHEREOF, the Fund, the Adviser, and the Company hereby amend this Schedule 2 in accordance with Article XI of the Agreement. M FUND, INC. LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Dan Byrne By: /s/ Rise C. M. Taylor Name: Dan Byrne Name: Rise C. M. Taylor Title: President Title: Vice President M FINANCIAL INVESTMENT ADVISERS, INC. By: /s/ Dan Byrne Name: Dan Byrne Title: President Effective as of May 1, 2006, the following classes of Contracts are hereby added to this Schedule 2 and made subject to the Agreement:
POLICY MARKETING NAME SEC 1933 ACT REGISTRATION NUMBER NAME OF SUPPORTING ACCOUNT ANNUITY OR LIFE (IF APPLICABLE) - --------------------- -------------------------------- -------------------------- --------------- Lincoln Momentum SVUL(ONE) 333-125993 LLANY Separate Account R for Life Flexible Premium Variable Life Insurance
IN WITNESS WHEREOF, the Fund, the Adviser, and the Company hereby amend this Schedule 2 in accordance with Article XI of the Agreement. M FUND, INC. LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK By: /s/ Gerald Graves By: /s/ Kelly D. Clevenger Name: Gerald Graves Name: Kelly D. Clevenger Title: President Title: Second Vice President M FINANCIAL INVESTMENT ADVISERS, INC. By: /s/ Gerald Graves Name: Gerald Graves Title: President AMENDMENT TO PARTICIPATION AGREEMENT This AMENDMENT (this "AMENDMENT") is dated as of April 16, 2007 by and among M FUND, INC., a corporation organized and existing under the laws of the State of Maryland (the "FUND"), M FINANCIAL ADVISERS, INC., a corporation organized and existing under the laws of the State of Colorado (the "ADVISER"), and THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, a life insurance company organized and existing under the laws of the State of Indiana (the "COMPANY"). WHEREAS, the Fund, the Adviser and the Company are parties to a Participation Agreement entered into on May 1, 2003, as subsequently amended (the "AGREEMENT"); WHEREAS, the parties wish to amend certain provisions of the Agreement as set forth herein, and in particular the parties desire to amend the Agreement to comply with SEC Rule 22c-2 promulgated under the Investment Company Act of 1940 (the "1940 ACT"); WHEREAS, the Company is an insurance company that has established certain segregated asset accounts (each an "ACCOUNT") to fund the obligations of certain variable universal life insurance policies and variable annuity contracts ("CONTRACTS"); WHEREAS, to fund the obligations of the Contracts, the Accounts purchase Shares pursuant to the Agreement; WHEREAS, the Fund has requested that the Company agree to restrict or prohibit trading by holders of Contracts ("CONTRACT OWNERS") when directed to do so by the Fund, the Adviser or either of their designees; and WHEREAS, capitalized terms used, but not defined, in this Amendment have the meanings assigned to such terms in the Agreement. NOW THEREFORE, in consideration of the mutual promises, representations, and warranties made herein, covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: 1. Article XIII of the Agreement is hereby redesignated as Article XIV, and Sections 13.1 through 13.5 are hereby redesignated as Sections 14.1 through 14.5. 2. The Agreement is hereby amended to provide for a new Article XIII, which contains the following provisions: "ARTICLE XIII. SHAREHOLDER INFORMATION. 13.1 DEFINITIONS. For purposes of this Article XIII, the following terms shall have the following meanings: (a) "INTERMEDIARY" means the Company, on behalf of its separate accounts investing in the Fund. (b) "SHARES" means the interests of Contract Owners corresponding to the redeemable securities of record issued by the Fund under the 1940 Act that are held by the Company on behalf of its separate accounts investing in the Series of the Fund. (c) "SHAREHOLDER" means the holder of interests in a Contract with a beneficial interest in the Fund. (d) The term "SHAREHOLDER-INITIATED TRANSFER" means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract to or out of a Series of the Fund, but does not include transactions that are executed: (1) automatically pursuant to a contractual or systematic program or enrollment such as a transfer of assets within a Contract to or out of a Series of the Fund as a result of "dollar cost averaging" programs or automatic rebalancing programs; (2) pursuant to a Contract death benefit; (3) one-time step-up in Contract value pursuant to a Contract death benefit; (4) allocation of assets to a Series of the Fund through a Contract as a result of payments such as loan repayments, scheduled contributions, retirement plan salary reduction contributions, or planned premium payments to the Contract; (5) pre-arranged transfers at the conclusion of a required free look period; (6) as a result of any deduction of charges or fees under a Contract; or (7) within a Contract out of a Series of the Fund as a result of scheduled withdrawals or surrenders from a Contract. (e) "WRITTEN" includes electronic writings and facsimile transmissions. 13.2. AGREEMENT TO PROVIDE INFORMATION. Intermediary will provide the Fund or its designee, upon written request from the Fund or the Adviser, the taxpayer identification number ("TIN"), the Individual/International Taxpayer Identification Number ("ITIN"), or other government-issued identifier ("GII") and the Contract Owner number or participant account number associated with the Shareholder, if known, of any or all Shareholder(s) of the account, and 2 the amount, date and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by the Intermediary during the period covered by the request. Unless otherwise specifically requested by the Fund, the Intermediary shall only be required to provide information relating to Shareholder-Initiated Transfers 13.3. PERIOD COVERED BY REQUEST. Requests must set forth a specific period, not to exceed 90 days prior to the date of the request, for which transaction information is sought. The Fund or the Adviser may request transaction information older than 90 days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund or Intermediary for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. 13.4. TIMING OF REQUESTS. Requests for Shareholder information shall be made no more frequently than quarterly except as the Fund or the Adviser deem necessary to investigate compliance with policies established by the Fund or Intermediary for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund. 13.5. FORM AND TIMING OF RESPONSE. (a) Intermediary will provide, promptly upon request of the Fund or its designee, the requested information specified in Section 13.2. If requested by the Fund, the Adviser or their designee, Intermediary will use its best efforts to determine promptly whether any specific person about whom the Fund has received the identification and transaction information specified in Section 13.2 is itself a financial intermediary, as defined in Rule 22c-2 under the 1940 Act (an "indirect intermediary"), and, upon further request of the Fund, the Adviser or their designee, promptly either (1) provide (or arrange to have provided) the information set forth in Section 13.2 for those shareholders who hold an account with the indirect intermediary, or (2) restrict or prohibit the indirect intermediary from purchasing, in nominee name on behalf of other persons, securities issued by the Fund. Intermediary will inform the Fund whether it plans to perform the actions set forth in subsection (1) or (2). (b) Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the Fund, the Adviser or their designee and the Intermediary. (c) To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format. 3 13.6. LIMITATIONS ON USE OF INFORMATION. The Fund agrees to maintain the confidentiality of all information received pursuant to this Article XIII and will not use the information received pursuant to this Article XII for any purpose other than as necessary to comply with the provisions of Rule 22c-2 under the 1940 Act or to fulfill other regulatory or legal requirements subject to the privacy provisions of Title V of the Gramm-Leach-Bliley Act (Public Law 106-102) and comparable state laws. 13.7. AGREEMENT TO RESTRICT TRADING. Intermediary will execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of Shares by a Shareholder that has been identified by the Fund as having engaged in transactions of the Fund's shares (directly or indirectly through the Intermediary's account) that violate policies established by the Fund or Intermediary for the purpose of eliminating or reducing any dilution of the value of the then outstanding Shares. Upon receipt of such written instructions, the Intermediary will: (1) review the terms of the Contract and Contract prospectus as well as applicable law to determine the extent of the legal rights of the Contract Owner to trade into and out of Accounts that purchase shares of Fund portfolios; (2) If, upon review, there does not exist any legal or contractual impediment to restricting or prohibiting trading by the Contract Owner, then Intermediary will comply with the Fund's request; (3) If, upon review, there exists a legal or contractual impediment to restricting or prohibiting trading by the Contract Owner, then Intermediary will review the availability of any alternatives that may be implemented to ensure that policies of the Fund established for the purposes of eliminating or reducing any dilution of the value of the Shares are not violated. Such alternatives may include (i) requiring that trades by submitted by the Contract Owner in writing by mail; (ii) imposition of fees for transfers between subaccounts as may be permitted under the terms of the Contract and/or the Contract prospectus; and (iii) limitations on the total number of trades in a calendar year as permitted under the terms of the Contract and/or the Contract prospectus. Working in conjunction with the Fund or its designee, the Company will implement mutually agreed to measures to achieve the goal of 4 preventing dilution of the value of the Fund's outstanding Shares. Unless otherwise directed by the Fund, any such restrictions or prohibitions shall only apply to Shareholder-Initiated Transfers that are effected directly or indirectly through the Intermediary. Instructions must be sent to the Intermediary at the following address, or such other address that the Intermediary may communicate to the Fund in writing from time to time, including, if applicable, the following e-mail and facsimile number: Lincoln National Life Insurance Company Attn: Jennifer Krouse 1300 S. Clinton Street Fort Wayne IN 46802 260-455-4384 jkrouse@Lfg.com 13.8. FORM OF INSTRUCTIONS. Instructions must include the TIN, ITIN or GII and the specific individual Contract Owner number or participant account number associated with the Shareholder, if known, and the specific restriction(s) to be executed, including how long the restriction(s) is(are) to remain in place. If the TIN, ITIN, GII or the specific individual Contract Owner number or participant account number associated with the Shareholder is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates. Upon request of the Intermediary, the Fund will provide to the Intermediary, along with any written instructions to prohibit further purchases or exchanges of Shares by the Shareholder, information regarding those trades of the Contract Owner that violated the policies of the Fund or Intermediary relating to eliminating or reducing any dilution of the value of the Fund's outstanding Shares. 13.9. TIMING OF RESPONSE. Intermediary agrees to execute instructions as soon as reasonably practicable, but not later than ten (10) business days after receipt of the instructions by the Intermediary. 13.10. CONFIRMATION BY INTERMEDIARY. Intermediary must provide written confirmation to the Fund that instructions have been executed. Intermediary agrees to provide confirmation as soon as reasonably practicable, but not later than ten (10) business days after the instructions have been executed. 13.11. CONSTRUCTION OF THIS ARTICLE XIII. To the extent that the terms of this Article XIII conflict with the other terms of this Agreement, the terms of this Article XIII shall control." 5 3. The Agreement is hereby amended to provide for a new Section 14.6, which contains the following provisions: "14.6 CUSTOMER IDENTIFICATION. The parties acknowledge that Federal law requires that the Fund obtain, verify and record information that identifies each person who opens an account with the Fund, including the Company on behalf of each Account. In connection with the opening of an account with the Fund, the Fund will request certain identifying information, including, but not limited to (1) the name of the account owner, (2) the address of the account owner's principal place of business, and (3) the account owner's Taxpayer Identification Number (TIN)." 4. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment. 5. This Amendment may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 6. This Amendment shall be governed by and construed in accordance with the Laws of the State of Maryland, without giving effect to the principles of conflicts of laws. [SIGNATURE PAGES FOLLOW] 6 IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their duly authorized officers, as of the day and year first above written. M FUND, INC. By: /s/ Gerald Graves ------------------------------------ Gerald Graves, President M FINANCIAL ADVISERS, INC. By: /s/ Gerald Graves ------------------------------------ Gerald Graves, President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ------------------------------------ Name: Kelly D. Clevenger Title: Vice President 7
EX-99 18 a2182656zex-99_1.txt AMENDED AND RESTATED PARTICIPATION AGREEMENT AMONG MFS VARIABLE INSURANCE TRUST, THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AND MASSACHUSETTS FINANCIAL SERVICES COMPANY THIS AGREEMENT, made and entered into this ____ day of June 2000, by and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"), THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana corporation (the "Company") on its own behalf and on behalf of each of the segregated asset accounts of the Company set forth in Schedule A hereto, as may be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS"). WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered or will be registered under the Securities Act of 1933, as amended (the "1933 Act"); WHEREAS, shares of beneficial interest of the Trust are divided into several series of shares, each representing the interests in a particular managed pool of securities and other assets; WHEREAS, certain series of shares of the Trust are divided into two separate share classes, an Initial Class and a Service Class, and the Trust on behalf of the Service Class has adopted a Rule 12b-1 plan under the 1940 Act pursuant to which the Service Class pays a distribution fee; WHEREAS, the series of shares of the Trust (each, a "Portfolio," and, collectively, the "Portfolios") and the classes of shares of those Portfolios (the "Shares") offered by the Trust to the Company and the Accounts are set forth on Schedule A attached hereto; WHEREAS, MFS is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended and is the Trust's investment adviser; WHEREAS, the Company will issue certain variable annuity and/or variable life insurance contracts (individually, the "Policy" or, collectively, the "Policies") which, if required by applicable law, will be registered under the 1933 Act; WHEREAS, the Accounts are duly organized, validly existing segregated asset accounts, established by resolution of the Board of Directors of the Company, to set aside and invest assets attributable to the aforesaid variable annuity and/or variable life insurance contracts that are allocated to the Accounts (the Policies and the Accounts covered by this Agreement, and each corresponding Portfolio covered by this Agreement in which the Accounts invest, is specified in Schedule A attached hereto as may be modified from time to time); WHEREAS, the Company has registered or will register the Accounts as unit investment trusts under the 1940 Act (unless exempt therefrom); WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a broker-dealer with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); WHEREAS, the Company, the underwriter for the Policies, is registered as a broker-dealer with the SEC under the 1934 Act and is a member in good standing of the NASD; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase the Shares of the Portfolios as specified in Schedule A attached hereto (the "Shares") on behalf of the Accounts to fund the Policies, and the Trust intends to sell such Shares to the Accounts at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS, and the Company agree as follows: ARTICLE I. SALE AND REDEMPTION OF TRUST SHARES ----------------------------------- 1.1. The Trust agrees to sell to the Company those Shares which the Accounts order (based on orders placed by Policy holders on that Business Day, as defined below) and which are available for purchase by such Accounts, executing such orders on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the order for the Shares. For purposes of this Section 1.1, the Company shall be the designee of the Trust for receipt of such orders from Policy owners and receipt by such designee shall constitute receipt by the Trust; PROVIDED that the Trust receives notice of such orders by 9:30 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC. 1.2. The Trust agrees to make the Shares available indefinitely for purchase at the applicable net asset value per share by the Company and the Accounts on those days on which the Trust calculates its net asset value pursuant to rules of the SEC and the Trust shall calculate such net asset value on each day which the NYSE is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Trust (the "Board") may refuse to sell any Shares to the Company and the Accounts, or suspend or terminate the offering of the Shares if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary in the best interest of the Shareholders of such Portfolio. 1.3. The Trust and MFS agree that the Shares will be sold only to insurance companies which have entered into participation agreements with the Trust and MFS (the "Participating Insurance Companies") and their separate accounts, qualified pension and retirement plans and MFS or its -2- affiliates. The Trust and MFS will not sell Trust shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles III and VII of this Agreement is in effect to govern such sales. The Company will not resell the Shares except to the Trust or its agents. 1.4. The Trust agrees to redeem for cash, on the Company's request, any full or fractional Shares held by the Accounts (based on orders placed by Policy owners on that Business Day), executing such requests on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the request for redemption. For purposes of this Section 1.4, the Company shall be the designee of the Trust for receipt of requests for redemption from Policy owners and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives notice of such request for redemption by 9:30 a.m. New York time on the next following Business Day. 1.5. Each purchase, redemption and exchange order placed by the Company shall be placed separately for each Portfolio and shall not be netted with respect to any Portfolio. However, with respect to payment of the purchase price by the Company and of redemption proceeds by the Trust, the Company and the Trust shall net purchase and redemption orders with respect to each Portfolio and shall transmit one net payment for all of the Portfolios in accordance with Section 1.6 hereof. 1.6. In the event of net purchases, the Company shall pay for the Shares by 2:00 p.m. New York time on the next Business Day after an order to purchase the Shares is made in accordance with the provisions of Section 1.1. hereof. In the event of net redemptions, the Trust shall pay the redemption proceeds by 2:00 p.m. New York time on the next Business Day after an order to redeem the shares is made in accordance with the provisions of Section 1.4. hereof. All such payments shall be in federal funds transmitted by wire. 1.7. Issuance and transfer of the Shares will be by book entry only. Stock certificates will not be issued to the Company or the Accounts. The Shares ordered from the Trust will be recorded in an appropriate title for the Accounts or the appropriate subaccounts of the Accounts. 1.8. The Trust shall furnish same day notice (by wire or telephone followed by written confirmation) to the Company of any dividends or capital gain distributions payable on the Shares. The Company hereby elects to receive all such dividends and distributions as are payable on a Portfolio's Shares in additional Shares of that Portfolio, but may revoke that election at any time by notifying the Trust in writing. The Trust shall notify the Company of the number of Shares so issued as payment of such dividends and distributions. 1.9. The Trust or its custodian shall make the net asset value per share for each Portfolio available to the Company on each Business Day as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 6:30 p.m. New York time. In the event that the Trust is unable to meet the 6:30 p.m. time stated herein, it shall provide additional time for the Company to place orders for the purchase and redemption of Shares. Such additional time shall be equal to the additional time which the Trust takes to make the net asset value available to the Company. If the Trust provides materially incorrect share net asset value information, the Trust shall make an adjustment to the number of shares purchased or redeemed for the Accounts to reflect the correct net asset value per share. Any material error in the calculation or reporting of net asset value per share, dividend or capital gains information shall be reported promptly upon discovery to the Company. -3- -4- ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS ------------------------------------------------- 2.1. The Company represents and warrants that the Policies are or will be registered under the 1933 Act or are exempt from or not subject to registration thereunder, and that the Policies will be issued, sold, and distributed in compliance in all material respects with all applicable state and federal laws, including without limitation the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly established the Account as a segregated asset account under applicable law and has registered or, prior to any issuance or sale of the Policies, will register the Accounts as unit investment trusts in accordance with the provisions of the 1940 Act (unless exempt therefrom) to serve as segregated investment accounts for the Policies, and that it will maintain such registration for so long as any Policies are outstanding. The Company shall amend the registration statements under the 1933 Act for the Policies and the registration statements under the 1940 Act for the Accounts from time to time as required in order to effect the continuous offering of the Policies or as may otherwise be required by applicable law. The Company shall register and qualify the Policies for sales in accordance with the securities laws of the various states only if and to the extent deemed necessary by the Company. 2.2. The Company represents and warrants that the Policies are currently and at the time of issuance will be treated as life insurance policies, endowment or annuity contracts under applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), that it will maintain such treatment and that it will notify the Trust or MFS immediately upon having a reasonable basis for believing that the Policies have ceased to be so treated or that they might not be so treated in the future. 2.3. The Company represents and warrants that it, as the underwriter for the Policies, is a member in good standing of the NASD and is a registered broker-dealer with the SEC. The Company represents and warrants that, to the extent it sells the Policies directly, it will sell and distribute such policies in accordance in all material respects with all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.4. The Trust and MFS represent and warrant that the Shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of The Commonwealth of Massachusetts and all applicable federal and state securities laws and that the Trust is and shall remain registered under the 1940 Act. The Trust shall amend the registration statement for its Shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its Shares. The Trust shall register and qualify the Shares for sale in accordance with the laws of the various states only if and to the extent deemed necessary by the Trust. 2.5. MFS represents and warrants that the Underwriter is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Trust and MFS represent that the Trust and the Underwriter will sell and distribute the Shares in accordance in all material respects with all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. -5- 2.6. The Trust represents that it is lawfully organized and validly existing under the laws of The Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act and any applicable regulations thereunder. 2.7. MFS represents and warrants that it is and shall remain duly registered under all applicable federal securities laws and that it shall perform its obligations for the Trust in compliance in all material respects with any applicable federal securities laws and with the securities laws of The Commonwealth of Massachusetts. MFS represents and warrants that it is not subject to state securities laws other than the securities laws of The Commonwealth of Massachusetts and that it is exempt from registration as an investment adviser under the securities laws of The Commonwealth of Massachusetts. 2.8. The Company shall submit to the Board such reports, material or data as the Board may reasonably request from time to time so that it may carry out fully the obligations imposed upon it by the conditions contained in the exemptive application pursuant to which the SEC has granted exemptive relief to permit mixed and shared funding (the "Mixed and Shared Funding Exemptive Order"). ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING --------------------------------------- 3.1. At least annually, the Trust or its designee shall provide the Company, free of charge, with as many copies of the current prospectus (describing only the Portfolios listed in Schedule A hereto) for the Shares as the Company may reasonably request for distribution to existing Policy owners whose Policies are funded by such Shares. The Trust or its designee shall provide the Company, at the Company's expense, with as many copies of the current prospectus for the Shares as the Company may reasonably request for distribution to prospective purchasers of Policies. If requested by the Company in lieu thereof, the Trust or its designee shall provide such documentation (including a "camera ready" copy of the new prospectus as set in type or, at the request of the Company, as a diskette in the form sent to the financial printer) and other assistance as is reasonably necessary in order for the parties hereto once each year (or more frequently if the prospectus for the Shares is supplemented or amended) to have the prospectus for the Policies and the prospectus for the Shares printed together in one document; the expenses of such printing to be apportioned between (a) the Company and (b) the Trust or its designee in proportion to the number of pages of the Policy and Shares' prospectuses, taking account of other relevant factors affecting the expense of printing, such as covers, columns, graphs and charts; the Trust or its designee to bear the cost of printing the Shares' prospectus portion of such document for distribution to owners of existing Policies funded by the Shares and the Company to bear the expenses of printing the portion of such document relating to the Accounts; PROVIDED, however, that the Company shall bear all printing expenses of such combined documents where used for distribution to prospective purchasers or to owners of existing Policies not funded by the Shares. In the event that the Company requests that the Trust or its designee provides the Trust's prospectus in a "camera ready" or diskette format, the Trust shall be responsible for providing the prospectus in the format in which it or MFS is accustomed to formatting prospectuses and shall bear the expense of providing the prospectus in such format (E.G., typesetting expenses), and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses. 3.2. The prospectus for the Shares shall state that the statement of additional information for the Shares is available from the Trust or its designee. The Trust or its designee, at its expense, -6- shall print and provide such statement of additional information to the Company (or a master of such statement suitable for duplication by the Company) for distribution to any owner of a Policy funded by the Shares. The Trust or its designee, at the Company's expense, shall print and provide such statement to the Company (or a master of such statement suitable for duplication by the Company) for distribution to a prospective purchaser who requests such statement or to an owner of a Policy not funded by the Shares. 3.3. The Trust or its designee shall provide the Company free of charge copies, if and to the extent applicable to the Shares, of the Trust's proxy materials, reports to Shareholders and other communications to Shareholders in such quantity as the Company shall reasonably require for distribution to Policy owners. 3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or of Article V below, the Company shall pay the expense of printing or providing documents to the extent such cost is considered a distribution expense. Distribution expenses would include by way of illustration, but are not limited to, the printing of the Shares' prospectus or prospectuses for distribution to prospective purchasers or to owners of existing Policies not funded by such Shares. 3.5. The Trust hereby notifies the Company that it may be appropriate to include in the prospectus pursuant to which a Policy is offered disclosure regarding the potential risks of mixed and shared funding. 3.6. If and to the extent required by law, the Company shall: (a) solicit voting instructions from Policy owners; (b) vote the Shares in accordance with instructions received from Policy owners; and (c) vote the Shares in each separate Account for which no instructions have been received in the same proportion as the Shares of such Portfolio in such Account for which instructions have been received from Policy owners; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass through voting privileges for variable contract owners. The Company will in no way recommend action in connection with or oppose or interfere with the solicitation of proxies for the Shares held for such Policy owners. The Company reserves the right to vote shares held in any segregated asset account in its own right, to the extent permitted by law. Participating Insurance Companies shall be responsible for assuring that each of their separate accounts holding Shares calculates voting privileges in the manner required by the Mixed and Shared Funding Exemptive Order. The Trust and MFS will notify the Company of any changes of interpretations or amendments to the Mixed and Shared Funding Exemptive Order. ARTICLE IV. SALES MATERIAL AND INFORMATION ------------------------------ 4.1. The Company shall furnish, or shall cause to be furnished, to the Trust or its designee, each piece of sales literature or other promotional material in which the Trust, MFS, any other investment adviser to the Trust, or any affiliate of MFS are named, at least ten (10) Business Days -7- prior to its use. No such material shall be used if the Trust, MFS, or their respective designees reasonably objects to such use within five (5) Business Days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statement on behalf of the Trust, MFS, any other investment adviser to the Trust, or any affiliate of MFS or concerning the Trust or any other such entity in connection with the sale of the Policies other than the information or representations contained in the registration statement, prospectus or statement of additional information for the Shares, as such registration statement, prospectus and statement of additional information may be amended or supplemented from time to time, or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust, MFS or their respective designees, except with the permission of the Trust, MFS or their respective designees. The Trust, MFS or their respective designees each agrees to respond to any request for approval on a prompt and timely basis. The Company shall adopt and implement procedures reasonably designed to ensure that information concerning the Trust, MFS or any of their affiliates which is intended for use only by brokers or agents selling the Policies (I.E., information that is not intended for distribution to Policy owners or prospective Policy owners) is so used, and neither the Trust, MFS nor any of their affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials. 4.3. The Trust or its designee shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company and/or the Accounts is named, at least ten (10) Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within five (5) Business Days after receipt of such material. 4.4. The Trust and MFS shall not give, and agree that the Underwriter shall not give, any information or make any representations on behalf of the Company or concerning the Company, the Accounts, or the Policies in connection with the sale of the Policies other than the information or representations contained in a registration statement, prospectus, or statement of additional information for the Policies, as such registration statement, prospectus and statement of additional information may be amended or supplemented from time to time, or in reports for the Accounts, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. The Company or its designee agrees to respond to any request for approval on a prompt and timely basis. The parties hereto agree that this Section 4.4. is neither intended to designate nor otherwise imply that MFS is an underwriter or distributor of the Policies. 4.5. The Company and the Trust (or its designee in lieu of the Company or the Trust, as appropriate) will each provide to the other at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate (in the case of the Trust) to the Policies, or (in the case of the Company) to the Trust or its Shares, within twenty (20) days after the filing of such document with the SEC or other regulatory authorities. The Company and the Trust shall also each promptly inform the other of the results of any examination by the SEC (or other regulatory authorities) that relates to the Policies, the Trust or its Shares, and the party that was the subject of the examination shall provide the other party with a copy of relevant portions of any "deficiency letter" or other correspondence or written report regarding any such examination. -8- 4.6. The Trust and MFS will provide the Company with as much notice as is reasonably practicable of any proxy solicitation for any Portfolio, and of any material change in the Trust's registration statement, particularly any change requiring change to the registration statement or prospectus or statement of additional information for any Account. The Trust and MFS will cooperate with the Company so as to enable the Company to solicit proxies from Policy owners or to make changes to its prospectus, statement of additional information or registration statement, in an orderly manner. The Trust and MFS will make reasonable efforts to attempt to have changes affecting Policy prospectuses become effective simultaneously with the annual updates for such prospectuses. 4.7. For purpose of this Article IV and Article VIII, the phrase "sales literature or other promotional material" includes but is not limited to advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), and sales literature (such as brochures, circulars, reprints or excerpts or any other advertisement, sales literature, or published articles), distributed or made generally available to customers or the public, educational or training materials or communications distributed or made generally available to some or all agents or employees. ARTICLE V. FEES AND EXPENSES ----------------- 5.1. The Trust shall pay no fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Trust, except that, to the extent the Trust or any Portfolio has adopted and implemented a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and for Shareholder servicing expenses, then the Trust may make payments to the Company or to the underwriter for the Policies in accordance with such plan. Each party, however, shall, in accordance with the allocation of expenses specified in Articles III and V hereof, reimburse other parties for expenses initially paid by one party but allocated to another party. In addition, nothing herein shall prevent the parties hereto from otherwise agreeing to perform, and arranging for appropriate compensation for, other services relating to the Trust and/or to the Accounts. 5.2. The Trust or its designee shall bear the expenses for the cost of registration and qualification of the Shares under all applicable federal and state laws, including preparation and filing of the Trust's registration statement, and payment of filing fees and registration fees; preparation and filing of the Trust's proxy materials and reports to Shareholders; setting in type and printing its prospectus and statement of additional information (to the extent provided by and as determined in accordance with Article III above); setting in type and printing the proxy materials and reports to Shareholders (to the extent provided by and as determined in accordance with Article III above); the preparation of all statements and notices required of the Trust by any federal or state law with respect to its Shares; all taxes on the issuance or transfer of the Shares; and the costs of distributing the Trust's prospectuses and proxy materials to owners of Policies funded by the Shares and any expenses permitted to be paid or assumed by the Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses of marketing the Policies. 5.3. The Company shall bear the expenses of distributing the Shares' prospectus or prospectuses in connection with new sales of the Policies and of distributing the Trust's -9- Shareholder reports to Policy owners. The Company shall bear all expenses associated with the registration, qualification, and filing of the Policies under applicable federal securities and state insurance laws; the cost of preparing, printing and distributing the Policy prospectus and statement of additional information to other than existing Policy owners; and the cost of preparing, printing and distributing annual individual account statements for Policy owners as required by state insurance laws. ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS --------------------------------------- 6.1. The Trust and MFS represent and warrant that each Portfolio of the Trust will meet the diversification requirements of Section 817 (h) (1) of the Code and Treas. Reg. 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts, as they may be amended from time to time (and any revenue rulings, revenue procedures, notices, and other published announcements of the Internal Revenue Service interpreting these sections), as if those requirements applied directly to each such Portfolio. 6.2. The Trust and MFS represent that each Portfolio will elect to be qualified as a Regulated Investment Company under Subchapter M of the Code and that they will maintain such qualification (under Subchapter M or any successor or similar provision), and will notify the Company if it appears that any Portfolio will not so qualify. ARTICLE VII. POTENTIAL MATERIAL CONFLICTS ---------------------------- 7.1. The Trust agrees that the Board, constituted with a majority of disinterested trustees, will monitor each Portfolio of the Trust for the existence of any material irreconcilable conflict between the interests of the variable annuity contract owners and the variable life insurance policy owners of the Company and/or affiliated companies ("contract owners") investing in the Trust. The Board shall have the sole authority to determine if a material irreconcilable conflict exists, and such determination shall be binding on the Company only if approved in the form of a resolution by a majority of the Board, or a majority of the disinterested trustees of the Board. The Board will give prompt notice of any such determination to the Company. 7.2. The Company agrees that it will be responsible for assisting the Board in carrying out its responsibilities under the conditions set forth in the Trust's exemptive application pursuant to which the SEC has granted the Mixed and Shared Funding Exemptive Order by providing the Board, as it may reasonably request, with all information necessary for the Board to consider any issues raised and agrees that it will be responsible for promptly reporting any potential or existing conflicts of which it is aware to the Board including, but not limited to, an obligation by the Company to inform the Board whenever contract owner voting instructions are disregarded. The Company also agrees that if it is determined by a majority of the Trustees, or a majority of the disinterested Trustees, that a material irreconcilable conflict exists, the Company shall, at its own expense and to the extent reasonably practicable (as determined by a majority of the disinterested Trustees) take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps include: (a) withdrawing the assets allocable to some or all of the Accounts from the Trust or any Portfolio and reinvesting such -10- assets in a different investment medium, including (but not limited to) another Portfolio of the Trust, or submitting to a vote of all affected contract owners whether to withdraw assets from the Trust or any Portfolio and reinvesting such assets in a different investment medium and, as appropriate, segregating the assets attributable to any appropriate group of contract owners that votes in favor of such segregation, or offering to any of the affected contract owners the option of segregating the assets attributable to their contracts or policies, and (b) establishing a new registered management investment company and segregating the assets underlying the Policies, unless a majority of Policy owners materially adversely affected by the conflict have voted to decline the offer to establish a new registered management investment company. 7.3. A majority of the disinterested trustees of the Board shall determine whether any proposed action by the Company adequately remedies any material irreconcilable conflict. In the event that the Board determines that any proposed action does not adequately remedy any material irreconcilable conflict, the Company will withdraw from investment in the Trust each of the Accounts designated by the disinterested trustees and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; PROVIDED, HOWEVER, that such withdrawal and termination shall be limited to the extent required to remedy any such material irreconcilable conflict as determined by a majority of the disinterested trustees of the Board. 7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. INDEMNIFICATION --------------- 8.1. INDEMNIFICATION BY THE COMPANY ------------------------------ The Company agrees to indemnify and hold harmless the Trust, MFS, any affiliates of MFS, and each of their respective directors/trustees, officers and each person, if any, who controls the Trust or MFS within the meaning of Section 15 of the 1933 Act, and any agents or employees of the foregoing (each an "Indemnified Party," or collectively, the "Indemnified Parties" for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including reasonable counsel fees) to which any Indemnified Party may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Shares or the Policies and: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, prospectus or statement of additional information for the Policies or contained in the Policies or sales literature or other promotional material for the Policies (or any amendment or -11- supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading PROVIDED that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reasonable reliance upon and in conformity with information furnished to the Company or its designee by or on behalf of the Trust or MFS for use in the registration statement, prospectus or statement of additional information for the Policies or in the Policies or sales literature or other promotional material (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Policies or Shares; or (b) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, statement of additional information or sales literature or other promotional material of the Trust not supplied by the Company or its designee, or persons under its control and on which the Company has reasonably relied) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Policies or Shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the registration statement, prospectus, statement of additional information, or sales literature or other promotional literature of the Trust, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Trust by or on behalf of the Company; or (d) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company; or (e) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; as limited by and in accordance with the provisions of this Article VIII. 8.2. INDEMNIFICATION BY THE TRUST ---------------------------- The Trust agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act, and any agents or employees of the foregoing (each an "Indemnified Party," or collectively, the "Indemnified Parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) or expenses (including reasonable counsel fees) to which any Indemnified Party may become subject under any statute, at common law or otherwise, insofar as such losses, claims, -12- damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Shares or the Policies and: (a) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, prospectus, statement of additional information or sales literature or other promotional material of the Trust (or any amendment or supplement to any of the foregoing), or arise 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 statement therein not misleading, PROVIDED that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reasonable reliance upon and in conformity with information furnished to the Trust, MFS, the Underwriter or their respective designees by or on behalf of the Company for use in the registration statement, prospectus or statement of additional information for the Trust or in sales literature or other promotional material for the Trust (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Policies or Shares; or (b) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, statement of additional information or sales literature or other promotional material for the Policies not supplied by the Trust, MFS, the Underwriter or any of their respective designees or persons under their respective control and on which any such entity has reasonably relied) or wrongful conduct of the Trust or persons under its control, with respect to the sale or distribution of the Policies or Shares; or (c) arise out of any untrue statement or alleged untrue statement of a material fact contained in the registration statement, prospectus, statement of additional information, or sales literature or other promotional literature of the Accounts or relating to the Policies, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Trust, MFS or the Underwriter; or (d) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Article VI of this Agreement) or arise out of or result from any other material breach of this Agreement by the Trust; or (e) arise out of or result from the materially incorrect or untimely calculation or reporting of the daily net asset value per share or dividend or capital gain distribution rate; or (f) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of the Agreement; -13- as limited by and in accordance with the provisions of this Article VIII. 8.3. In no event shall the Trust be liable under the indemnification provisions contained in this Agreement to any individual or entity, including without limitation, the Company, or any Participating Insurance Company or any Policy holder, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by the Company hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by the Company or any Participating Insurance Company to maintain its segregated asset account (which invests in any Portfolio) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by the Company or any Participating Insurance Company to maintain its variable annuity and/or variable life insurance contracts (with respect to which any Portfolio serves as an underlying funding vehicle) as life insurance, endowment or annuity contracts under applicable provisions of the Code. 8.4. Neither the Company nor the Trust shall be liable under the indemnification provisions contained in this Agreement with respect to any losses, claims, damages, liabilities or expenses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, willful misconduct, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 8.5. Promptly after receipt by an Indemnified Party under this Section 8.5. of notice of commencement of any action, such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any Indemnified Party otherwise than under this section. In case any such action is brought against any Indemnified Party, and it notified the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, assume the defense thereof, with counsel satisfactory to such Indemnified Party. After notice from the indemnifying party of its intention to assume the defense of an action, the Indemnified Party shall bear the expenses of any additional counsel obtained by it, and the indemnifying party shall not be liable to such Indemnified Party under this section for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation. 8.6. Each of the parties agrees promptly to notify the other parties of the commencement of any litigation or proceeding against it or any of its respective officers, directors, trustees, employees or 1933 Act control persons in connection with the Agreement, the issuance or sale of the Policies, the operation of the Accounts, or the sale or acquisition of Shares. 8.7. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VIII shall survive any termination of this Agreement. ARTICLE IX. APPLICABLE LAW -------------- -14- 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. NOTICE OF FORMAL PROCEEDINGS ---------------------------- The Trust, MFS, and the Company agree that each such party shall promptly notify the other parties to this Agreement, in writing, of the institution of any formal proceedings brought against such party or its designees by the NASD, the SEC, or any insurance department or any other regulatory body regarding such party's duties under this Agreement or related to the sale of the Policies, the operation of the Accounts, or the purchase of the Shares. ARTICLE XI. TERMINATION ----------- 11.1. This Agreement shall terminate with respect to the Accounts, or one, some, or all Portfolios: (a) at the option of any party upon six (6) months' advance written notice to the other parties; or (b) at the option of the Company to the extent that the Shares of Portfolios are not reasonably available to meet the requirements of the Policies or are not "appropriate funding vehicles" for the Policies, as reasonably determined by the Company. Without limiting the generality of the foregoing, the Shares of a Portfolio would not be "appropriate funding vehicles" if, for example, such Shares did not meet the diversification or other requirements referred to in Article VI hereof; or if the Company would be permitted to disregard Policy owner voting instructions pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt notice of the election to terminate for such cause and an explanation of such cause shall be furnished to the Trust by the Company; or (c) at the option of the Trust or MFS upon institution of formal proceedings against the Company by the NASD, the SEC, or any insurance department or any other regulatory body regarding the Company's duties under this Agreement or related to the sale of the Policies, the operation of the Accounts, or the purchase of the Shares; or (d) at the option of the Company upon institution of formal proceedings against the Trust or MFS by the NASD, the SEC, or any state securities or insurance department or any other regulatory body regarding the Trust's or MFS' duties under this Agreement or related to the sale of the Shares; or (e) at the option of the Company, the Trust or MFS upon receipt of any necessary regulatory approvals and/or the vote of the Policy owners having an interest in the -15- Accounts (or any subaccounts) to substitute the shares of another investment company for the corresponding Portfolio Shares in accordance with the terms of the Policies for which those Portfolio Shares had been selected to serve as the underlying investment media. The Company will give thirty (30) days' prior written notice to the Trust of the Date of any proposed vote or other action taken to replace the Shares; or (f) termination by either the Trust or MFS by written notice to the Company, if either one or both of the Trust or MFS respectively, shall determine, in their sole judgment exercised in good faith, that the Company has suffered a material adverse change in its business, operations, financial condition, or prospects since the date of this Agreement; or (g) termination by the Company by written notice to the Trust and MFS, if the Company shall determine, in its sole judgment exercised in good faith, that the Trust or MFS has suffered a material adverse change in this business, operations, financial condition or prospects since the date of this Agreement; or (h) at the option of any party to this Agreement, upon another party's material breach of any provision of this Agreement; or (i) upon assignment of this Agreement, unless made with the written consent of the parties hereto. 11.2. The notice shall specify the Portfolio or Portfolios, Policies and, if applicable, the Accounts as to which the Agreement is to be terminated. 11.3. It is understood and agreed that the right of any party hereto to terminate this Agreement pursuant to Section 11.1(a) may be exercised for cause or for no cause. Termination by any party pursuant to any of Section 11.1(b) through Section 11.1(i) shall not take effect until the terminating party shall have provided written notice to the other party. 11.4. Except as necessary to implement Policy owner initiated transactions, or as required by state insurance laws or regulations, the Company shall not redeem the Shares attributable to the Policies (as opposed to the Shares attributable to the Company's assets held in the Accounts), and the Company shall not prevent Policy owners from allocating payments to a Portfolio that was otherwise available under the Policies, until thirty (30) days after the Company shall have notified the Trust of its intention to do so. 11.5. Notwithstanding any termination of this Agreement, the Trust and MFS shall, at the option of the Company, continue to make available additional shares of the Portfolios pursuant to the terms and conditions of this Agreement, for all Policies in effect on the effective date of termination of this Agreement (the "Existing Policies"), except as otherwise provided under Article VII of this Agreement. Specifically, without limitation, the owners of the Existing Policies shall be permitted to transfer or reallocate investment under the Policies, redeem investments in any Portfolio and/or invest in the Trust upon the making of additional purchase payments under the Existing Policies. -16- ARTICLE XII. NOTICES ------- Any notice shall be sufficiently given when sent by registered or certified mail, overnight courier or facsimile to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: MFS VARIABLE INSURANCE TRUST 500 Boylston Street Boston, Massachusetts 02116 Facsimile No.: (617) 954-6624 Attn: Stephen E. Cavan, Secretary If to the Company: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 South Clinton Street Fort Wayne, Indiana 46802-3506 Facsimile No.: (219) 455-1773 Attn: Kelly D. Clevenger If to MFS: MASSACHUSETTS FINANCIAL SERVICES COMPANY 500 Boylston Street Boston, Massachusetts 02116 Facsimile No.: (617) 954-6624 Attn: Stephen E. Cavan, General Counsel ARTICLE XIII. MISCELLANEOUS ------------- 13.1. Subject to the requirement of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Policies and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement or as otherwise required by applicable law or regulation, shall not disclose, disseminate or utilize such names and addresses and other confidential information without the express written consent of the affected party until such time as it may come into the public domain. 13.2. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.3. This Agreement may be executed simultaneously in one or more counterparts, each of which taken together shall constitute one and the same instrument. 13.4. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. -17- 13.5. The Schedule attached hereto, as modified from time to time, is incorporated herein by reference and is part of this Agreement. 13.6. Each party hereto shall cooperate with each other party in connection with inquiries by appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance regulators) relating to this Agreement or the transactions contemplated hereby. 13.7. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws. 13.8. A copy of the Trust's Declaration of Trust is on file with the Secretary of State of The Commonwealth of Massachusetts. The Company acknowledges that the obligations of or arising out of this instrument are not binding upon any of the Trust's trustees, officers, employees, agents or shareholders individually, but are binding solely upon the assets and property of the Trust in accordance with its proportionate interest hereunder. The Company further acknowledges that the assets and liabilities of each Portfolio are separate and distinct and that the obligations of or arising out of this instrument are binding solely upon the assets or property of the Portfolio on whose behalf the Trust has executed this instrument. The Company also agrees that the obligations of each Portfolio hereunder shall be several and not joint, in accordance with its proportionate interest hereunder, and the Company agrees not to proceed against any Portfolio for the obligations of another Portfolio. -18- IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, By: /s/ Steven M. Kluever ------------------------------- Steven M. Kluever Second Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, By: /s/ James R. Bordewick, Jr. ------------------------------- James R. Bordewick, Jr. Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, By: /s/ Arnold D. Scott ------------------------------- Arnold D. Scott Senior Executive Vice President and Secretary -19- As of July 15, 2000 SCHEDULE A ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT --------------------------------------
================================= ==================================== ========================== =============================== NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES ================================= ==================================== ========================== =============================== Lincoln Life Flexible |X| Variable Universal Life I Initial MFS Emerging Growth Series Premium Variable Life |X| Lincoln Variable Universal Life MFS Total Return Series Separate Account M |X| Lincoln Variable Universal Life MFS Utilities Series Death Benefit (VUL) Lincoln Life Flexible |X| Survivorship Variable Initial MFS Emerging Growth Series Premium Variable Life Universal Life I MFS Total Return Series Separate Account R |X| Lincoln Survivorship MFS Utilities Series Variable Universal Life Lincoln Life Variable Annuity |X| Lincoln ChoicePlus Initial MFS Emerging Growth Series Account N |X| Lincoln Choice Plus Access Service MFS Total Return Series |X| Lincoln ChoicePlus Bonus Service MFS Utilities Series MFS Research Series Lincoln Life Flexible |X| Corporate Specialty Markets Initial MFS Total Return Series Premium Variable Life COLI Product (CVUL) MFS Utilities Series Separate Account S FS Capital Opportunities Series MFS Research Series - --------------------------------- ------------------------------------ -------------------------- -------------------------------
-20- AMENDMENT TO SCHEDULE A AS OF JULY 15, 2001 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - -------------------------------------------------------------------------------------------------------------------------------- Lincoln National Multifund 1,2,3,4,5 Initial MFS Capital Opportunities Variable Annuity MFS Emerging Growth Account C MFS Total Return MFS Utilities Lincoln National GVA I, II, III Initial MFS Capital Opportunities Variable Annuity MFS Emerging Growth Account L MFS Total Return MFS Utilities Lincoln Life Flexible VUL I Initial MFS Emerging Growth Premium Variable Life MFS Total Return Account M MFS Utilities Lincoln Life Flexible LVUL(CV) Initial MFS Capital Opporunities Premium Variable Life LVUL(DB) MFS Emerging Growth Account M LVUL(CV2) MFS Total Return Money Guard MFS Utilities Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access Service MFS Research ChoicePlus Bonus MFS Total Return ChoicePlus Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus Advance MFS Utilities Lincoln Life Variable Annuity Group MultiFund Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium Variable SVUL I Initial MFS Emerging Growth Life Separate LSVUL MFS Total Return Account R MFS Utilities
1
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ---------------------------------------------------------------------------------------------------------------------------------- Lincoln Life Flexible Premium LSVUL II Initial MFS Capital Opportunities Variable Life Separate MFS Emerging Growth Account R MFS Total Return MFS Utilities Lincoln Life Flexible LCVUL Initial MFS Capital Opportunities Premium Variable Life LCVUL III MFS Emerging Growth Account S MFS Research MFS Total Return MFS Utilities Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities
2 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - -------------------------------------------------------------------------------------------------------------------------------- Lincoln National Life Insurance Company Director Initial MFS Emerging Growth Separate Account 65 Lincoln National Life Insurance Company Director Initial MFS Capital Opportunities Separate Account 66 Lincoln National Life Insurance Company Director Initial MFS Utilities Series Separate Account 67
IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: By:/s/Steven M. Kluever --------------------- ------------------------------------------- Name:Steven M. Kluever Title:Second Vice Presidnet MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: By:/s/James R. Bordewick, Jr. --------------------- ------------------------------------------- Name:James R. Bordewick, Jr. Title:Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: By:/s/Arnold D. Scott --------------------- ------------------------------------------- Name:Arnold D. Scott Title:Senior Executive Vice President 3 AMENDMENT TO SCHEDULE A AS OF MAY 1, 2003 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ------------------------------------------------------------------------------------------------------------------------------------ Lincoln National Variable Annuity Multifund 1,2,3,4,5 Initial MFS Capital Opportunities Account C MFS Emerging Growth MFS Total Return MFS Utilities Lincoln National Variable Annuity GVA I, II, III Initial MFS Capital Opportunities Account L MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium Variable VUL I Initial MFS Emerging Growth Life Account M MFS Total Return MFS Utilities Lincoln Life Flexible Premium Variable LVUL(CV) Initial MFS Capital Opporunities Life Account M LVUL(DB) MFS Emerging Growth LVUL(CV)-II MFS Total Return LVUL(CV)-III MFS Utilities LVUL(DB)-II Money Guard Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access MFS Total Return ChoicePlus Bonus MFS Utilities Service MFS Capital Opportunities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus II Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus Assurance (B Share) Service MFS Capital Opportunities Account N ChoicePlus Assurance (C Share) MFS Emerging Growth ChoicePlus Assurance (L Share) MFS Total Return ChoicePlus Assurance (Bonus) MFS Utilities
1
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ------------------------------------------------------------------------------------------------------------------------------------ Lincoln Life Variable Annuity Group MultiFund Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium Variable SVUL I Initial MFS Emerging Growth Life Separate Account R LSVUL MFS Total Return MFS Utilities Lincoln Life Flexible Premium LSVUL II Initial MFS Capital Opportunities Variable Life Separate Account R LSVUL III MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium Variable LCVUL Initial MFS Capital Opportunities Life Account S LCVUL III MFS Emerging Growth Lincoln Corporate Variable 4 MFS Research MFS Total Return MFS Utilities Lincoln Life Variable Annuity SEI Service MFS Capital Opportunities Account T SEI Select MFS Emerging Growth MFS Total Return Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities Lincoln Life Flexible Premium Variable Lincoln Corporate Variable Initial MFS Capital Opportunities Life Account Z Private Solutions MFS Emerging Growth MFS Total Return MFS Utilities Lincoln National Life Insurance Director Initial MFS Emerging Growth Company Separate Account 65 Lincoln National Life Insurance Director Initial MFS Capital Opportunities Company Separate Account 66 Lincoln National Life Insurance Director Initial MFS Utilities Series Company Separate Account 67
2 IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: 11/13/03 By: /s/ Rise C. M. Taylor ------------ ----------------------------------------------- Name: Rise C. M. Taylor Title: Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: 11/11/03 By: /s/ James R. Bordewick, Jr. ------------ ----------------------------------------------- Name: James R. Bordewick, Jr. Title: Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: 11/11/03 By: /s/ Stephen E. Cavan ------------ ----------------------------------------------- Name: Stephen E. Cavan Title: Senior Vice President 3 AMENDMENT TO SCHEDULE A AS OF JANUARY 1, 2005 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ------------------------------------------------------------------------------------------------------------------------------------ Lincoln National Variable Annuity Multi-Fund(R) 1,2,3,4,5 Initial MFS Capital Opportunities Account C MFS Emerging Growth MFS Total Return MFS Utilities Multi-Fund(R) Select Service MFS Utilities (effective 7/1/04) Lincoln National Variable Annuity GVA I, II, III Initial MFS Capital Opportunities Account L MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL I Initial MFS Emerging Growth Variable Life Account M MFS Total Return MFS Utilities Lincoln Life Flexible Premium LVUL(CV) Initial MFS Capital Opporunities Variable Life Account M LVUL(DB) MFS Emerging Growth LVUL(CV) II MFS Total Return LVUL(CV) III MFS Utilities LVUL(CV) (IV) (effective 10/27/04) LVUL(DB)-II LVUL(DB) IV (effective 10/27/04) Money Guard VUL(ONE) (effective 5/3/04) Momentum VUL(ONE) (effective 7/1/04) Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access MFS Total Return ChoicePlus Bonus MFS Utilities Service MFS Capital Opportunities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus II Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus Assurance (B Share ) Service MFS Capital Opportunities Account N ChoicePlus Assurance (C Share ) MFS Emerging Growth ChoicePlus Assurance (L Share ) MFS Total Return ChoicePlus Assurance (Bonus ) MFS Utilities Momentum Income Option (effective 1/1/2005)
1
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ------------------------------------------------------------------------------------------------------------------------------------ Lincoln Life Variable Annuity Group MultiFund Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL I Initial MFS Emerging Growth Variable Life Separate Account R LSVUL MFS Total Return MFS Utilities Lincoln Life Flexible Premium LSVUL II Initial MFS Capital Opportunities Variable Life Separate Account R LSVUL III MFS Emerging Growth LSVUL IV (effective 7/23/04) MFS Total Return MFS Utilities Lincoln Life Flexible Premium LCVUL Initial MFS Capital Opportunities Variable Life Account S LCVUL III MFS Emerging Growth Lincoln Corporate Variable 4 MFS Research MFS Total Return MFS Utilities Lincoln Life Variable Annuity SEI Service MFS Capital Opportunities Account T SEI Select MFS Emerging Growth MFS Total Return Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable Initial MFS Capital Opportunities Variable Life Account Z Private Solutions MFS Emerging Growth MFS Total Return MFS Utilities Lincoln National Life Insurance Director Initial MFS Emerging Growth Company Separate Account 65 Lincoln National Life Insurance Director Initial MFS Capital Opportunities Company Separate Account 66 Lincoln National Life Insurance Director Initial MFS Utilities Series Company Separate Account 67
2 IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: 1/12/05 By: /s/ Peter L. Witkewiz -------------- ---------------------------------------- Name: Peter L. Witkewiz Title: Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: 1/4/05 By: /s/ James R. Bordewick, Jr. -------------- ---------------------------------------- Name: James R. Bordewick, Jr. Title: Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: 1/4/05 By: /s/ Jeffrey N. Carp -------------- ---------------------------------------- Name: Jeffery N. Carp Title: Senior Vice President & General Counsel 3 [MFS(SM) LOGO] INVESTMENT MANAGEMENT(R) MFS INVESTMENT MANAGEMENT 500 Boylston Street, Boston, Massachusetts 02116-3741 December 7, 2005 Ms. Karen Putman Lincoln National Life Insurance Co 1300 South Clinton St Fort Wayne, IN 46802-3518 Dear Ms. Karen Putman: The purpose of this letter is to amend each Participation Agreement among Massachusetts Financial Services Company ("MFS"), MFS Variable Insurance Trust ("VIT") and each of the insurance companies listed on the attached Appendix (each, a "Company"), made and entered into as of the dates listed on the Appendix (each, an "Agreement"). The amendment will enable VIT (i) to sell its shares to additional qualified parties, including funds-of-funds operated by certain insurance companies ("Funds-of-Funds"); and (ii) to make in-kind redemptions. Each Agreement currently permits VIT shares to be sold only to insurance companies and their separate accounts and qualified pension and retirement plans (as well as MFS and its affiliates). MFS and VIT intend to amend the Agreement to allow sales of VIT shares to any other person or plan to the extent such sales would not cause any Participating Insurance Company to violate the diversification requirements of Section 817(h) of the Internal Revenue Code of 1986, as amended. Such an amendment would be sufficiently broad to permit sales of VIT shares to Funds-of-Funds. As such, Article I, Section 1.3 of the Agreement is amended to read as follows: 1.3 The Trust and MFS agree that the Shares will be sold only to insurance companies which have entered into participation agreements with the Trust and MFS (the "Participating Insurance Companies") and their separate accounts, qualified pension and retirement plans, MFS or its affiliates, and any other person or plan permitted to hold shares of the Trust pursuant to Treasury Regulation 1.817-5 without impairing the ability of the Company, on behalf of its separate accounts, to consider the Shares as constituting investments of the separate accounts for the purpose of satisfying the diversification requirements of Section 8l7(h). The Trust and MFS will not sell Trust shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles III and VII of this Agreement is in effect to govern such sales. The Company will not resell the Shares except to the Trust or its agents. Currently, each Agreement provides only for cash redemptions. This amendment to the Agreement will permit VIT to make in-kind redemptions in addition to cash redemptions, to the extent permitted by law and as described in the VIT Prospectus. The amendment is principally intended to permit in-kind redemptions in the event of large-scale redemptions, such as those in connection with substitutions. As such, Article I, Section 1.4 of the Agreement is amended to read as follows: 1.4. The Trust agrees to redeem for cash or, to the extent permitted by applicable law, in-kind, on the Company's request, any full or fractional Shares held by the Accounts (based on orders placed by Policy owners prior to the close of regular trading on the NYSE on that Business Day), executing such requests on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the request for redemption. For purposes of this Section 1.4, the Company shall be the designee of the Trust for receipt of requests for redemption from Policy owners and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives notice of such request for redemption by 9:00 a.m. New York time on the next following Business Day. Except as modified and amended above, each Agreement is hereby ratified and confirmed in full force and effect accordance with its terms. All capitalized terms not defined in this letter shall have the meanings ascribed to them in the Agreement. Please indicate your acceptance of these amendments by having the enclosed copies of this letter signed where indicated below by an appropriate officer of each Company and return an executed copy at your earliest convenience. Should you have any questions regarding these amendments, please contact Erik Lindahl, Vice President-Business Support & Development, at 617.954.5594 or Megan Johnson, Counsel, at 617.954.5843. Very truly yours, MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, /s/ Martin E. Beaulieu ---------------------- Martin E. Beaulieu Executive Vice President and Director of Global Distribution MFS VARIABLE INSURANCE TRUST ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually. /s/ Jeffrey N Carp ------------------ Jeffrey N Carp, Secretary Accepted by: LINCOLN NATIONAL LIFE INSURANCE COMPANY LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK By: /s/ RISE' CM TAYLOR By: /s/ RISE' CM TAYLOR ------------------- ------------------ Name: RISE' CM TAYLOR Name: RISE' CM TAYLOR Title: VICE PRESIDENT Title: SECOND VICE PRESIDENT 2 APPENDIX
NAME OF PARTICIPATING INSURANCE COMPANY DATE OF PARTICIPATION AGREEMENT - --------------------------------------- ------------------------------- Lincoln National Life Insurance Company May 22, 1998 Lincoln Life & Annuity Company of New York June 1, 2000
AMENDMENT TO SCHEDULE A AS OF APRIL 1, 2006 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ----------------------------------------------------------------------------------------------------------------------------- Lincoln National Variable Annuity Multi-Fund(R) 1,2,3,4,5 Initial MFS Capital Opportunities Account C MFS Emerging Growth MFS Total Return MFS Utilities Multi-Fund(R) Select Service MFS Utilities (effective 7/1/04) Lincoln National Variable Annuity GVA I, II, III Initial MFS Capital Opportunities Account L MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL I Initial MFS Emerging Growth Variable Life Account M MFS Total Return MFS Utilities Lincoln Life Flexible Premium LVUL(CV) Initial MFS Capital Opporunities Variable Life Account M LVUL(DB) MFS Emerging Growth LVUL(CV) II MFS Total Return LVUL(CV)III MFS Utilities LVUL(CV) IV (effective 10/27/04) LVUL(DB)-II LVUL(DB) IV (effective 10/27/04) Money Guard VUL(ONE) (effective 5/3/04) Momentum VUL(ONE) (effective 7/1/04) Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access MFS Total Return ChoicePlus Bonus MFS Utilities Service MFS Capital Opportunities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus II Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus Assurance (B Share) Service MFS Capital Opportunities Account N ChoicePlus Assurance (C Share) MFS Emerging Growth ChoicePlus Assurance (L Share) MFS Total Return ChoicePlus Assurance (Bonus) MFS Utilities Momentum Income Option (effective 1/1/2005)
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - ---------------------------------------------------------------------------------------------------------------------------- Lincoln Life Variable Annuity Group MultiFund Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL I Initial MFS Emerging Growth Variable Life Separate Account R LSVUL MFS Total Return MFS Utilities Lincoln Life Flexible Premium LSVUL II Initial MFS Capital Opportunities Variable Life Separate Account R LSVUL III MFS Emerging Growth LSVUL IV (effective 7/23/04) MFS Total Return MFS Utilities Lincoln Life Flexible Premium LCVUL Initial MFS Capital Opportunities Variable Life Account S LCVUL III MFS Emerging Growth Lincoln Corporate Variable 4 MFS Research MFS Total Return MFS Utilities Lincoln Life Variable Annuity SEI Service MFS Capital Opportunities Account T SEI Select MFS Emerging Growth MFS Total Return Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable Initial MFS Capital Opportunities Variable Life Account Z Private Solutions MFS Emerging Growth MFS Total Return MFS Utilities Lincoln National Life Insurance Director Initial MFS Emerging Growth Company Separate Account 65 Lincoln National Life Insurance Director Initial MFS Capital Opportunities Company Separate Account 66 Lincoln National Life Insurance Director Initial MFS Utilities Series Company Separate Account 67 Lincoln Life Separate Account 4k Lincoln American Legacy Service MFS Research Retirement Group Variable International Series Annuity MFS Total Return
IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: 4/3/06 By: /s/ Rise C.M. Taylor ------------------------------------ Name: Rise C.M. Taylor Title: Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: 4/3/06 By: /s/ Susan S. Newton ------------------------------------ Name: Susan S. Newton Title: Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: 4/3/06 By: /s/ Robert J. Manning ------------------------------------ Name: Robert J. Manning Title: President and Chief Executive Officer AMENDMENT TO SCHEDULE A AS OF MAY 1, 2006 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - --------------------------------------------------------------------------------------------------------------------------- Lincoln National Variable Annuity Multi-Fund(R) 1,2,3,4,5 Initial MFS Capital Opportunities Account C MFS Emerging Growth MFS Total Return MFS Utilities Multi-Fund(R) Select Service MFS Utilities Lincoln National Variable Annuity GVA I, II, III Initial MFS Capital Opportunities Account L MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL I Initial MFS Emerging Growth Variable Life Account M MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL(CV) Initial MFS Capital Opporunities Variable Life Account M VUL(DB) MFS Emerging Growth VUL(CV) II MFS Total Return VUL(CV)III MFS Utilities VUL(CV) IV VUL(DB)-II VUL(DB) IV Money Guard VUL(ONE) Momentum VUL(ONE) Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access MFS Total Return ChoicePlus Bonus MFS Utilities Service MFS Capital Opportunities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus II Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus Assurance (B Share) Service MFS Capital Opportunities Account N ChoicePlus Assurance (C Share) MFS Emerging Growth ChoicePlus Assurance (L Share) MFS Total Return ChoicePlus Assurance (Bonus) MFS Utilities Momentum Income Option
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - --------------------------------------------------------------------------------------------------------------------------- Lincoln Life Variable Annuity MultiFund(R) Group Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL I Initial MFS Emerging Growth Variable Life Separate Account R SVUL MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL II Initial MFS Capital Opportunities Variable Life Separate Account R SVUL III MFS Emerging Growth SVUL IV MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVULONE Initial MFS Total Return Variable Life Separate Account R Momentum SVULONE MFS Utilities Lincoln Life Flexible Premium CVUL Initial MFS Capital Opportunities Variable Life Account S CVUL III MFS Emerging Growth Lincoln Corporate Variable 4 MFS Research MFS Total Return MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable 5 Initial MFS Total Return Variable Life Account S MFS Utilities Lincoln Life Variable Annuity IVA (formerly SEI) Service MFS Capital Opportunities Account T IVA (formerly SEI Select) MFS Emerging Growth MFS Total Return Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable Initial MFS Capital Opportunities Variable Life Account Z Private Solutions MFS Emerging Growth MFS Investors Trust MFS Research MFS Strategic Income MFS Total Return MFS Utilities
Lincoln National Life Insurance Director Initial MFS Emerging Growth Company Separate Account 65 Lincoln National Life Insurance Director Initial MFS Capital Opportunities Company Separate Account 66 Lincoln National Life Insurance Director Initial MFS Utilities Series Company Separate Account 67 Lincoln Life Separate Account 4k Lincoln American Legacy Service MFS Research Retirement Group Variable International Series Annuity MFS Total Return
IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: 7/31/06 By: /s/ Kelly D. Clevenger ------------------------------------ Name: Kelly D. Clevenger Title: Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: 7/27/06 By: /s/ Susan S. Newton ------------------------------------ Name: Susan S. Newton Title: Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: 7/27/06 By: /s/ Robert J. Manning ------------------------------------ Name: Robert J. Manning Title: President and Chief Executive Officer AMENDMENT TO SCHEDULE A AS OF OCTOBER 1, 2006 ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - --------------------------------------------------------------------------------------------------------------------------- Lincoln National Variable Annuity Multi-Fund(R) 1,2,3,4,5 Initial MFS Capital Opportunities Account C MFS Emerging Growth MFS Total Return MFS Utilities Multi-Fund(R) Select Service MFS Utilities Lincoln National Variable Annuity GVA I, II, III Initial MFS Capital Opportunities Account L MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL I Initial MFS Emerging Growth Variable Life Account M MFS Total Return MFS Utilities Lincoln Life Flexible Premium VUL(CV) Initial MFS Capital Opporunities Variable Life Account M VUL(DB) MFS Emerging Growth VUL(CV) II MFS Total Return VUL(CV)III MFS Utilities VUL(CV) IV VUL(DB)-II VUL(DB) IV Money Guard VUL(ONE) Momentum VUL(ONE) Lincoln Life Variable Annuity ChoicePlus Initial MFS Emerging Growth Account N ChoicePlus Access MFS Total Return ChoicePlus Bonus MFS Utilities Service MFS Capital Opportunities Lincoln Life Variable Annuity ChoicePlus II Service MFS Capital Opportunities Account N ChoicePlus II Access MFS Emerging Growth ChoicePlus II Bonus MFS Total Return ChoicePlus II Advance MFS Utilities Lincoln Life Variable Annuity ChoicePlus Assurance (B Share) Service MFS Capital Opportunities Account N ChoicePlus Assurance (C Share) MFS Emerging Growth ChoicePlus Assurance (L Share) MFS Total Return ChoicePlus Assurance (Bonus) MFS Utilities Momentum Income Option ChoicePlus Assurance (A Share)
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED SHARE CLASS PORTFOLIOS ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT (INITIAL OR SERVICE CLASS) APPLICABLE TO POLICIES - --------------------------------------------------------------------------------------------------------------------------- Lincoln Life Variable Annuity ChoicePlus Design Service MFS Total Return Account N MFS Utilities Lincoln Life Variable Annuity MultiFund(R) Group Initial MFS Capital Opportunities Account Q MFS Emerging Growth MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL I Initial MFS Emerging Growth Variable Life Separate Account R SVUL MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL II Initial MFS Capital Opportunities Variable Life Separate Account R SVUL III MFS Emerging Growth SVUL IV MFS Total Return MFS Utilities Lincoln Life Flexible Premium SVUL(ONE) Initial MFS Total Return Variable Life Separate Account R Momentum SVUL(ONE) MFS Utilities Lincoln Life Flexible Premium CVUL Initial MFS Capital Opportunities Variable Life Account S CVUL III MFS Emerging Growth Lincoln Corporate Variable 4 MFS Research MFS Total Return MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable 5 Initial MFS Total Return Variable Life Account S MFS Utilities Lincoln Life Variable Annuity IVA (formerly SEI) Service MFS Capital Opportunities Account T IVA (formerly SEI Select) MFS Emerging Growth MFS Total Return Lincoln Life Variable Annuity New Directions Core Service MFS Capital Opportunities Account W New Directions Access MFS Emerging Growth New Directions Access 4 MFS Utilities Lincoln Life Flexible Premium Lincoln Corporate Variable Initial MFS Capital Opportunities Variable Life Account Z Private Solutions MFS Emerging Growth MFS Investors Trust MFS Research MFS Strategic Income MFS Total Return MFS Utilities
Lincoln National Life Insurance Director Initial MFS Emerging Growth Company Separate Account 65 Lincoln National Life Insurance Director Initial MFS Capital Opportunities Company Separate Account 66 Lincoln National Life Insurance Director Initial MFS Utilities Series Company Separate Account 67 Lincoln Life Separate Account 4k Lincoln American Legacy Service MFS Research Retirement Group Variable International Series Annuity MFS Total Return
IN WITNESS WHEREOF, each of the parties hereto has caused the Amendment to this Agreement to be executed in its name and on its behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified above. THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By its authorized officer, Date: 10/11/06 By: /s/ Kelly D. Clevenger ------------------------------------------- Name: Kelly D. Clevenger Title: Vice President MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS By its authorized officer and not individually, Date: 10/1/06 By: /s/ Susan S. Newton ------------------------------------------- Name: Susan S. Newton Title: Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, Date: 10/1/06 By: /s/ Robert J. Manning ------------------------------------------- Name: Robert Manning Title: President May 10, 2007 VIA Federal Express MFS Variable Insurance Trust Massachusetts Financial Services Company 500 Boylston Street Boston, MA 02116 Attn: Tim Fagan Re: Notice of Change of Principal Underwriter To our valued business partner: MFS Variable Insurance Trust, Massachusetts Financial Services Company and The Lincoln National Life Insurance Company ("Lincoln") are parties to an Amended and Restated Participation Agreement (the "Agreement") dated June 30, 2000. Effective May 1, 2007, Lincoln Financial Distributors, Inc., a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member in good standing of the National Association of Securities Dealers, Inc., assumed the role of principal underwriter with respect to the Policies listed in Schedule A of the Agreement. Lincoln requests that you provide acknowledgement of this letter by signing below and returning one executed original letter to Mary Jo Ardington, 1300 S. Clinton Street, Fort Wayne, IN 46802. Thank you for your prompt attention to this matter. If you have any questions, please feel free to contact Mary Jo Ardington at 260-455-3917. Sincerely, /s/ Kelly D. Clevenger - --------------------------- Kelly D. Clevenger Vice President ACKNOWLEDGED and AGREED: MASSACHUSETTS FINANCIAL SERVICES MFS(R) VARIABLE INSURANCE TRUST(SM) COMPANY By: /s/ Robert J. Manning By: /s/ Susan S. Newton ----------------------------- ----------------------------- Name: Robert J. Manning Name: Susan S. Newton --------------------------- ----------------------------- Title: President Title: Senior Vice President -------------------------- ----------------------------- Date: October 1, 2007 Date: October 1, 2007 --------------------------- ------------------------------
EX-99 19 a2182661zex-99_1.txt 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: /s/ Stanley Egener Name: Stanley Egener Title: President ADVISERS MANAGERS TRUST By: /s/ Stanley Egener Name: Stanley Egener Title: President NEUBERGER&BERMAN MANAGEMENT INCORPORATED By: /s/ Daniel J. Sullivan Name: Daniel J. Sullivan Title: Senior Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President 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 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: /s/ Peter E. Sundman By: /s/ Daniel J. Sullivan ------------------------------- ------------------------------- 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: /s/ Peter E. Sundman By: /s/ Steven M. Kluever ------------------------------- ------------------------------- 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 ADDENDUM TO FUND PARTICIPATION AGREEMENT This ADDENDUM dated as of May 1, 2000 amends the Fund Participation Agreement among The Lincoln National Life Insurance Company ("Company"), Neuberger Berman Advisers Management Trust ("Trust"), Advisers Managers Trust ("Managers Trust"), and Neuberger Berman Management Inc. ("NBMI"). WHEREAS, the Company, Trust, Managers Trust, and NBMI are parties to a Fund Participation Agreement ("Agreement") pursuant to which separate accounts of the Company invest proceeds from variable annuity and/or variable life insurance policies in the one or more portfolios of the Trust ("Portfolios"); and WHEREAS, the Trust, through the Portfolios, currently invests all of its net investable assets in corresponding series of Managers Trust in a "master-feeder" structure; and WHEREAS, the Boards of Trustees of the Trust and Managers Trust have approved a transaction to eliminate the current master-feeder structure in which Trust will receive the portfolio securities held by Managers Trust in redemption of the interests of Managers Trust held by the Trust (this transaction is referred to as the "In-Kind Redemption"); and WHEREAS, the In-Kind Redemption is currently scheduled to be effected on or about May 1, 2000 (the date on which the In-Kind Redemption is effected is referred to as the "Effective Date"); and WHEREAS, upon completion of the In-Kind Redemption, the Trust will hold and invest directly in its own portfolio of securities and Managers Trust will cease investment operations and be dissolved; and WHEREAS, the parties wish to amend the Agreement to reflect the In-Kind Redemption and the elimination of the master-feeder structure. NOW THEREFORE, effective on the Effective Date, the Trust assumes all of the rights, obligations, and liabilities of Managers Trust under the Agreement. The undersigned hereby consents to the assignment described in the preceding paragraph. THE LINCOLN NATIONAL LIFE ADVISERS MANAGERS TRUST INSURANCE COMPANY By: /s/ Daniel Sullivan By: /s/ Steven M. Kluever Name: Daniel Sullivan Name: Steven M. Kluever Title: Vice President Title: Second Vice President NEUBERGER BERMAN ADVISERS NEUBERGER BERMAN MANAGEMENT TRUST MANAGEMENT By: /s/ Daniel Sullivan By: /s/ Daniel Sullivan Name: Daniel Sullivan Name: Daniel Sullivan Title: Vice President Title: Vice President AMENDMENT #3 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of July 15, 2001, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, as amended, among LIFE COMPANY, 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: /s/Peter E. Sundman By: /s/Robert Conti -------------------- ------------------ Name: Peter E. Sundman Name: Robert Conti Title: President Title: Senior Vice President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/Steven M. Kluever --------------------- Name: Steven M. Kluever Title: Second Vice President APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS - ------------------------------------------------------------------------------------------------------------ Partners Lincoln National Variable Annuity Account C Mid-Cap Growth Regency Lincoln National Variable Annuity Account L Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account Q Partners Mid-Cap Growth Regency Lincoln National Variable Annuity Account 37 Mid-Cap Growth Lincoln National Variable Annuity Account 38 Partners Regency Lincoln National Variable Annuity Account 53 Partners Mid-Cap Growth Lincoln National FlexiblePremium Life Account M Partners Mid-Cap Growth Regency Lincoln National FlexiblePremium Variable Life Account R Partners Mid-Cap Growth Regency Lincoln National FlexiblePremium Variable Life Account S Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account N Mid-Cap Growth Regency Lincoln Life Variable Annuity Account W Balanced - ------------------------------------------------------------------------------------------------------------
2 AMENDMENT #5 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of August 1, 2002, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, as amended, among LIFE COMPANY, TRUST and NB MANAGEMENT (the "Agreement"). Terms defined in the Agreement are used herein as therein defined. WHEREAS, the parties wish to amend Section 1.5 to include additional language. WHEREAS, the parties wish to amend Article IX to correct address of LIFE COMPANY for notices. 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. Section 1.5 is replaced in its entirety with the following: 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 NB MANAGEMENT to LIFE COMPANY. In the event of any material error in the calculation or communication of net asset value, dividends or capital gain information or any delay in the communication, the responsible party or parties shall reimburse the LIFE COMPANY for any losses or reasonable costs incurred as a result of the error or delay, including but not limited to, amounts needed to make contractowners whole and reasonable administrative costs necessary to correct the error. 2. Article IX. NOTICES is hereby amended such that the addresses for the Life Company are replaced in their entirety with the following: If to the LIFE COMPANY: Lincoln National Life Insurance Company Attn: Steven M. Kluever, 2nd Vice President 1300 S. Clinton Street Fort Wayne IN 46802 Facsimile: (260) 455-1773 3. Appendix B of the Agreement is hereby deleted and replaced with new Appendix B attached hereto. 4. Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. 5. 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: _/s/ Peter E. Sundman By:_/s/ Peter E. Sundman__ Name: Peter E. Sundman Name: Peter E. Sundman Title: Chairman and CEO Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: __/s/ Steven M. Kluever Name: Steven M. Kluever Title: Second Vice President 2 APPENDIX B SEPARATE ACCOUNTS SELECTED PORTFOLIOS ----------------- ------------------- Partners Lincoln National Variable Annuity Account C Mid-Cap Growth Regency Lincoln National Variable Annuity Account L Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account Q Partners Mid-Cap Growth Regency Lincoln National Variable Annuity Account 37 Mid-Cap Growth Lincoln National Variable Annuity Account 38 Regency Lincoln National Variable Annuity Account 53 Partners Mid-Cap Growth Lincoln National FlexiblePremium Life Account M Partners Mid-Cap Growth Regency Lincoln National FlexiblePremium Variable Life Account R Partners Mid-Cap Growth Regency Lincoln National FlexiblePremium Variable Life Account S Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account N Mid-Cap Growth Regency Lincoln Life Variable Annuity Account W Balanced Mid-Cap Growth Regency 3 AMENDMENT #6 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of July 30, 2003, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, as amended, among LIFE COMPANY, 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 a new Separate Account. 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: /s/ Peter E. Sundman By: /s/ Peter E. Sundman ------------------------------- --------------------------------- Name: Peter E. Sundman Name: Peter E. Sundman Title: Chairman and CEO Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C. M. Taylor --------------------------------- Name: Rise C. M. Taylor Title: Vice President APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS ----------------- ------------------- Partners Lincoln National Variable Annuity Account C Mid-Cap Growth Regency Lincoln National Variable Annuity Account L Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account Q Partners Mid-Cap Growth Regency Lincoln National Variable Annuity Account 37 Mid-Cap Growth Lincoln National Variable Annuity Account 38 Regency Lincoln National Variable Annuity Account 53 Partners Mid-Cap Growth Lincoln National Flexible Premium Life Account M Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account R Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account S Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account N Mid-Cap Growth Regency Lincoln Life Variable Annuity Account W Balanced Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account Z Mid-Cap Growth Regency
2 AMENDMENT #7 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of April 1, 2006, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, as amended, among LIFE COMPANY, 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 a new Separate Account. 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: /s/ Peter E. Sundman By: /s/ Peter E. Sundman --------------------- --------------------- Name: Peter E. Sundman Name: Peter E. Sundman Title: Chairman and CEO Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Rise C.M. Taylor --------------------- Name: Rise C. M. Taylor Title: Vice President APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS ----------------- ------------------- Lincoln National Variable Annuity Account C Partners Mid-Cap Growth Regency Lincoln National Variable Annuity Account L Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account Q Partners Mid-Cap Growth Regency Lincoln National Variable Annuity Account 37 Mid-Cap Growth Lincoln National Variable Annuity Account 38 Regency Lincoln National Variable Annuity Account 53 Partners Mid-Cap Growth Lincoln National Flexible Premium Life Account M Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account R Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account S Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account N Mid-Cap Growth Regency Lincoln Life Variable Annuity Account W Balanced Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account Z Mid-Cap Growth Regency Lincoln Life Separate Account 4k Mid-Cap Growth Regency
AMENDMENT #8 TO THE FUND PARTICIPATION AGREEMENT This AMENDMENT, dated as of May 1, 2006, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement, dated as of September 18, 1998, as amended, among LIFE COMPANY, 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 a new Separate Account. 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 MANAGEMENT INC. ADVISERS MANAGEMENT TRUST By: /s/ Peter E. Sundman By: /s/ Peter E. Sundman --------------------- --------------------- Name: Peter E. Sundman Name: Peter E. Sundman Title: Chairman and CEO Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ----------------------- Name: Kelly D. Clevenger Title: Vice President APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS ----------------- ------------------- Lincoln National Variable Annuity Account C Partners* Mid-Cap Growth Regency Lincoln National Variable Annuity Account L Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account Q Partners* Mid-Cap Growth Regency Lincoln National Variable Annuity Account 37 Mid-Cap Growth Lincoln National Variable Annuity Account 38 Regency Lincoln National Flexible Premium Life Account M Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account R Partners Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account S Partners Mid-Cap Growth Regency Lincoln Life Variable Annuity Account N Mid-Cap Growth Regency Lincoln Life Variable Annuity Account W Balanced Mid-Cap Growth Regency Lincoln National Flexible Premium Variable Life Account Z Balanced Limited Maturity Bond Mid-Cap Growth Partners Regency Lincoln Life Separate Account 4k Mid-Cap Growth Regency
*The Partners Fund will not be available under this separate account after June 9, 2006. AMENDMENT #9 TO THE FUND PARTICIPATION AGREEMENT This Amendment to the Fund Participation Agreement dated as of September 18, 1998, as amended, among 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") and NEUBERGER BERMAN MANAGEMENT INC., a New York corporation ("NB MANAGEMENT"), is effective as of May 1, 2007, regardless of when executed. Terms defined in the Agreement are used herein as therein defined. WHEREAS, Lincoln Financial Distributors, Inc. will serve as the Principal Underwriter for the Variable Contracts; NOW, THEREFORE, the Life Company, Trust and NB Management hereby agree as follows: 1. Section 2.1 of the Agreement is deleted and replaced in its entirety as follows: 2.1 LIFE COMPANY represents and warrants that it is an insurance company duly organized and validly existing under the laws of Indiana and that it has legally and validly established each Separate Account as a segregated asset account under such laws, and that Lincoln Financial Distributors, Inc., a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member in good standing of the National Association of Securities Dealers, Inc., is the principal underwriter for the Variable Contracts. 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 MANAGEMENT INC. ADVISERS MANAGEMENT TRUST By: /s/ Peter E. Sundman By: /s/ Peter E. Sundman -------------------------- -------------------------- Name: Peter E. Sundman Name: Peter E. Sundman Title: Chairman and CEO Title: President THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger -------------------------- Name: Kelly D. Clevenger Title: Vice President
EX-99 20 a2182662zex-99_1.txt PARTICIPATION AGREEMENT By and Among OCC ACCUMULATION TRUST And THE LINCOLN NATIONAL LIFE INSURANCE COMPANY And OCC DISTRIBUTORS THIS AGREEMENT, made and entered into this 15 day of May 1998 by and among The Lincoln National Life Insurance Company, an Indiana Corporation (hereinafter the "Company"), on its own behalf and on behalf of each separate account of the Company named in Schedule I to this Agreement, as may be amended from time to time (each account referred to as the "Account"), OCC ACCUMULATION TRUST, an open-end diversified management investment company organized tinder the laws of the State of Massachusetts (hereinafter the "Fund") and OCC DISTRIBUTORS, a Delaware general partnership (hereinafter the "Underwriter"). WHEREAS, the Fund engages in business as an open-end diversified, management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance contracts and variable annuity contracts to be offered by insurance companies which have entered into participation agreements substantially identical to this Agreement (hereinafter "Participating Insurance Companies"); and WHEREAS, beneficial interests in the Fund are divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission (alternatively referred to as the "SEC" or the "Commission") dated February 22, 1995 (File No. 812-9290), granting Participating Insurance Companies and variable annuity separate accounts and variable life insurance separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity separate accounts and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and qualified pension and retirement plans (hereinafter the "Mixed and Shared Funding Exemptive Order"); and WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the" 193 3 Act"); and WHEREAS, the Company has registered or will register certain variable annuity contracts and variable life insurance policies (the "Contracts") under the 1933 Act; and WHEREAS, the Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company under the insurance laws of the State of Indiana, to set aside and invest assets attributable to the Contracts; and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and 2 WHEREAS, the Underwriter is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is a member in GOOD standing of the National Association of Securities Dealers, Inc. (hereinafter "NASD")and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios named in Schedule 2 on behalf of the Accounts named in Schedule 2 to fund the Contracts and the Underwriter is authorized to sell such shares to unit investment trusts such as the Accounts at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund and the Underwriter agree as follows: ARTICLE I. SALE AND REDEMPTION OF FUND SHARES 1.1. The Underwriter agrees to sell to the Company those shares of the Fund which the Company orders on behalf of each Account, executing such orders on a daily basis at the net asset value next computed after receipt and acceptance by the Fund or its agent of the order for the shares of the Fund. For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such order by 10:00 a.m. Eastern Time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the SEC. 3 1.2. The Company shall pay for Fund shares on the next Business Day after it places an order to purchase Fund shares in accordance with Section 1. 1 hereof Payment shall be in federal funds transmitted by wire. 1.3. The Fund agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by Participating Insurance Companies and their separate accounts on those days on which the Fund calculates its net asset value pursuant to rules of the SEC; provided, however, that the Board of Trustees of the Fund (hereinafter the "Directors") may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Directors, acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of any Portfolio. 1.4. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts, qualified pension and retirement plans or such other persons as are permitted under applicable provisions of the Internal Revenue Code of 1986, as amended, (the "Internal Revenue Code"), and regulations promulgated thereunder, the sale to which will not impair the tax treatment currently afforded the contracts. No shares of any Portfolio will be sold to the general public. 1.5. The Fund and the Underwriter will not sell Fund shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles 1, 111, V, and VII of this Agreement are in effect to govern such sales. The Fund shall make available upon written request from the Company (i) a list of all other Participating 4 Insurance Companies and (ii) a copy of the Participation Agreement executed by any other Participating Insurance Company. 1.6. The Fund agrees to redeem for cash, upon the Company's request, any full or fractional shares of the Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt and acceptance by the Fund or its agent of the request for redemption. For purposes of this Section 1.6, the Company shall be the designee of the Fund for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided the Fund receives notice of request for redemption by 10:00 a.m. Eastern Time on the next following Business Day. Payment shall be in federal funds transmitted by wire to the Company's account as designated by the Company in writing from time to time, on the same Business Day the Fund receives notice of the redemption order from the Company, except that the Fund reserves the right to delay payment of redemption proceeds in the event that portfolio holdings other than cash equivalents must be liquidated to pay the redemption proceeds, but in no event may such payment be delayed longer than the period permitted under Section 22(e) of the 1940 Act. Neither the Fund nor the Underwriter shall bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds; the Company alone shall be responsible for such action. If notification of redemption is received after 10:00 a.m. Eastern Time, payment for redeemed shares will be made on the next following Business Day. 1.7. The Company agrees to purchase and redeem the shares of the Portfolios named in Schedule 2 offered by the then current prospectus of the Fund in accordance with the provisions of such prospectus. 1.8. Issuance and transfer of the Fund's shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Purchase and redemption orders 5 for Fund shares will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account. 1.9. The Fund shall furnish notice as soon as reasonably practicable to the Company of any income, dividends or capital gain distributions payable on the Fund's shares. The Company hereby elects to receive all such dividends and distributions as are payable on the Portfolio shares in the form of additional shares of that Portfolio. The Company reserves the right to revoke this election and to receive all such dividends and distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.10. The Fund shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated and shall use its best efforts to make such net asset value per share available by 5:30 p.m., Eastern Time, each business day. Any material error in the calculation of net asset value per share, dividend or capital gain information shall be reported promptly to the Company upon discovery by the Fund and the Company shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct net asset value. ARTICLE H. REPRESENTATIONS AND WARRANTIES 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act and that the Contracts will be issued and sold in compliance with all applicable federal and state laws. The Company further represents and warrants that it is an insurance company duly organized and validly existing under applicable law and that it has legally and validly established each Account as a segregated asset account under applicable state law and has 6 registered each Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as segregated investment accounts for the Contracts, and that it will maintain such registration for so long as the 1940 Act requires. The Company shall amend the registration statement under the 1933 Act for the Contracts and the registration statement under the 1940 Act for the Account from time to time as required in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company shall register and qualify the Contracts for sale in accordance with the securities laws of the various states only if and to the extent deemed necessary by the Company. 2.2. The Company represents that it believes that the Contracts are currently and at the time of issuance will be treated as annuity contracts or life insurance policies under applicable provisions of the Internal Revenue Code and that it will make every effort to maintain such treatment and that it will notify the Fund and the Underwriter immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. 2.3. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Fund is and shall remain registered under the 1940 Act for as long as the Fund shares are sold. The Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund or the Underwriter. 7 2.4. The Fund represents that it is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code, and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.5. The Fund represents that its investment objectives, policies and restrictions comply with applicable state investment laws as they may apply to the Fund. The Fund makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws and regulations of any state. The Company alone shall be responsible for informing the Fund of any investment restrictions imposed by state insurance laws which are applicable to the Fund. To the extent feasible and consistent with market conditions, the Fund will adjust its investments to comply with the aforementioned state insurance laws upon written notice from the Company of such requirements and proposed adjustments, it being agreed and understood that in any such case the Fund shall be allowed a reasonable period of time under the circumstances after receipt of such notice to make any such adjustment. 2.6. The Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule l2b-1 under the 1940 Act or otherwise, although it may make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have its Board of Trustees, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule l2b-I to finance distribution expenses. 8 2.7. The Underwriter represents and warrants that it is a member in good standing of the National Association of Securities Dealers, Inc., ("NASD") and is registered as a broker-dealer with the SEC. The Underwriter' further represents that it will sell and distribute the Fund shares in accordance with all applicable federal and state securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.8. The Fund represents that it is lawfully organized and validly existing under the laws of Massachusetts and that it does and will comply with applicable provisions of the 1940 Act. 2.9. The Underwriter represents and warrants that the Fund's Adviser, OpCap Advisors, is and shall remain duly registered under federal securities laws and that the Adviser will perform its obligations to the Fund in accordance with the laws of Massachusetts and any applicable state and federal securities laws. 2.10. The Fund and Underwriter represent and warrant that all of their directors, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(I) adopted pursuant to the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid Bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. 2.11. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are covered by a blanket fidelity bond or similar coverage for the benefit of the Fund,- in an amount not less than $5 million. The aforesaid includes coverage for larceny and 9 embezzlement and is issued by a reputable bonding company. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund and the Underwriter in the event that such coverage no longer applies. ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING 3.1. The Underwriter shall provide the Company, at the Company's expense, with as many copies of the Fund's current prospectus or, if requested by the Company, a version of the Fund's prospectus that includes only the Portfolios of the Fund that are used to fund the Company's contracts, as the Company may reasonably request for use with prospective contractowners and applicants. The Underwriter shall print and distribute, at the Fund's or Underwriter's expense, as many copies of said prospectus as necessary for distribution to existing contractowners or participants. If requested by the Company in lieu thereof, the Fund shall provide such documentation including a final copy of a current prospectus set in type at the Fund's expense and other assistance as is reasonably necessary in order for the Company at least annually (or more frequently if the Fund prospectus is amended more frequently) to have the new prospectus for the Contracts and the Fund's new prospectus printed together in one document. In such case the Fund shall bear its share of expenses as described above. 3.2. The Fund's prospectus shall state that the Statement of Additional Information for the Fund is available from the Underwriter or alternatively from the Company (or, in the Fund's discretion, the Prospectus shall state that such Statement is available from the Fund), and the Underwriter (or the Fund) shall provide such Statement, at its expense, to the Company-and to any owner of or participant under a Contract who requests such Statement or, at 10 the Company's expense, to any prospective contractowner and applicant who requests such statement. 3.3. The Fund, at its expense, shall provide the Company with copies of its proxy material, if any, reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably require and shall bear the costs of distributing them to existing contractowners or participants. 3.4. If and to the extent required by law the Company shall: (i) solicit voting instructions from contractowners or participants; (ii) vote the Fund shares held in an Account in accordance with in structions received from contractowners or participants; and (iii) vote Fund shares held in an Account for which no timely instructions have been received, in the same proportion as Fund shares of such Portfolio for which instructions have been received from the Company's contractowners or participants; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass through voting privileges for variable contractowners. The Company reserves the right to vote Fund shares held in any segregated asset account in its own right, to the extent permitted by law. Participating Insurance Companies shall be responsible for assuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with other Participating Insurance Companies. 3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular as required, the Fund will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in accordance with the SEC interpretation of the requirements of 11 Section 16(a) with respect to periodic elections of directors and with whatever rules the Commission may promulgate with respect thereto. ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or the Underwriter, each piece of sales literature or other promotional material in which the Fund or the Fund's adviser or the Underwriter is named, at least fifteen business days prior to its use. No such material shall be used if the Fund or the Underwriter reasonably objects in writing to such use within ten business days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or by the Underwriter, except with the permission of the Fund or the Underwriter. The Fund and the Underwriter agree to respond to any request for approval on a prompt and timely basis. 4.3. The Fund or the Underwriter shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company or its separate account is named, least fifteen business days prior to its use. No such material shall be used if the Company reasonably objects in writing to such use within ten business days after receipt of such material. 12 4.4. The Fund and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts-other than the information or representations contained in a registration statement or prospectus for the Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by the Company for distribution to contractowners or participants, or in sales literature or other promotional material approved by the Company, except with the permission of the Company. The Company agrees to respond to any request for approval on a prompt and timely basis. 4.5. The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares, within 20 days after the filing of such document with the SEC or other regulatory authorities. 4.6. The Company will provide to the Fund at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund, within 20 days after the filing of such document with the SEC or other regulatory authorities. 4.7. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or 13 tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (ie., any written communication distributed or made generally available to customers- or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act. ARTICLE V. FEES AND EXPENSES 5.1. THE FUND AND UNDERWRITER shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then, subject to obtaining any required exemptive orders or other regulatory approvals, the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing. Currently, no such payments are contemplated. 5.2. All expenses incident to performance by the Fund of this Agreement shall be paid by the Fund to the extent permitted by law. All Fund shares will be duly authorized for issuance and registered in accordance with applicable federal law and to the extent deemed advisable by the Fund, in accordance with applicable state law, prior to sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, Fund proxy materials and reports, setting in- type, printing and distributing the prospectuses, the proxy materials and reports to 14 existing shareholders and contractowners, the preparation of all statements and notices required by any federal or state law, all taxes on the issuance or transfer of the Fund's shares, and any expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any, under Rule by 12b- I under the 1940 Act. ARTICLE VI. DIVERSIFICATION 6.1. The Fund will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Internal Revenue Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or fife insurance contracts and any amendments or other modifications to such Section or Regulations in accordance with guidelines provided by the Company prior to the execution of this Agreement and as necessary thereafter. In the event of a breach of this Article VI by the Fund, it will take all reasonable steps (a) to notify the Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance with the grace period afforded by Treasury Regulation 1.817-5. ARTICLE VII. POTENTIAL CONFLICTS 7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the Fund for the existence of any material irreconcilable conflict among the interests of the contractowners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public 15 ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by Participating Insurance Companies or by variable annuity contract and variable fife insurance contractowners; or (f) a decision by an insurer to disregard the voting instructions of contractowners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. A majority of the Fund Board shall consist of persons who are not "interested" persons of the Fund. 7.2. The Company has reviewed a copy of the Mixed and Shared Funding Exemptive Order, and in particular, has reviewed the conditions to the requested relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive Order, the Company will report any potential or existing conflicts of which it is aware to the Fund Board. The Company agrees to assist the Fund Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Fund Board upon its request with all information reasonably necessary for the Fund Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Fund Board whenever contractowner voting instructions are disregarded. The Fund Board shall record in its minutes or other appropriate records, all reports received by it and all action with regard to a conflict. 7.3. If it is determined by a majority of the Fund Board, or a majority of its disinterested Directors, that an irreconcilable material conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested Directors), take whatever steps are necessary to 16 remedy or eliminate the irreconcilable material Conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting- such assets in a different investment medium, including (but not limited to) another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected contractowners and, as appropriate, segregating the assets of any appropriate group (ie., variable annuity contractowners or variable fife insurance contractowners, of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contractowners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. 7.4. If the Company's disregard of voting instructions could conflict with the majority of contractowner voting instructions, and the Company's judgment represents a minority position or would preclude a majority vote, the Company may be required, at the Fund's election, to withdraw the Account's investment in the Fund and terminate this Agreement with respect to such Account. Any such withdrawal and termination must take place within 90 days after the Fund gives written notice to the Company that this provision is being implemented. Until the end of such 90 day period the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.5. If a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state insurance regulators, then the Company will withdraw the Account's investment in the Fund and terminate this Agreement with respect to such Account. Any such withdrawal and termination must take place within 90 days after the Fund gives written notice to the Company that this provision is being implemented. Until the end of such 90 day 17 period the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund. 7.6. For purposes of Sections 1.3 through 7.6 of this Agreement, a majority of the disinterested members of the Fund Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund or the Underwriter be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of contractowners materially adversely affected by the irreconcilable material conflict. 7.7. The Company shall from time to time submit to the Fund Board such reports, materials or data as the Fund Board may reasonably request so that the Fund Board may fully carry out the duties imposed upon it as delineated in the Mixed and Shared Funding Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Fund Board. 7.8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall 18 continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted. ARTICLE VIII. INDEMNIFICATION 8.1. INDEMNIFICATION BY THE COMPANY (a) The Company agrees to indemnify and hold harmless the Fund, the Underwriter, and each of the Fund's or the Underwriter's directors, officers, employees or agents and each person, if any, who controls or is associated with the Fund or the Underwriter within the meaning of such terms under the federal securities laws (collectively, the "indemnified parties" for purposes of this Section 8. 1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including reasonable legal and other expenses), to which the indemnified parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement, prospectus or statement of additional information for the Contracts or contained in the Contracts or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this agreement to indemnify shall not apply as to any indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the registration statement, prospectus or statement of additional information for the Contracts or in the Contracts or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or 19 (ii) arise out of or as a result of untrue statements or representations by or on behalf of the Company (other than statements or representations contained in the Fund registration statement, Fund prospectus, Fund statement of additional information or sales literature or other promotional material of the Fund not supplied by the Company or persons under its control) or willful malfeasance, bad faith or gross negligence of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Fund registration statement, Fund prospectus, statement of additional information or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such a statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company or persons under its control; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (v) arise out of any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach by the Company of this Agreement; except to the extent provided in Sections 8. 1 (b) and 8.3 hereof This indemnification shall be in addition to any liability which the Company may otherwise have. (b) No party shall be entitled to indemnification if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 20 (c) The indemnified parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of THE Fund shares or the Contracts or the . operation of the Fund. 8.2. INDEMNIFICATION BY THE UNDERWRITER (a) The Underwriter, on its own behalf and on behalf of the Fund, agrees to indemnify and hold harmless the Company and each of its directors, officers, employees or agents and each person, if any, who controls or is associated with the Company within the meaning of such terms under the federal securities laws (collectively, the "indemnified parties" for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including reasonable legal and other expenses) to which the indemnified parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, prospectus or statement of additional information for the Fund or sales literature or other promotional material of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this agreement to indemnify shall not apply as to any indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity With information furnished to the Underwriter or Fund by or on behalf of the Company for use in the registration statement, prospectus or statement of additional information for the Fund or in sales literature or other promotional material of the Fund (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of untrue statements or representations (other than statements or representations contained in the Contracts 21 or in the Contract or Fund registration statement, the Contract or Fund prospectus, statement of additional information, or sales literature or other promotional material for the Contracts or of the Fund not supplied by the Underwriter or the Fund or persons under the control of the Underwriter or the Fund respectively) or willful malfeasance, bad faith or gross negligence of the Underwriter or the Fund or persons under the control of the Underwriter or the Fund respectively, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, statement of additional information or sales literature or other promotional material covering the Contracts (or any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Underwriter or the Fund or persons under the control of the Underwriter or the Fund; or (iv) arise as a result of any failure by the Fund to provide the services and furnish the materials under the terms of this Agreement(including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements and procedures related thereto specified in Article VI of this Agreement except if such failure is a result of the Company's failure to comply with the notification procedures specified in Article VI); or (v) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter or the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter or the Fund; except to the extent provided in Sections 8.2(b) and 8.3 hereof. This indemnification shall be in addition to any liability which the Underwriter may otherwise have. (b) No party shall be entitled to indemnification if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 22 (c) The indemnified parties will promptly notify the Underwriter of the commencement of any litigation or proceedings against them in connection with the issuance or sale of THE Contracts or the operation of the Account. 8.3. INDEMNIFICATION PROCEDURE Any person obligated to provide indemnification under this Article VIE ("indemnifying party" for the purpose of this Section 8.3) shall not be liable under the indemnification provisions of this Article VIII with respect to any claim made against a party entitled to indemnification under this Article VIII ("indemnified party" for the purpose of this Section 8.3) unless such indemnified party shall have notified the indemnifying party in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such indemnified party (or after such party shall have received notice of such service on any designated agent), but failure to notify the indemnifying party of any such claim shall not relieve the indemnifying party from any liability which it may have to the indemnified party against whom such action is brought under the indemnification provision of this Article VIII, except to the extent that the failure to notify results in the failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of failure to give such notice. In case any such action is brought against the indemnified party, the indemnifying party will be entitled to participate, at its own expense, in the defense thereof The indemnifying party also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the indemnifying party to the indemnified party of the indemnifying party's election to assume the defense thereof, the indemnified party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to such party under this Agreement for any legal or other 23 expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VHI shall survive any termination of this Agreement. 8.4. CONTRIBUTION In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Article VIII is due in accordance with its terms but for any reason is held to be unenforceable with respect to a party entitled to indemnification ("indemnified party" for purposes of this Section 8.4) pursuant to the terms of this Article VIII, then each party obligated to indemnify pursuant to the terms of this Article VIII shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and litigations in such proportion as is appropriate to reflect the relative benefits received by the parties to this Agreement in connection with the offering of Fund shares to the Account and the acquisition, holding or sale of Fund shares by the Account, or if such allocation is not permitted 24 by applicable law, in such proportions as is appropriate to reflect the relative net benefits referred to above but also the relative fault of the parties to this Agreement in connection with any actions that lead to such losses, claims, damages, liabilities or litigations, as well as any other relevant equitable considerations. ARTICLE IX. APPLICABLE LAW 9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York. 9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to the Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. TERMINATION 10.1. This Agreement shall terminate: (a) at the option of any party upon six months' advance written notice to the other parties unless otherwise agreed in a separate written agreement among the parties; or (b) at the option of the Company if shares of the Portfolios delineated in Schedule 2 are not reasonably available to meet the requirements of the Contracts as determined by the Company; or (c) at the option of the Fund upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other 25 regulatory body regarding the Company's duties under this Agreement or related to the sale of the Contracts, the administration of the Contracts, the operation of the Account, or the purchase of the FUND shares, which the Fund reasonably believes would have a material adverse effect on the Company's ability to perform its obligations under this Agreement; or (d) at the option of the Company upon institution of formal proceedings against the Fund or the Underwriter by the NASD, the SEC, or any state securities or insurance department or any other regulatory body, which the Company reasonably believes would have a material adverse effect on the Fund's or the Underwriter's ability to perform its obligations under this Agreement; or (e) at the option of the Company or the Fund upon receipt of any necessary regulatory approvals and/or the vote of the contractowners having an interest in the Account (or any subaccount) to substitute the shares of another investment company for the corresponding Portfolio shares of the Fund in accordance with the terms of the Contracts for which those Portfolio shares had been selected to serve as the underlying investment media. The Company will give 30 days prior written notice to the Fund of the date of any proposed vote or other action taken to replace the Fund's shares; or (f) at the option of the Company or the Fund upon a determination by a majority of the Fund Board, or a majority of the disinterested Fund Board members, that an irreconcilable material conflict exists among the interests of (i) all contractowners of variable insurance products of all separate accounts of (ii) the interests of the Participating Insurance Companies investing in the Fund as delineated in Article VII of this Agreement; or (g) at the option of the Company if the Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Internal Revenue Code, or under any 26 successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify; or (h) at the option of the Company if the Fund fails to meet the diversification requirements specified in Article VI hereof, or (i) at the option of any party to this Agreement, upon another party's material breach of any provision of this Agreement; or (j) at the option of the Company, if the Company determines in its sole judgment exercised in good faith, that either the Fund or the Underwriter has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement; or (k) at the option of the Fund or Underwriter, if the Fund or Underwriter respectively, shall determine in its sole judgment exercised in good faith, that the Company has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement; or (1) at the option of the Fund in the event any of the Contracts are not issued or sold in accordance with applicable federal and/or state law. Termination shall be effective immediately upon such occurrence without notice. 10.2. NOTICE REQUIREMENT (a) In the event that any termination of this Agreement is based upon the provisions of Article VII, such prior written notice shall be given in advance of the effective date of termination as required by such provisions. (b) In the event that any termination of this Agreement is based upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice of the election to 27 terminate this Agreement for cause shall be furnished by the party terminating the Agreement to the non-terminating parties, with said termination to be effective upon receipt of such notice by the non-terminating parties. (c) In the event that any termination of this Agreement is based upon the provisions of Sections 10.10) or 10.1(k), prior written notice of the election to terminate this Agreement for cause shall be famished by the party terminating this Agreement to the nonterminating parties. Such prior written notice shall be given by the party terminating this Agreement to the non-terminating parties at least 30 days before the effective date of termination. 10.3. It is understood and agreed that the right to terminate this Agreement pursuant to Section 16. 1 (a) may be exercised for any reason or for no reason. 10.4. EFFECT OF TERMINATION (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement, the Company may require the Fund and the Underwriter to, -continue to make available additional shares of the Fund for so long after the termination of this Agreement as the Company desires pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.4 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. 28 (b) If shares of the Fund continue to be made available after termination of this Agreement pursuant to this Section 10.4, the provisions of this Agreement shall remain in effect except for Section 10. 1 (a) and thereafter the Fund, the Underwriter, or the Company may terminate the Agreement, as so continued pursuant to this Section 10.4, upon written notice to the other party, such notice to be for a period that is reasonable under the circumstances but, if given by the Fund or Underwriter, need not be for more than 90 days. 10.5. Except as necessary to implement contractowner initiated or approved transactions, or as required by state insurance laws or regulations, the Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company's assets held in the Account), and the Company shall not prevent contractowners from allocating payments to a Portfolio that was otherwise available under the Contracts, until 90 days after the Company shall have notified the Fund or Underwriter of its intention to do so. ARTICLE XI. NOTICES Any notice shall be deemed duly given only if sent by hand, evidenced by written receipt or by certified mail, return receipt requested, to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. All notices shall be deemed given three business days after the date received or rejected by the addressee. If to the Fund: Mr. Bernard H. Garil President OpCap Advisors 200 Liberty Street New York, NY 10281 If to the Company: 29 Kelly D. Clevenger The Lincoln National Life Insurance Company 1300 S. Clinton Street Fort Wayne, IN 46802-3 506 If to the Underwriter: Mr. Thomas E. Duggan Secretary OCC Distributors 200 Liberty Street New York, NY 10281 ARTICLE XII. MISCELLANEOUS 12.1. All persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund as neither the Directors, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Fund. 12.2. Subject to law and regulatory authority, each party hereto shall treat as confidential all information reasonably identified as such in writing by any other party hereto (including without limitation the names and addresses of the owners of the Contracts) and, except as contemplated by this Agreement, shall not disclose, disseminate or utilize such confidential information until such time as it may come into the public domain without the express prior written consent of the affected party. 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or other-wise affect their construction or effect. 12.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 30 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. This Agreement shall not be assigned by any party hereto without the prior written consent of all the parties. 12.7. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit each other and such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 12.8. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 12.9. The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts, the Accounts or the Portfolios of the Fund. 31 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized representative as of the date and year first WRITTEN above. COMPANY: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY SEAL By: /s/ Kelly D. Clevenger FUND: OCC ACCUMULATION TRUST SEAL By: UNDERWRITER: OCC DISTRIBUTORS By: /s/ Thomas E. Duggan 32 SCHEDULE I Participation Agreement Among OCC Accumulation Trust, The Lincoln National Life Insurance Company and OCC Distributors The following separate accounts of The Lincoln National Life Insurance Company are permitted in accordance with the provisions of this Agreement to invest in Portfolios of the Fund shown in Schedule 2: Lincoln Life Flexible Premium Variable Life Separate Account M Lincoln Life Flexible Premium Variable Life Separate Account R May 15, 1998 SCHEDULE 2 Participation Agreement Among OCC Accumulation Trust, The Lincoln National Life Insurance Company and OCC Distributors The Separate Account(s) shown on Schedule I may invest in the following Portfolios of the OCC Accumulation Trust: Global Equity Portfolio Managed Portfolio May 15, 1998 AMENDMENT TO THE PARTICIPATION AGREEMENT DATED MAY 15,1998 BY AND AMONG OCC ACCUMULATION TRUST, OCC DISTRIBUTORS AND THE LINCOLN NATIONAL LIFE INSURANCE COMPANY This is an amendment to the May 15, 1998 Participation Agreement ("Agreement") among OCC Accumulation Trust, OCC Distributors, and The Lincoln National Life Insurance Company. The following separate accounts of The Lincoln National Life Insurance Company are permitted in accordance with the provisions of this Agreement to invest in Portfolios of the Fund shown in Schedule 2: Lincoln Life Flexible Premium Variable Life Separate' Account M Lincoln Life Premium Variable Life Separate Account R Lincoln Life Variable Annuity Account N October 7, 1998 OCC ACCUMULATION TRUST By: /s/ Bernard H. Garil Name Bernard H. Garil Title: Vice President OCC DISTRIBUTORS By: /s/ Thomas E. Duggan Name: Thomas E. Duggan Title: Secretary THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President AMENDMENT TO THE PARTICIPATION AGREEMENT DATED MAY 15, 1998 BY AND AMONG OCC ACCUMULATION TRUST, OCC DISTRIBUTORS AND THE LINCOLN NATIONAL LIFE INSURANCE COMPANY This is an amendment to the May 15, 1998 Participation Agreement ("Agreement") among OCC Accumulation Trust, OCC Distributors, and The Lincoln National Life Insurance Company. Schedule 1 is amended to add the following separate account of The Lincoln National Life Insurance Company as permitted in accordance with the provisions of this Agreement to invest in Portfolios of the Fund shown in Schedule 2: Lincoln Life Flexible Premium Variable Life Separate Account S May 17, 1999 OCC ACCUMULATION TRUST By: /s/ Bernard H. Garil Name: Bernard H. Garil Title: Vice President OCC DISTRIBUTORS By: /s/ Deborah Kaback Name: Deborah Kaback Title: Secretary THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger Name: Kelly D. Clevenger Title: Vice President NOVATION OF PARTICIPATION AGREEMENT This Novation Agreement dated as of September 1, 2005 is by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (the "Company"), an Indiana corporation, on its own behalf and on behalf of each separate account of the Company named in Schedule 1 to Participation Agreement (as defined below), PREMIER VIT, an open-end diversified management investment company organized under the laws of the State of Massachusetts (the "Fund"), OCC DISTRIBUTORS LLC, a Delaware limited liability company ("OCC Distributors"), and ALLIANZ GLOBAL INVESTORS DISTRIBUTORS LLC, a Delaware limited liability company ("AGI Distributors"). WHEREAS, the Company, the Fund and OCC Distributors entered into a Participation Agreement on May 15, 1998 ("Participation Agreement"); WHEREAS, the Fund was previously known as OCC ACCUMULATION TRUST; WHEREAS, each of AGI Distributors and OCC Distributors is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934, as amended, and is a member in good standing of the National Association of Securities Dealers, Inc.; WHEREAS, the Company, the Fund and OCC Distributors desire that OCC Distributors be replaced as the Fund's principal underwriter by AGI Distributors; and WHEREAS, the Company and the Fund desire to affect a novation of the Participation Agreement so that AGI Distributors is substituted for OCC Distributors as a party to such agreement and OCC Distributors is released from its obligations under such agreement, AGI Distributors desires to accept the novation thereof, and OCC Distributors desires to consent to such novation. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. NOVATION AND ACCEPTANCE. Subject to the terms and conditions contained herein, the Company and the Fund hereby affect a novation of the Participation Agreement to substitute AGI Distributors for OCC Distributors as party to such agreement (the "Novation"), AGI Distributors hereby accepts such novation and agrees to undertake all of OCC Distributors' duties and obligations under the Participation Agreement. The Company and AGI Distributors hereby release OCC Distributors from all of its duties and obligations under the Participation Agreement and OCC Distributors hereby consents to such novation. 2. TERM. The novation shall become effective on the September 15, 2005 and shall extend for so long as the terms specified in Section 10 of the Participation Agreement are satisfied or until terminated in accordance with said Section 10. 3. NO TERMINATION. The parties agree that the novation shall not constitute a termination of the Participation Agreement for purposes of Section 10 of the Participation Agreement, and that the Participation Agreement, as so novated, shall remain in full force and effect after the novation. 4. NOTICES. All notices to the Company shall be sent to: Rise C.M. Taylor Vice President The Lincoln National Life Insurance Company 1300 South Clinton Street Fort Wayne, Indiana 46802 (260) 455 -1331 rtaylor@lnc.com All notices to the Fund shall be sent to: Attn: Brian Shlissel Fund President 1345 Avenue of the Americas New York, NY 10105 212-732-0200 IN WITNESS WHEREOF, the parties hereto have caused this Novation Agreement to be executed by a duly authorized representative as of the day and year first above written. THE LINCOLN NATIONAL LIFE PREMIER VIT INSURANCE COMPANY By: /s/ Rise C.M. Taylor By: /s/ Brian S. Shlissel -------------------------------- -------------------------------- Name: Rise C.M. Taylor Name: Brian S. Shlissel Title: Vice President Title: President/CEO OCC DISTRIBUTORS ALLIANZ GLOBAL INVESTORS DISTRIBUTORS LLC By: /s/ Francis C. Poli By: /s/ E. Blake Moore, Jr. -------------------------------- -------------------------------- Name: Francis C. Poli Name: E. Blake Moore, Jr. Title: CEO Title: Managing Director and CEO 2 AMENDMENT TO THE PARTICIPATION AGREEMENT DATED MAY 15, 1998 BY AND AMONG PREMIER VIT, ALLIANZ GLOBAL INVESTORS DISTRIBUTORS LLC and THE LINCOLN NATIONAL LIFE INSURANCE COMPANY This is an amendment to the May 15, 1998 Participation Agreement ("Agreement") among Premier VIT (the "Fund"), Allianz Global Investors Distributors LLC, and The Lincoln National Life Insurance Company. Schedule 1 is amended to add the following separate account of The Lincoln National Life Insurance Company as permitted in accordance with the provisions of the Agreement to invest in Portfolios of the Fund shown in Schedule 2: Lincoln Life Flexible Premium Variable Life Separate Account Z Schedule 2 is amended to add the following Portfolio of the Fund as permitted in accordance with the provisions of the Agreement for investment by the separate accounts listed on Schedule 1: Small Cap Portfolio June 1, 2006 PREMIER VIT By: /s/ Brian S. Shlissel ---------------------- Name: Brian S. Shlissel Title: PRESIDENT & CEO ALLIANZ GLOBAL INVESTORS DISTRIBUTORS LLC By: /z/ E. Blake Moore, Jr. ------------------------ Name: E. Blake Moore, Jr. Title: MANAGING DIRECTOR & CEO THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: /s/ Kelly D. Clevenger ----------------------- Name: Kelly D. Clevenger Title: Vice President EX-99 21 a2182657zex-99_1.txt PARTICIPATION AGREEMENT AMONG PUTNAM VARIABLE TRUST PUTNAM RETAIL MANAGEMENT, L.P. AND THE LINCOLN NATIONAL LIFE INSURANCE COMPANY THIS AGREEMENT, made and entered into as of this 30th day of April, 2001, among The Lincoln National Life Insurance Company (the "Company"), an Indiana corporation, on its own behalf and on behalf of each separate account of the Company set forth on Schedule A hereto, as such Schedule may be amended from time to time (each such account hereinafter referred to as the "Account"), PUTNAM VARIABLE TRUST (the "Trust"), a Massachusetts business trust, and PUTNAM RETAIL MANAGEMENT, L.P. (the "Underwriter"), a Massachusetts limited partnership. WHEREAS, the Trust is an open-end diversified 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 Trust and the Underwriter (the "Participating Insurance Companies"); and WHEREAS, the beneficial interest in the Trust is divided into several series of shares, each designated a "Fund" and representing the interest in a particular managed portfolio of securities and other assets; and WHEREAS, the Trust has obtained an order from the Securities and Exchange Commission, dated December 29, 1993 (File No. 812-8612), granting the variable annuity and variable life insurance separate accounts participating in the Trust exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended (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 the Participating Insurance Companies (the "Shared Funding Exemptive Order"); and WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and the sale of its shares is registered under the Securities Act of 1933, as amended (the " 1933 Act"); and WHEREAS, the Company has registered or will register certain variable life and/or variable annuity contracts under the 1933 Act unless exempt therefrom and any applicable state securities and insurance law; and WHEREAS, each Account is a duly organized, validly existing separate account, established by resolution of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to one or more variable insurance contracts (the "Contracts"); and WHEREAS, the Company has registered or will register the Account as a unit investment trust under the 1940 Act unless exempt therefrom; and WHEREAS, the Underwriter is registered as a broker dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the " 1934 Act"), and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in certain Funds ("Authorized Funds") on behalf of each Account to fund certain of the 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 the promises herein, the Company, the Trust and the Underwriter agree as follows: ARTICLE 1. SALE OF TRUST SHARES 1.1 The Underwriter agrees, subject to the Trust's rights under Section 1.2 and otherwise under this Agreement, to sell to the Company those Trust shares representing interests in Authorized Funds which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Trust or its designee of the order for the shares of the Trust. For purposes of this Section 1.1, the Company shall be the designee of the Trust for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives notice of such order by 10:00 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 the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. The initial Authorized Funds are set forth in Schedule B, as such schedule is amended from time to time. The Ttrust will confirm receipt of each trade (ending share balance by account and fund) by 2:30 p.m. New York time on the day the trade is placed with the Trust (using a mutually agreed upon format). 1.2 The Trust 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 Trust calculates its net asset value pursuant to rules of the Securities and Exchange 2 Commission and the Trust shall use its best efforts to calculate such net asset value on each day on which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Trustees of the Trust (the "Trustees") may refuse to sell shares of any Fund to the Company or any other person, or suspend or terminate the offering of shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction over the Trust or if the Trustees determine, in the exercise of their fiduciary responsibilities, that to do so would be in the best interests of shareholders. 1.3 The Trust and the Underwriter agree that shares of the Trust will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Fund will be sold to the general public. 1.4 The Trust shall redeem its shares in accordance with the terms of its then current prospectus. For purposes of this Section 1.4, the Company shall be the designee of the Trust for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Trust; provided that the Trust receives notice of such request for redemption by 10:00 a.m., New York time, on the next following Business Day. Payment shall be made the same business day that the Trust receives notice of the order in federal funds initiated by wire no later than 2:30 p.m. New York time as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. 1.5 The Company shall purchase and redeem the shares of Authorized Funds offered by the then current prospectus of the Trust in accordance with the provisions of such prospectus. Trust shall promptly notify Company of any changes to such provisions. 1.6 The Company shall pay for Trust shares on the next Business Day after an order to purchase Trust shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds initiated by wire no later than 2:30 p.m. New York time as long as the banking system is open for business. If the banking system is closed, payment will be transmitted the next day that the banking system is open for business. 1.7 Issuance and transfer of the Trust's shares will be by book entry only. Share certificates will not be issued to the Company or any Account. Shares ordered from the Trust will be recorded as instructed by the Company to the Underwriter in an appropriate title for each Account or the appropriate sub-account of each Account. 1.8 The Underwriter shall furnish prompt notice on or before ex-dividend date (using a mutually agreed upon format) to the Company of the declaration 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 the Fund shares in additional shares of that Fund. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Underwriter shall notify the Company of the number of shares so issued as payment of such dividends and 3 distributions. Each year the Underwriter will provide the Company with a dividend and capital gain payment schedule (using a mutually agreed upon format). 1.9 The Underwriter shall make the net asset value per share for each Fund available to the Company on a daily basis as soon as reasonably practical after the Trust calculates its net asset value per share and each of the Trust and the Underwriter shall use its best efforts to make such net asset value per share available by 6:30 p.m. New York time (using a mutually agreed upon format). The Underwriter will notify Company when and if Underwriter does not communicate the net asset value per share by 6:30 pm New York time. The Trust shall indemnify the Company with respect to all costs, expenses and losses relating to pricing errors or delays in communication of net asset value as may be required to be corrected by law. ARTICLE II. REPRESENTATIONS AND WARRANTIES 2.1 The Company represents and warrants that (a) at all times during the term of this Agreement the Contracts are or will be registered under the 1933 Act or will be offered and sold in compliance with exemptions from such registration; the Contracts will be issued and sold in compliance in all material respects with all applicable 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 separate account under applicable law 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 or operate such Account in compliance with exemption from such registration; and (b) the Contracts are currently treated as endowment, annuity or life insurance contracts, under applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and that it will make every effort to maintain such treatment and that it will notify the Trust 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. 2.2 The Trust represents and warrants that (a) at all times during the term of this Agreement Trust shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold by the Trust to the Company in compliance with all applicable laws, subject to the terms of Section 2.4 below, and the Trust is and shall remain registered under the 1940 Act. The Trust shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Trust shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust or the Underwriter in connection with their sale by the Trust to the Company and only as required by Section 2.4; 4 (b) the Trust is currently qualified as a Regulated Investment Company under Subchapter M of the Code, and that it will use its best efforts to maintain such qualification (under Subchapter M or any successor 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; and (c) the Trust 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. 2.3 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 Trust shares in accordance with all applicable securities laws applicable to it, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.4 Notwithstanding any other provision of this Agreement, the Trust shall be responsible for the registration and qualification of its shares and of the Trust itself under the state securities or "blue sky laws only in connection with the sales of shares directly to the Company through the Underwriter. The Trust shall not be responsible, and the Company shall take full responsibility, for determining whether any qualification or registration of Trust shares is required under such laws in connection with the sale of the Contracts or the indirect interest of any Contractholder in any shares of the Trust and advising the Trust thereof at such time and in such manner as is necessary to permit the Trust to comply. 2.5 The Trust 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. ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING 3.1 The Trust shall provide such documentation (including a camera-ready copy of its prospectus) and other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus for the Trust is amended) to have the prospectus for the Contracts and the Trust's prospectus printed together in one or more documents (such printing to be at the Company's expense). 3.2 The Trust's Prospectus shall state that the Statement of Additional Information for the Trust is available from the Underwriter or its designee (or in the Trust's discretion, the Prospectus shall state that such Statement is available from the Trust), and the Underwriter (or the Trust), at its expense, shall print and provide such Statement free of charge to the Company and to any owner of a Contract or prospective owner who requests such Statement. 5 3.3 The Trust, at its expense, shall provide the Company with copies of its reports to shareholders, proxy material and other communications to shareholders in such quantity as the Company shall reasonably require for distribution to the Contract owners, such distribution to be at the expense of the Trust in the case of proxy material and at the expense of the Company in the case of shareholder reports. 3.4 The Company shall vote all Trust shares as required by law and the Shared Funding Exemptive Order. The Company reserves the right to vote Trust shares held in any separate account in its own right, to the extent permitted by law and the Shared Funding Exemptive Order. The Company shall be responsible for assuring that each of its separate accounts participating in the Trust calculates voting privileges in a manner consistent with all legal requirements and the Shared Funding Exemptive Order. 3.5 The Trust will comply with all applicable provisions of the 1940 Act requiring voting by shareholders, and in particular the Trust will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Trust 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 Trust 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. 3.6 The Trust and the Underwriter agree to use their best efforts to provide the Company all Trust proxies, reports, and prospectuses (including supplements) in HTML, PDF and hard copy in final form no later than 15 calendar days before they must be mailed: Reports - February 13th and August 14th, Prospectuses - April 15th. Trust will customize prospectuses (including supplements) to include only funds offered in the Company's products. ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1 Without limiting the scope or effect of Section 4.2 hereof, the Company shall furnish, or shall cause to be furnished, to the Underwriter each piece of sales literature or other promotional material (as defined hereafter) in which the Trust, its investment adviser or the Underwriter is named at least 15 days prior to its use. No such material shall be used if the Underwriter objects to such use within five 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 Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Trust shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in annual or semi-annual reports or proxy statements for the Trust, or in sales literature or other promotional material approved by the Trust or its designee or by the Underwriter, except with the written permission of the Trust or the Underwriter or the designee of either or as is required by law. 6 4.3 The 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 prepared by the Underwriter in which the Company and/or its separate account(s) is named at least 15 days prior to its use. No such material shall be used if the Company or its designee objects to such use within five Business Days after receipt of such material. 4.4 Neither the Trust nor the Underwriter shall 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 written permission of the Company or as is required by law. 4.5 For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), 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 registered representatives. 4.6 The Underwriter will support onsite visits by Company no less frequently than biannually and visit the Company no less frequently than annually. The Trust or Underwriter will provide a signed compliance report as reasonably requested by the Company or its designee, on a quarterly basis to include but not limited to: 817 (h), subchapter M, and Prospectus guidelines. The Trust or Underwriter will provide State of California Bulletin 97-2 compliance certification upon reasonable request. The Trust or Underwriter will provide fund statistics and commentaries (as reasonably required by Company) in electronic format each calendar quarter, no later than the 17th of the month following quarter-end. The Underwriter will support the Company's marketing and due diligence efforts by granting reasonable requests for visits to the Underwriter's and its affiliates' offices by representatives of the Company. ARTICLE V. FEES AND EXPENSES 5.1 Except as provided in Article VI, the Trust and Underwriter shall pay no fee or other compensation to the Company under this agreement. 5.2 All expenses incident to performance by the Trust under this Agreement 7 shall be paid by the Trust. The Trust shall bear the expenses for the cost of registration and qualification of the Trust's shares, preparation and filing of the Trust's prospectus and registration statement, proxy materials and reports, setting the prospectus and shareholder reports in type, setting in type and printing the proxy materials, and the preparation of all statements and notices required by any federal or state law, in each case as may reasonably be necessary for the performance by it of its obligations under this Agreement. 5.3 The Trust shall bear the expenses of printing and distributing the Trust's proxy materials to existing Contract owners. The Trust will bear the expense of printing its shareholder reports sent to existing Contract owners. The Company will pay the costs of distributing such reports. 5.4 The Company shall bear the expenses of printing and distributing materials, including the Trust's prospectus, used in connection with the sales of the Contracts. The Company shall also bear the expenses of printing and distributing the Account's prospectus (including supplements) to existing Contract owners. ARTICLE VI. SERVICE FEES 6.1 So long as the Company complies with its obligations in this Article VI, the Underwriter shall pay such Company a service fee (the "Service Fee") on shares of the Funds held in the Accounts at the annual rates specified in Schedule B, subject to Section 6.2 hereof. The Company represents and warrants that any Service Fees paid to the Company with respect to the Company's own retirement plans will be used in compliance with the Employee Retirement Income Security Act of 1974, as amended. 6.2 The Company understands and agrees that all Service Fee payments are subject to the limitations contained in each Fund's Distribution Plan, which may be varied or discontinued at any time and hereby waives the right to receive such service fee payments with respect to the Fund if the Fund ceases to pay 12b-1 fees to the Underwriter. 6.3 (a) The Company's failure to provide the services described in Section 6.4 or otherwise comply with the terms of this Agreement will render it ineligible to receive Service Fees; and (b) the Underwriter may, without the consent of the Company, amend this Article VI to change the terms of the Service Fee payments with 90 days prior written notice to the Company. 6.4 The Company will provide the following services to the Contract Owners purchasing Fund shares: (i) Maintaining regular contact with Contract owners and assisting in answering inquiries concerning the Funds; 8 (ii) Assisting in printing and distributing shareholder reports and prospectuses provided by the Underwriter; (iii) Assisting the Underwriter and its affiliates in the establishment and maintenance of investor accounts and records; (iv) Assisting Contract owners in effecting administrative changes, such as exchanging shares in or out of the Funds; (v) Assisting in processing purchasing purchase and redemption transactions; and (vi) Providing any other information or services as the Contract owners or the Underwriter may reasonably request. 6.5 The Company's compliance with the service requirement set forth in this Agreement will be evaluated from time to time by monitoring redemption levels of Fund shares held in any Account and by such other methods as the Underwriter deems appropriate. 6.6 The provisions of this Article VI shall remain in effect for not more than one year from the date hereof and thereafter for successive annual periods only so long as such continuance is specifically approved at least annually by the Trustees in conformity with Rule 12b-1. This Article VI shall automatically terminate in the event of this Agreement' assignment (as defined by the 1940 Act). In addition, this Article VI may be terminated at any time, without the payment of any penalty, with respect to any Fund or the Trust as a whole by any party upon written notice delivered or mailed by registered mail, postage prepaid, to the other party, or , as provided in Rule 12b-1 under the 1940 Act by the Trustees or by the vote of the holders of the outstanding voting securities of any Fund. 6.7 The Underwriter shall provide the Trustees of each of the Funds, and such Trustees shall review at least quarterly, a written report of the amounts paid to the Company under this Article VI and the purposes for which such expenditures were made. The Company will support the Underwriter's marketing efforts by granting reasonable requests for visits to the Company's offices by representatives of the Underwriter. 6.8 For purposes of computing the payment to Company contemplated under this Section 6, the average aggregate net asset value of shares of the Trust held by the Accounts over a one-month period shall be computed by totaling each Account's aggregate investment (share net asset value multiplied by total number of shares held by each Account) on each calendar day during the month, and dividing by the total number of calendar days during such month. The payment shall be calculated by Trust at the end of each calendar quarter and will be paid to the Company within thirty (30) calendar days thereafter. The payment will be accompanied by a statement showing the calculation of the quarterly amounts payable by Trust and such other 9 supporting data as may be reasonably requested by Company. The Company reserves the right to audit the calculations made by Trust. ARTICLE VII. DIVERSIFICATION 7.1 The Trust and the Underwriter represent and warrant that the Trust 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, and life insurance contracts and any amendments or other modifications to such Section or Regulations. Trust will notify Company immediately upon failure to comply with the diversification requirements and take all steps necessary to remedy the failure. ARTICLE VIII. POTENTIAL CONFLICTS 8.1 The Trustees will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Trust. A material irreconcilable 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 law or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Trust shall promptly inform the Company if the Trustees determine that a material irreconcilable conflict exists and the implications thereof. 8.2 The Company will report any potential or existing conflicts of which it is aware to the Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Shared Funding Exemptive Order, by providing the Trustees with all information reasonably necessary for the Trustees to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Trustees whenever Contract owner voting instructions are disregarded. 8.3 If it is determined by a majority of the Trustees, or a majority of the disinterested Trustees, that a material irreconcilable conflict exists, the Company shall to the extent reasonably practicable (as determined by a majority of the disinterested Trustees), take, at the Company's expense, whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including: (1) withdrawing the assets allocable to some or all of the Accounts from the Trust or any Fund and reinvesting such assets in a different investment medium, including (but not limited to) another Fund of the Trust, 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 10 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. 8.4 If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the affected Account's investment in one or more portfolios of 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. No charge or penalty shall be imposed as a result of such withdrawal. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice that this provision is being implemented , and until the end of that six month period the Underwriter and Trust shall, to the extent permitted by law and any exemptive relief previously granted to the Trust, continue to accept and implement orders by the Company for the purchase (or redemption) of shares of the Trust. 8.5 If a material irreconcilable conflict arises because of a particular state insurance regulator's decision applicable to the Company to disregard Contract owner voting instructions and that decision represents a minority position that would preclude a majority vote, then the Company may be required, at the Trust's direction, to withdraw the affected Account's investment in one or more Authorized Funds of the Trust; 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 , unless a shorter period is required by law, and until the end of the foregoing six month period (or such shorter period if required by law), the Underwriter and Trust shall, to the extent permitted by law and any exemptive relief previously granted to the Trust, continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Trust. No charge or penalty will be imposed as a result of such withdrawal. 8.6 For purposes of Sections 8.3 through 8.6 of this Agreement, a majority of the disinterested Trustees shall determine whether any proposed action adequately remedies any material irreconcilable conflict. Neither the Trust nor the Underwriter shall be required to establish a new finding medium for the Contracts, nor shall the Company be required to do so, if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the material irreconcilable conflict. In the event that the Trustees determine that any proposed action does not adequately remedy any material irreconcilable conflict, then the Company will withdraw the Account's investment in one or more Authorized Funds of the Trust and terminate this Agreement within six (6) months (or such shorter period as may be required by law or any exemptive relief previously granted to the Trust) 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 11 determined by a majority of the disinterested Trustees. No charge or penalty will be imposed as a result of such withdrawal. 8.7 The responsibility to take remedial action in the event of the Trustees' determination of a material irreconcilable conflict and to bear the cost of such remedial action shall be the obligation of the Company, and the obligation of the Company set forth in this Article VII shall be carried out with a view only to the interests of Contract owners. 8.8 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 Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then (a) the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with 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, 8.1, 8.2, 8.3, 8.4 and 8.5 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. 8.9 The Company has reviewed the Shared Funding Exemption Order and hereby assumes all obligations referred to therein which are required, including, without limitation, the obligation to provide reports, material or data as the Trustees may request as conditions to such Order, to be assumed or undertaken by the Company. ARTICLE IX. INDEMNIFICATION 9.1. INDEMNIFICATION BY THE COMPANY 9.1 (a). The Company shall indemnify and hold harmless the Trust and the Underwriter and each of the Trustees, directors of the Underwriter, officers, employees or agents of the Trust or the Underwriter and each person, if any, who controls the Trust or the Underwriter within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 9.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company which consent may 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 sale or acquisition of the Trust's shares or the Contracts or the performance by the parties of their obligations hereunder and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a Registration Statement, Prospectus or Statement of Additional Information 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 12 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 Trust for use in the Registration Statement, Prospectus or Statement of Additional Information 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 Trust shares; or (ii) arise out of or as a result of written statements or representations (other than statements or representations contained in the Trust's Registration Statement or Prospectus, or in sales literature for Trust shares 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 Trust 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 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 a statement or omission was made in reliance upon information furnished to the Trust or the Underwriter by or on behalf of the Company; or (iv) arise out of or result from any breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other breach of this Agreement by the Company, as limited by and in accordance with the provisions of Sections 9.1(b) and 9.1(c) hereof. 9.1 (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 to the extent 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 Trust, whichever is applicable. 9.1 (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), on the basis of which the Indemnified Party should reasonably know of the availability of indemnity hereunder in respect of such claim but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the 13 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 Indemnified Party named in the action. After notice from the Company to such Indemnified 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 Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other than reasonable costs of investigation. 9.1 (d) The Underwriter shall promptly notify the Company of the commencement of any litigation or proceedings against the Trust or the Underwriter in connection with the issuance or sale of the Trust Shares or the Contracts or the operation of the Trust. 9. 1 (e) The provisions of this Section 9.1 shall survive any termination of this Agreement. 9.2 INDEMNIFICATION BY THE UNDERWRITER 9.2 (a) The Underwriter shall indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act and any director, officer, employee or agent of the foregoing (collectively, the "Indemnified Parties" for purposes of this Section 9.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter which consent may not be unreasonably withheld) 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 Trust's shares or the Contracts or the performance by the parties of their obligations hereunder and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the sales literature of the Trust prepared by or approved by the Trust or Underwriter (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 Trust by or on behalf of the Company for use in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or 14 (ii) arise out of or as a result of written statements or representations (other than statements or representations contained in the Registration Statement, Prospectus, Statement of Additional Information or sales literature for the Contracts not supplied by the Underwriter or persons under its control) of the Underwriter or persons under its control, with respect to the sale or distribution of the Contracts or Trust shares; or (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, Prospectus, Statement of Additional Information 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 Underwriter; or (iv) arise out of or result from any breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other breach of this Agreement by the Underwriter; as limited by and in accordance with the provisions of Sections 9.2(b) and 9.2(c) hereof. 9.2 (b) The Underwriter 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 each Company or the Account, whichever is applicable. 9.2 (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) on the basis of which the Indemnified Party should reasonably know of the availability of indemnity hereunder in respect of such claim, 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 Indemnified Party named in the action. After notice from the Underwriter to such Indemnified 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 Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other than reasonable costs of investigation. 15 9.2 (d) The Company shall promptly notify the Underwriter of the Trust 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. 9.2 (e) The provisions of this Section 9.2 shall survive any termination of this Agreement. 9.3 INDEMNIFICATION BY THE TRUST 9.3 (a) The Trust shall indemnify and hold harmless the Company, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act and any director, officer, employee or agent of the foregoing (collectively, the "Indemnified Parties" for purposes of this Section 9.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust which consent may not be unreasonably withheld) 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 operations of the Trust and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement, Prospectus and Statement of Additional Information of the 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 furnished to the Underwriter or Trust by or on behalf of the Company for use in the Registration Statement, Prospectus, or Statement of Additional Information for the Trust (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (ii) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust, as limited by and in accordance with the provisions of Sections 9.3(b) and 9.3(c) hereof. 9.3 (b) The Trust shall not be liable under the 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 or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Company, the Trust, the Underwriter or each Account, whichever is applicable. 16 9.3 (c) The Trust shall not be liable under this indemnification provision with respect to any claim made against any Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the 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) on the basis of which the Indemnified Party should reasonably know of the availability of indemnity hereunder in respect of such claim, but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof. The Trust also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Indemnified Party named in the action. After notice from the Trust to such Indemnified Party of the Trust's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Trust will not be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof other than reasonable costs of investigation. 9.3 (d) The Company agrees promptly to notify the Trust of the commencement of any litigation or proceedings against it or any of its officers or, directors, in connection with this Agreement, the issuance or sale of the Contracts or the sale or acquisition of shares of the Trust. 9.3 (e) The provisions of this Section 9.3 shall survive any termination of this Agreement. ARTICLE X. APPLICABLE LAW 10.1 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 10.2 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 XI. TERMINATION 11.1.This Agreement shall terminate: (a) at the option of any party upon six months advance written notice to the other parties; or 17 (b) at the option of the Trust or the Underwriter in the event that formal administrative proceedings are instituted against the Company by the NASD, the Securities and Exchange Commission, any State Insurance Commissioner or any other regulatory body regarding the Company's duties under this Agreement or related to the sales of the Contracts, with respect to the operation of any Account, or the purchase of the Trust shares, provided, however, that the Trust or the Underwriter determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or (c) at the option of the Company in the event that formal administrative proceedings are instituted against the Trust or Underwriter by the NASD, the Securities and Exchange Commission, or any state securities or insurance department or any other regulatory body regarding the Trust's or Underwriter's duties under this Agreement or with in respect to the operation of any Trust, or the sale of shares of the Trust to the Company, provided, however, that the Company determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Trust or Underwriter to perform its obligations under this Agreement; or (d) with respect to any Account, upon requisite vote of the Contract owners having an interest in such Account (or any subaccount) to substitute the shares of another investment company for the corresponding Fund shares of the Trust in accordance with the terms of the Contracts for which those Fund shares had been selected to serve as the underlying investment media. The Company will give 30 days' prior written notice to the Trust of the date of any proposed vote to replace the Trust's shares; or (e) with respect to any Authorized Fund, upon 90 days advance written notice from the Underwriter to the Company, upon a decision by the Underwriter to cease offering shares of the Fund for sale; or (f) at the option of the Company in the event that the Trust fails to maintain its status as a Registered Investment Company or fails to comply with Section 817(h) of the Code. 11.2. It is understood and agreed that the right of any party hereto to terminate this Agreement pursuant to Section 11.1 (a) may be exercised for any reason or for no reason. 11.3 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. Such prior written notice shall be given in advance of the effective date of termination as required by this Article XI. 11.4 Notwithstanding any termination of this Agreement, subject to Section 1.2 of this Agreement, the Trust and the Underwriter shall, at the option of the Company, continue to make 18 available additional shares of the Trust 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, subject to Section 1.2 of this Agreement, the owners of the Existing Contracts shall be permitted to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 11.4 shall not apply to any termination under Article VIII and the effect of such Article VIII termination shall be governed by Article VIII of this Agreement. 11.5 The Company shall not redeem Trust shares attributable to the Contracts (as opposed to Trust shares attributable to the Company's assets held in either Account) except (i) as necessary to implement Contract owner initiated 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"). Upon request, the Company will promptly furnish to the Trust and the Underwriter an opinion of counsel for the Company, reasonably satisfactory to the Trust, to the effect that any redemnification pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, subject to Section 1.2 of this Agreement, the Company shall not prevent Contract owners from allocating payments to an Authorized Fund that was otherwise available under the Contracts without first giving the Trust or the Underwriter 45 days notice of its intention to do. ARTICLE XII. 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: One Post Office Square Boston, MA 02109 Attention: John R. Verani If to the Underwriter: One Post Office Square Boston, MA 02109 Attention: General Counsel 19 If to the Company: The Lincoln National Life Insurance Company 1300 South Clinton Street Fort Wayne, IN 46802 Attn: Steven M. Kluever ARTICLE XIII. MISCELLANEOUS 13.1 A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of the Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually and that the obligations of or arising out of this instrument, including without limitation Article VII, are not binding upon any of the Trustees or shareholders individually but binding only upon the assets and property of the Trust. 13.2 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 13.3 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 13.4 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 13.5 Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the Securities and Exchange Commission, 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. 13.6 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. 13.7 Notwithstanding any other provision of this Agreement, the obligations of the Trust and the Underwriter are several and, without limiting in any way the generality of the foregoing, neither such party shall have any liability for any action or failure to act by the other party, or any person acting on such other party's behalf. 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 its authorized officer, /s/ Steven M. Kluever --------------------------------------- Name: Steven M. Kluever Title: Second Vice President PUTNAM VARIABLE TRUST By its authorized officer, /s/ John Verani --------------------------------------- Name: John Verani Title: Vice President PUTNAM RETAIL MANAGEMENT, L.P. By its authorized officer, /s/ Eric Levy --------------------------------------- Name: Eric Levy Title: Senior Vice President 21 SCHEDULE A LINCOLN LIFE SEPARATE ACCOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------ SEPARATE ACCOUNT NAME DATE ESTABLISHED FUNDS USED CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Lincoln National Variable June 3, 1981 Health Sciences - Class IB Multi Fund (Individual) Annuity Account C Lincoln National Variable Annuity April 29, 1996 Growth and Income - Class IB Lincoln Life Group Variable Account L Annuity Health Sciences - Class IB Lincoln Life Variable Annuity November 3, 1997 Growth and Income - Class IB Lincoln ChoicePlus II Account N Health Sciences - Class IB Lincoln ChoicePlus Bonus II Lincoln ChoicePlus Access II Lincoln ChoicePlus Advance Lincoln Life Variable November 3, 1997 Health Sciences - Class IB Multi Fund (Group) Annuity Account Q Lincoln Life Variable Annuity November 28, 2000 Growth and Income - Class IB Wells Fargo New Directions Core B Account W Small Cap Value - Class IB Wells Fargo New Directions Access C Lincoln Life Flexible Premium December 2, 1997 Growth and Income - Class IB Lincoln Variable Universal Life Variable Life Account M (CV) and (CV2) Health Sciences - Class IB Lincoln Variable Universal Life (DB) and (DB2) Lincoln Variable Universal Life MoneyGuard Lincoln Life Flexible Premium December 2, 1997 Growth and Income - Class IB Lincoln Survivor Variable Variable Life Account R Universal Life Health Sciences - Class IB Lincoln Survivor Variable Universal Life II Lincoln Life Flexible Premium November 2, 1998 Growth and Income - Class IB Lincoln Corporate-owned Variable Variable Life Universal Life - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Account S Health Sciences - Class IB Lincoln Corporate-owned Variable Universal Life Series III Lincoln National Life Insurance May 1, 2001 Growth and Income - Class IB Director Group Variable Annuity Company Separate Account 68 Lincoln National Life Insurance May 1, 2001 Health Sciences - Class IB Director Group Variable Annuity Company Separate Account 69 - ------------------------------------------------------------------------------------------------------------------------------------
23 SCHEDULE B SERVICE FEE PAYMENTS ON CLASS IB SHARES FUND RATE Putnam VT Health Sciences Fund 0.25% per annum Putnam VT Growth & Income Fund 0.25% per annum 24 AMENDMENT NO. 2 TO THE PARTICIPATION AGREEMENT AMONG PUTNAM VARIABLE TRUST PUTNAM RETAIL MANAGEMENT, L.P. AND LINCOLN NATIONAL LIFE INSURANCE COMPANY THIS AMENDMENT is made and executed as of the 23rd day of July , 2002 among Lincoln National Life Insurance Company (the "Company"), Putnam Variable Trust (the "Trust") and Putnam Retail Management, L.P. (the "Underwriter). WHEREAS, the Company, the Trust and the Underwriter have executed a Participation Agreement dated as of April 30, 2001 (the "Fund Participation Agreement"); Wherefore, each of the parties hereto wish to amend the Fund Participation Agreement as follows. 1. ARTICLE I, Section 1.9, shall be deleted in its entirety and replaced with the following: SECTION 1.9. The underwriter shall make the net asset value per share for each Fund available to the Company on a daily basis as soon as reasonably practical after the Trust calculates its net asset value per share and each of the Trust and the Underwriter shall use its best efforts to make such net asset value per share available by 6:30 p.m. New York time (using a mutually agreed upon format). The Underwriter will notify Company when and if Underwriter does not communicate the net asset value per share by 6:30 p.m. New York time. Any material errors in the calculation of the net asset value, dividends or capital gain information shall be reported immediately upon discovery to the Company. The Trust shall indemnify the Company with respect to all costs, expenses and losses relating to pricing errors or delays in communication of net asset value as may be legally required. 2. ARTICLE XII. NOTICES If to the Company shall be replaced with: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 1300 S. Clinton Street Fort Wayne, IN 46802 Attn: Steven M. Kluever Funds Management Facsimile 260-455-1773 3. Schedule A of the Fund Participation Agreement shall be deleted and replaced with the attached Schedule A. 4. All Other terms of the Fund Participation Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the first above-written date. PUTNAM RETAIL MANAGEMENT, L.P. PUTNAM VARIABLE TRUST By /s/ Eric S. Levy By /s/ John R. Verani --------------------------- --------------------------- Eric Levy John R. Verani Its Managing Director Its Vice President Duly Authorized Duly Authorized LINCOLN NATIONAL LIFE INSURANCE COMPANY By /s/ Steven M. Kluever ------------------------------------- Steven M. Kluever Its 2nd Vice President Duly Authorized SCHEDULE A LINCOLN LIFE SEPARATE ACCOUNTS
SEPARATE ACCOUNT NAME DATE ESTABLISHED FUNDS USED CONTRACT NAME - ----------------------------------------------------------------------------------------------------------------------------------- Lincoln National Variable June 3, 1981 Health Sciences - Class IB Multi Fund (Individual) Annuity Account C Lincoln National Variable April 29, 1996 Growth and Income - Class IB Lincoln Life Group Variable Annuity Account L Annuity Health Sciences - Class IB Lincoln Life Variable November 3, 1997 Growth and Income - Class IB Lincoln ChoicePlus II Annuity Account N Health Sciences - Class IB Lincoln ChoicePlus II Bonus Lincoln ChoicePlus II Access Lincoln ChoicePlus II Advance Lincoln Life Variable November 3, 1997 Health Sciences - Class IB Multi Fund (Group) Annuity Account Q Lincoln Life Variable November 28, 2000 Growth and Income - Class IB Wells Fargo New Directions Annuity Account W Core Small Cap Value - Class IB Wells Fargo New Directions Access Wells Fargo New Directions Access 4 Lincoln Life Flexible December 2, 1997 Growth and Income - Class IB Lincoln Variable Universal Premium Variable Life Life (CV), (CV2) and (CV3) Account M Health Sciences - Class IB Lincoln Variable Universal Life (DB) and (DB2) Lincoln Variable Universal Life MoneyGuard Lincoln Life Flexible December 2, 1997 Growth and Income - Class IB Lincoln Survivor Variable Premium Variable Life Universal Life Account R Health Sciences - Class IB Lincoln Survivor Variable Universal Life II Lincoln Survivor Variable Universal Life III Lincoln Life Flexible November 2, 1998 Growth and Income - Class IB Lincoln Corporate-owned Premium Variable Life Variable Universal Life Account S Health Sciences - Class IB Lincoln Corporate-owned Variable Universal Life Series
III Lincoln National Life May 1, 2001 Growth and Income - Class IB Director Group Variable Insurance Company Separate Annuity Account 68 Lincoln National Life May 1, 2001 Health Sciences - Class IB Director Group Variable Annuity Insurance Company Separate Account 69
AMENDMENT NO. 3 TO THE PARTICIPATION AGREEMENT AMONG PUTNAM VARIABLE TRUST PUTNAM RETAIL MANAGEMENT, L.P. AND LINCOLN NATIONAL LIFE INSURANCE COMPANY THIS AMENDMENT is made and executed as of the 1st day of May, 2003 among Lincoln National Life Insurance Company (the "Company"), Putnam Variable Trust (the "Trust") and Putnam Retail Management, L.P. (the "Underwriter). WHEREAS, the Company, the Trust and the Underwriter have executed a Participation Agreement dated as of April 30, 2001 (the "Fund Participation Agreement"); Wherefore, each of the parties hereto wish to amend the Fund Participation Agreement as follows. 1. Schedule A of the Fund Participation Agreement shall be deleted and replaced with the attached Schedule A. 2. All other terms of the Fund Participation Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the first above-written date. PUTNAM RETAIL MANAGEMENT, L.P. PUTNAM VARIABLE TRUST By /s/ Eric S. Levy By /s/ Beth S. Mazor ---------------------------- ---------------------------- Eric S. Levy Beth S. Mazor Its Managing Director Its Senior Vice President Duly Authorized Duly Authorized LINCOLN NATIONAL LIFE INSURANCE COMPANY By /s/ Rise C. M. Taylor ---------------------------- Rise C. M. Taylor Its Vice President Duly Authorized SCHEDULE A LINCOLN LIFE SEPARATE ACCOUNTS
SEPARATE ACCOUNT NAME DATE ESTABLISHED FUNDS USED CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Lincoln National Variable June 3, 1981 Health Sciences - Class IB Multi Fund (Individual) Annuity Account C Lincoln National Variable April 29, 1996 Growth and Income - Class IB Lincoln Life Group Variable Annuity Annuity Account L Health Sciences - Class IB Lincoln Life Variable November 3, 1997 Growth and Income - Class IB Lincoln ChoicePlus Annuity Account N Lincoln ChoicePlus II Health Sciences - Class IB Lincoln ChoicePlus II Bonus Lincoln ChoicePlus II Access Lincoln ChoicePlus II Advance ChoicePlus Assurance (B Share) ChoicePlus Assurance (C Share) ChoicePlus Assurance (L Share) ChoicePlus Assurance (Bonus) Lincoln Life Variable November 3, 1997 Health Sciences - Class IB Multi Fund (Group) Annuity Account Q Lincoln Life Variable November 28, 2000 Growth and Income - Class IB Wells Fargo New Directions Core Annuity Account W Small Cap Value - Class IB Wells Fargo New Directions Access Wells Fargo New Directions Access 4 Lincoln Life Flexible December 2, 1997 Growth and Income - Class IB Lincoln Variable Universal Life (CV), Premium Variable Life (CV)-II and (CV)-III Account M Health Sciences - Class IB Lincoln Variable Universal Life (DB) and (DB)-II Lincoln Variable Universal Life MoneyGuard Lincoln Life Flexible December 2, 1997 Growth and Income - Class IB Lincoln Survivor Variable Premium Variable Life Universal Life Account R Health Sciences - Class IB Lincoln Survivor Variable Universal Life II Lincoln Survivor Variable Universal Life III
SEPARATE ACCOUNT NAME DATE ESTABLISHED FUNDS USED CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Lincoln Life Flexible November 2, 1998 Growth and Income - Class IB Lincoln Corporate-owned Variable Premium Variable Life Universal Life Account S Health Sciences - Class IB Lincoln Corporate-owned Variable Universal Life Series III Lincoln Corporate-owned Variable 4 Lincoln Life Flexible July 30, 2003 Growth and Income - Class IB Lincoln Corporate Variable Premium Variable Life Private Soltuions Account Z Health Sciences - Class IB Lincoln National Life May 1, 2001 Growth and Income - Class IB Director Group Variable Annuity Insurance Company Separate Account 68 Lincoln National Life May 1, 2001 Health Sciences - Class IB Director Group Variable Annuity Insurance Company Separate Account 69
EX-99 22 a2183907zex-99.txt ------------------------- LINCOLN NATIONAL CORPORATION DOM: INDIANA FUNCTION: HOLDING COMPANY ------------------------- | | |-----------------------------------------------------------------------------------------------------------------------------| | | | \|/ | | | ------------ | | | CONTINUED ON | | | NEXT PAGE | | | ------------ | | \|/ | --------------------------- | ------------------- --------------------- | HAMPSHIRE FUNDING, INC. | LINCOLN NATIONAL JEFFERSON-PILOT | DOM: NEW HAMPSHIRE | REINSURANCE COMPANY INVESTMENTS, INC. |-->FUNCTION: INSURANCE/LENDING |--->(BARBADOS) LIMITED DOM: NORTH CAROLINA | OWNERSHIP: 100% | DOM: BARBADOS FUNCTION: CORPORATION | --------------------------- | OWNERSHIP: 100% OWNERSHIP: 100% | | ------------------- --------------------- | -------------------------------- | | | LINCOLN INVESTMENT | ------------------- | | ADVISORS CORPORATION | LINCOLN REINSURANCE | ----------------------------- |-->DOM: TENNESSEE | COMPANY OF BERMUDA, | HAMPSHIRE SYNDICATIONS, | FUNCTION: CORPORATION/INVESTMENT |--->LIMITED | INC. | ADVISOR | DOM: BERMUDA | DOM: NEW HAMPSHIRE | OWNERSHIP: 100% | OWNERSHIP: 100% |--->FUNCTION: CORPORATION/GENERAL | -------------------------------- | ------------------- PARTNER/REAL ESTATE | | OWNERSHIP: 100% | ----------------------------------- | ----------------------------- | JEFFERSON PILOT VARIABLE | | CORPORATION | |-->DOM: NORTH CAROLINA | | FUNCTION: CORPORATION/BROKER-DEALER | --------------------------------------- | OWNERSHIP: 100% | FIRST PENN-PACIFIC LIFE | ----------------------------------- | INSURANCE COMPANY | |-------->DOM: INDIANA | --------------------- | FUNCTION: CORPORATION/INSURANCE COMPANY | LINCOLN LIFE IMPROVED | OWNERSHIP: 100% | HOUSING INC. --------------------------------------- |-->DOM: INDIANA | OWNERSHIP: 100% | --------------------- | | ---------------------------- | LINCOLN NATIONAL | MANAGEMENT CORPORATION |-->DOM: PENNSYLVANIA | FUNCTION: MANAGEMENT COMPANY | OWNERSHIP: 100% | ---------------------------- | | ----------------------- | LINCOLN NATIONAL REALTY | CORPORATION |-->DOM: INDIANA FUNCTION: REAL ESTATE OWNERSHIP: 100% -----------------------
1 --------------------- LINCOLN NATIONAL CORPORATION CONTINUED FROM PAGE 1 --------------------- | -------------------------------------------------------------------------------------- | | | \|/ | ------------ | CONTINUED ON | NEXT PAGE | ------------ | | ------------------------- | INTERNATIONAL HOME | FURNISHING CENTER, INC. | DOM: NORTH CAROLINA |------->FUNCTION: CORPORATION | OWNERSHIP: 29.074% | OWNED BY LINCOLN NATIONAL | CORPORATION | ------------------------- | | ------------------------- | TOMCO2 EQUIPMENT COMPANY | DOM: GEORGIA ------->FUNCTION: CORPORATION OWNERSHIP: 29.16% OWNED BY LINCOLN NATIONAL CORPORATION --------------------------
2 - --------------------- LINCOLN NATIONAL CORPORATION CONTINUED FROM PAGE 2 - --------------------- | --------------------------------------------------------------------------------------------------------------------- | | | \|/ | \|/ - ------------------------------------- | ------------ JEFFERSON PILOT SECURITIES | CONTINUED ON CORPORATION \|/ NEXT PAGE DOM: NEW HAMPSHIRE ----------------------------------- ------------ FUNCTION: CORPORATION/BROKER-DEALER LINCOLN FINANCIAL MEDIA OWNERSHIP: 100% COMPANY - ------------------------------------- DOM: NORTH CAROLINA | FUNCTION: CORPORATION/BROADCASTING | OWNERSHIP: 100% | ----------------------------------- | ------------------------------------------ | | ALLIED PROFESSIONAL | | ADVISORS, INC. | |--------->DOM: NEW HAMPSHIRE | | FUNCTION: CORPORATION/INVESTMENT ADVISOR | | OWNERSHIP: 100% | | ------------------------------------------ | | | | ------------------------------------------ | | JPSC INSURANCE SERVICES, | | INC. | |--------->DOM: NEW HAMPSHIRE | | FUNCTION: CORPORATION/INSURANCE AGENCY | | OWNERSHIP: 100% | | ------------------------------------------ | ------------ | CONTINUED ON ------> NEXT PAGE ------------
3 - ------------------------------- ------------------------------ LINCOLN FINANCIAL LINCOLN NATIONAL MEDIA COMPANY CORPORATION CONTINUED FROM PAGE 3 CONTINUED FROM PAGE 3 - ------------------------------- ------------------------------ | | |------------------------------------------------------| | \|/ | | ------------------------------------ ----------------------------- \|/ | WBTV, INC. LINCOLN NATIONAL ----------------- |--->DOM: NORTH CAROLINA INVESTMENTS, INC. CONTINUED ON | FUNCTION: CORPORATION/BROADCASTING DOM: INDIANA NEXT PAGE | OWNERSHIP: 100% FUNCTION: HOLDING COMPANY ----------------- | ------------------------------------ OWNERSHIP: 100% | ------------------------------------ ----------------------------- | WWBT, INC. | --->DOM: VIRGINIA | | FUNCTION: CORPORATION/BROADCASTING | | OWNERSHIP: 100% | ------------------------- | ------------------------------------ | LINCOLN NATIONAL | ------------------------------------ | INVESTMENT COMPANIES, | LINCOLN FINANCIAL MEDIA ------------>INC. | COMPANY OF CALIFORNIA DOM: INDIANA --->DOM: NORTH CAROLINA FUNCTION: HOLDING COMPANY | FUNCTION: CORPORATION/BROADCASTING OWNERSHIP: 100% | OWNERSHIP: 100% ------------------------- | ------------------------------------ | | ------------------------------------ | | LINCOLN FINANCIAL MEDIA | ------------------------- | COMPANY OF COLORADO | DELAWARE MANAGEMENT --->DOM: NORTH CAROLINA | HOLDINGS, INC. | FUNCTION: CORPORATION/BROADCASTING |---------->DOM: DELAWARE | OWNERSHIP: 100% FUNCTION: HOLDING COMPANY | ------------------------------------ OWNERSHIP: 100% | ------------------------------------ ------------------------- | LINCOLN FINANCIAL MEDIA | | COMPANY OF FLORIDA | --->DOM: NORTH CAROLINA | | FUNCTION: CORPORATION/BROADCASTING | | OWNERSHIP: 100% | | ------------------------------------ | | ------------------------------------ | | LINCOLN FINANCIAL MEDIA | | COMPANY OF GEORGIA | --->DOM: NORTH CAROLINA | | FUNCTION: CORPORATION/BROADCASTING | | OWNERSHIP: 100% | | ------------------------------------ | | ------------------------------------ | | WCSC, INC. | | DOM: SOUTH CAROLINA | --->FUNCTION: CORPORATION/BROADCASTING | OWNERSHIP: 100% | ------------------------------------ | | | ------------------- | | | | ------------------------------------ | | TALL TOWER, INC. | ----->DOM: SOUTH CAROLINA | FUNCTION: CORPORATION/BROADCASTING | OWNERSHIP: 100% | ------------------------------------ | | | ------------ |------>CONTINUED ON NEXT PAGE ------------
4 --------------------- DELAWARE MANAGEMENT HOLDINGS, INC. CONTINUED FROM PAGE 4 --------------------- | ------------ | | ----------------- | DMH CORP. | DOM: DELAWARE -->FUNCTION: HOLDING COMPANY OWNERSHIP: 100% ----------------- | | -------------------- | DELAWARE INVESTMENTS | U.S., INC. |--------> DOM: DELAWARE FUNCTION: HOLDING COMPANY OWNERSHIP: 100% -------------------- | |-------------------------------------------------------------- | | | ----------------------- | ------------------------- | DELAWARE MANAGEMENT | DELAWARE MANAGEMENT | TRUST COMPANY | COMPANY, INC. |----------->DOM: PENNSYLVANIA ----->DOM: DELAWARE | FUNCTION: TRUST SERVICE FUNCTION: HOLDING COMPANY | OWNERSHIP: 100% OWNERSHIP: 100% | ----------------------- ------------------------- | | | ------------------------------ | | DELAWARE SERVICE | | COMPANY, INC. | |----------->DOM: DELAWARE | | FUNCTION: SHAREHOLDER SERVICES | | & TRANSFER AGENT | | OWNERSHIP: 100% | | ------------------------------ | | | | ------------------------- | | DELAWARE DISTRIBUTORS, | | INC. | |----------->DOM: DELAWARE | | FUNCTION: GENERAL PARTNER | | OWNERSHIP: 100% | | ------------------------- | | | | ------------------------- | | DELAWARE GENERAL | | MANAGEMENT, INC. | |----------->DOM: DELAWARE | | FUNCTION: GENERAL PARTNER | | OWNERSHIP: 100% | | ------------------------- | | | | ----------------------------- | | RETIREMENT FINANCIAL | | SERVICES, INC. | | DOM: DELAWARE | ----------->FUNCTION: REGISTERED TRANSFER | AGENT & INVESTMENT ADVISOR | OWNERSHIP: 100% | ----------------------------- | | | | | ------------ ------>CONTINUED ON NEXT PAGE ------------
5 --------------------- --------------------- DELAWARE MANAGEMENT LINCOLN NATIONAL COMPANY, INC. CORPORATION CONTINUED FROM PAGE 5 CONTINUED FROM PAGE 4 --------------------- --------------------- | |----------------------------------------------- - -------------| | | | \|/ \|/ | ---------------------------- --------------------------------------- ------------ | DELAWARE MANAGEMENT THE LINCOLN NATIONAL CONTINUED ON | BUSINESS TRUST LIFE INSURANCE COMPANY NEXT PAGE |-->DOM: DELAWARE DOM: INDIANA ------------ FUNCTION: INVESTMENT ADVISOR FUNCTION: CORPORATION/INSURANCE COMPANY OWNERSHIP: 100% OWNERSHIP: 100% ---------------------------- --------------------------------------- | | | --------------------------------- | ---------------------- | DELAWARE DISTRIBUTORS, | LNC ADMINISTRATIVE | L.P. | SERVICES CORPORATION | DOM: DELAWARE |------>DOM: INDIANA | FUNCTION: MUTUAL FUND DISTRIBUTOR | FUNCTION: THIRD PARTY | & BROKER/DEALER | ADMINISTRATOR |-------------->OWNERSHIP: 98% DELAWARE | OWNERSHIP: 100% INVESTMENT ADVISERS (LP); | ---------------------- 1% DELAWARE | CAPITAL MANAGEMENT (LP); | -------------------------- 1% DELAWARE DISTRIBUTORS, | LINCOLN FINANCIAL ADVISORS INC. (GP) | CORPORATION --------------------------------- |------>DOM: INDIANA | FUNCTION: BROKER-DEALER | OWNERSHIP: 100% | -------------------------- | | | | | | | ---------------------------- | | LFA MANAGEMENT CORPORATION | | DOM: PENNSYLVANIA | --->FUNCTION: MANAGEMENT COMPANY | OWNERSHIP: 100% | ---------------------------- | | ---------------------------------------------- | LINCOLN FINANCIAL | DISTRIBUTORS, INC. |------>DOM: CONNECTICUT | FUNCTION: BROKER DEALER AND INVESTMENT ADVISOR | OWNERSHIP: 100% | ---------------------------------------------- | | ---------------------- | LINCOLN INVESTMENT | SOLUTIONS, INC. |------>DOM: DELAWARE | FUNCTION: CORPORATION | OWNERSHIP: 100% | ---------------------- | | ------------ | CONTINUED ON |------> NEXT PAGE ------------
6 ---------------------- THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONTINUED FROM PAGE 6 ---------------------- | | -------------------------------------------------------------------------------- | | -------------------------- | -------------------------------------- | LINCOLN FINANCIAL AND | LINCOLN REALTY CAPITAL | INSURANCE SERVICES | CORPORATION ------>CORPORATION |-------->DOM: INDIANA DOM: CALIFORNIA | FUNCTION: GENERAL BUSINESS CORPORATION FUNCTION: INSURANCE AGENCY | OWNERSHIP: 100% OWNERSHIP: 100% | -------------------------------------- -------------------------- | | | ----------------------------------- | | LINCOLN RETIREMENT | | SERVICES COMPANY, LLC | -------------------------- |-------->DOM: INDIANA | CALIFORNIA FRINGE | FUNCTION: LIMITED LIABILITY COMPANY | BENEFIT AND INSURANCE | OWNERSHIP: 100% ----->MARKETING CORPORATION | ----------------------------------- DOM: CALIFORNIA | | FUNCTION: INSURANCE AGENCY | | OWNERSHIP: 100% | | -------------------------- | | | | ---------------------------------- | LINCOLN VARIABLE INSURANCE | PRODUCTS TRUST |-------->DOM: DELAWARE | FUNCTION: INSURANCE PRODUCTS TRUST | OWNERSHIP: 100% | ---------------------------------- | | ------------------------------------------ | LINCOLN LIFE & ANNUITY COMPANY OF | NEW YORK |-------->DOM: NEW YORK | FUNCTION: CORPORATION/INSURANCE | OWNERSHIP: 100% | ------------------------------------------ | | ----------------------- | WESTFIELD ASSIGNED | BENEFITS COMPANY |-------->DOM: OHIO | FUNCTION: CORPORATION/ | INSURANCE AGENCY | OWNERSHIP: 100% | ----------------------- | | -------------------------------- | JEFFERSON STANDARD LIFE | INSURANCE COMPANY |-------->DOM: NORTH CAROLINA | FUNCTION: CORPORATION/INSURANCE | OWNERSHIP: 100% | -------------------------------- | | ------------------------------------- | LFA, LIMITED LIABILITY | COMPANY |-------->DOM: INDIANA | FUNCTION: LIMITED LIABILITY COMPANY | OWNERSHIP: 100% | ------------------------------------- | | --------------------------- | LFD INSURANCE AGENCY, | LIMITED LIABILITY COMPANY |-------->DOM: DELAWARE | FUNCTION: INSURANCE AGENCY | OWNERSHIP: 100% | --------------------------- | | ----------------------------------- | LINCOLN FINANCIAL | HOLDINGS, LLC |-------->DOM: DELAWARE | FUNCTION: LIMITED LIABILITY COMPANY | OWNERSHIP: 100% | ----------------------------------- | | | | | ------------------------------------------- ----------------------------- | | LFG SOUTH CAROLINA | | REINSURANCE COMPANY | ------->DOM: SOUTH CAROLINA | FUNCTION: REINSURANCE CAPTIVE | OWNERSHIP: 100% | ----------------------------- | | ------------ | CONTINUED ON --------->NEXT PAGE ------------
7 ---------------------- THE LINCOLN NATIONAL LIFE INSURANCE COMPANY CONTINUED FROM PAGE 7 ---------------------- | | ----------------------- | | ------------------------- | LINCOLN FINANCIAL AND | INSURANCE SERVICES |---------------------------------------------------------->CORPORATION DOM: DELAWARE FUNCTION: HOLDING COMPANY OWNERSHIP: 100% ------------------------- | | | | | ----------------------------- | LINCOLN REINSURANCE COMPANY | OF SOUTH CAROLINA ------->DOM: SOUTH CAROLINA FUNCTION: REINSURANCE CAPTIVE OWNERSHIP: 100% -----------------------------
--------------------- LINCOLN NATIONAL CORPORATION CONTINUED FROM PAGE 6 --------------------- | \|/ - ------------------------- LINCOLN NATIONAL (UK) PLC DOM: ENGLAND FUNCTION: HOLDING COMPANY OWNERSHIP: 99.99% (REMAINDER OWNED BY THE LINCOLN NATIONAL LIFE INSURANCE COMPANY) - ------------------------- | |--------------------------------------------------------------------------- | | ------------------------------------- | ----------------------------------------------------------- | LINCOLN GENERAL | CITY FINANCIAL PARTNERS | INSURANCE CO. LTD. | LIMITED |------>DOM: ENGLAND |------------>DOM: ENGLAND | FUNCTION: ACCIDENT & HEALTH INSURANCE | FUNCTION: DISTRIBUTION OF LIFE ASSURANCE & PENSION PRODUCTS | OWNERSHIP: 100% | OWNERSHIP: 100% | ------------------------------------- | ----------------------------------------------------------- | | | ------------------- | ------------------------- | LINCOLN INDEPENDENT | CONSUMERS FINANCIAL | (JERSEY) LIMITED | EDUCATION COMPANY LIMITED |------>DOM: JERSEY | DOM: ENGLAND | OWNERSHIP: 100% |------------>FUNCTION: (DORMANT) | ------------------- | OWNERSHIP: 100% | | ------------------------- | --------------------------------------- | | LINCOLN INDEPENDENT | ------------------------------- | LIMITED | FINANCIAL ALLIANCES |------>DOM: ENGLAND | LIMITED | FUNCTION: INDEPENDENT FINANCIAL ADVISOR |------------>DOM: ENGLAND | OWNERSHIP: 100% | FUNCTION: UNIT TRUST MANAGEMENT | --------------------------------------- | OWNERSHIP: 100% | | ------------------------------- | ------------------------------- | | LINCOLN INVESTMENT | ---------------------------------------- | MANAGEMENT LIMITED | LIV LIMITED |------>DOM: ENGLAND | DOM: ENGLAND | FUNCTION: INVESTMENT MANAGEMENT |------------>FUNCTION: INVESTMENT MANAGEMENT SERVICES | OWNERSHIP: 100% | OWNERSHIP: 100% | ------------------------------- | ---------------------------------------- | | | ------------------ | ------------------------------------------- | LINCOLN NATIONAL | LN MANAGEMENT LIMITED | (GUERNSEY) LIMITED | DOM: ENGLAND |------>DOM: GUERNSEY |------------>FUNCTION: ADMINISTRATIVE SERVICES (DORMANT) | OWNERSHIP: 100% | OWNERSHIP: 100% | ------------------ | ------------------------------------------- | | | ------------------- | ------------------------- | LINCOLN SBP TRUSTEE | LN SECURITIES LIMITED | LIMITED | DOM: ENGLAND |------>DOM: ENGLAND |------------>FUNCTION: NOMINEE COMPANY | OWNERSHIP: 100% | OWNERSHIP: 100% | ------------------- | ------------------------- | | | ------------------------------- | ------------------------------------------- | LINCOLN UNIT TRUST | LAURTRUST LIMITED | MANAGERS LIMITED | DOM: ENGLAND |------>DOM: ENGLAND |------------>FUNCTION: PENSION SCHEME TRUSTEE (INACTIVE) | FUNCTION: INVESTMENT MANAGEMENT | OWNERSHIP: 100% | OWNERSHIP: 100% | ------------------------------------------- | ------------------------------- | | | -------------------------- | -------------------------- | LINCOLN FINANCIAL ADVISERS | LINCOLN INSURANCE SERVICES | LIMITED | LIMITED |------------>DOM: ENGLAND |------>DOM: ENGLAND | FUNCTION: SALES COMPANY FUNCTION: HOLDING COMPANY | OWNERSHIP: 100% OWNERSHIP: 100% | -------------------------- -------------------------- | | | ------------ | ------------ | CONTINUED ON | CONTINUED ON -------------> NEXT PAGE |------> NEXT PAGE ------------ ------------
8 - -------------------------- ------------------------- LINCOLN INSURANCE SERVICES LINCOLN NATIONAL (UK) PLC LIMITED CONTINUED FROM PAGE 8 CONTINUED FROM PAGE 8 ------------------------- - -------------------------- | | | ------------------------- | -------------------------------- | LINCOLN ASSURANCE LIMITED | CHAPEL ASH FINANCIAL | DOM: ENGLAND | SERVICES LTD. |--> FUNCTION: LIFE ASSURANCE - -----> DOM: ENGLAND | OWNERSHIP: 100% (EXCEPT FUNCTION: DIRECT INSURANCE SALES | FOR OWNERSHIP: 100% | DIRECTOR-QUALIFYING -------------------------------- | SHARES) | ------------------------- | | | | | | ----------------------------- | | IMPCO PROPERTIES G.B. LTD. | |--> DOM: ENGLAND | | FUNCTION: PROPERTY INVESTMENT | | OWNERSHIP: 100% | | ----------------------------- | | --------------------------------- | | BARNWOOD PROPERTY GROUP | | LIMITED | --> DOM: ENGLAND | FUNCTION: PROPERTY MANAGEMENT CO. | OWNERSHIP: 100% | --------------------------------- | | | | ----------------------------- | | BARNWOOD PROPERTIES | | LIMITED | -------------------> DOM: ENGLAND | FUNCTION: PROPERTY INVESTMENT | OWNERSHIP: 100% | ------------------------- ----------------------------- | LINCOLN FINANCIAL GROUP | PLC --> DOM: ENGLAND FUNCTION: HOLDING COMPANY OWNERSHIP: 100% ------------------------- | | | ----------------------- | LINCOLN MILLDON LIMITED |--> DOM: ENGLAND | FUNCTION: SALES COMPANY | OWNERSHIP: 100% | ----------------------- | ----------------------------- | LINCOLN MANAGEMENT | SERVICES LIMITED --> DOM: ENGLAND FUNCTION: MANAGEMENT SERVICES OWNERSHIP: 100% ----------------------------- | --------------------------------- | LAURIT LIMITED | DOM: ENGLAND ------------------> FUNCTION: DATA PROCESSING SYSTEMS OWNERSHIP: 100% ---------------------------------
9 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 dormant 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 dormant 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. b. Addition of Lincoln Life & Annuity Company of New York, incorporated as a New York corporation on September 27, 1996. OCTOBER 1996 a. Addition of Lincoln National (India) Inc., incorporated as an Indiana corporation on October 17, 1996. NOVEMBER 1996 a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was incorporated on November 26, 1996; it was formed to act as Trustee for Lincoln Staff Benefits Plan. DECEMBER 1996 a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana corporation on December 12, 1996. JANUARY 1, 1997-DECEMBER 31, 1997 JANUARY 1997 a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global Advisors, Inc. were transferred via capital contribution to Lincoln National Investments, Inc. effective January 2, 1997. b. Lincoln National Investments, Inc. changed its name to Lincoln National Investment Companies, Inc. effective January 24, 1997. c. Lincoln National Investment Companies, Inc. changed its named to Lincoln National Investments, Inc. effective January 24, 1997. 1 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. 2 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 1, 1998-DECEMBER 31, 1998 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 effective June 10, 1998. d. Dissolution of LUTM Nominees Limited effective June 10, 1998. e. Dissolution of Cannon Fund Managers Limited June 16, 1998. 3 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 1, 1999-DECEMBER 31, 1999 JANUARY 1999 a. Lincoln Unit Trust Management changed its name on January 5, 1999, to Lincoln ISA Management Limited. FEBRUARY 1999 a. Removal of Lincoln Southwest Financial Group, Inc. -- company's term of existence expired July 18, 1998. JULY 1999 a. Addition of First Penn-Pacific Securities, Inc., incorporated as an Illinois corporation and a wholly-owned subsidiary of First Penn-Pacific Life Insurance Company on June 18, 1999. b. Addition of Lincoln Realty Capital Corporation, incorporated as an Indiana corporation and a wholly-owned subsidiary of The Lincoln National Life Insurance Company on July 9, 1999. AUGUST 1999 a. Deletion of Professional Financial Planning, Inc. - company dissolved August 25, 1999. 4 NOVEMBER 1999 a. Addition of Lincoln National Insurance Associates of Hawaii, Inc., incorporated as a wholly-owned subsidiary of Lincoln National Insurance Associates, Inc. as a Hawaii domiciled corporation effective December 8, 1998. b. Addition of AnnuityNet of Alabama, Inc., an Alabama corporation and a wholly-owned subsidiary of AnnuityNet, Inc., incorporated on November 4, 1999. c. Addition of AnnuityNet of New Mexico, Inc., a New Mexico corporation and a wholly-owned subsidiary of AnnuityNet, Inc., incorporated on November 1, 1999. DECEMBER 1999 a. Addition of Wakefield Tower Alpha Limited, a Cayman Islands Corporation, effective December 15, 1999, with 100% of the ordinary shares owned by The Lincoln National Life Insurance Company. One (1) G Share is held by a third party. b. Addition of Delaware General Management, Inc. (DGM), a Delaware Corporation and wholly owned subsidiary of Delvoy, Inc., effective December 9, 1999. The corporation was formed to act as the general partner of the Delaware Market Neutral Equity Fund, L.P. JANUARY 1, 2000-DECEMBER 31, 2000 JANUARY 2000 a. Addition of AnnuityNet Insurance Agency of Massachusetts, Inc., a Massachusetts Corporation and a wholly-owned subsidiary of AnnuityNet, Inc., incorporated on January 1, 2000. FEBRUARY 2000 a. Addition of The Kyoei Lincoln Reinsurance Services Co., Ltd., a Japanese Corporation in which Lincoln National Corporation has a 90% ownership interest. The remaining 10% is owned by The Kyoei Life Insurance Co., Ltd. The date of incorporation in Japan was February 29, 2000. MARCH 2000 a. Name change of Underwriters & Management Services, Inc. to Lincoln Re Risk Management Services, Inc. effective March 1, 2000. b. Lincoln National Corporation disposed of its 49% investment in Seguros Serfin Lincoln, S.A. effective March 30, 2000. APRIL 2000 a. Lincoln Life and Annuity Distributors, Inc. stock was transferred via capital contribution from Lincoln National Corporation to The Lincoln National Life Insurance Company effective April 7, 2000. b. Change in ownership percentage of Lincoln National Insurance Associates of Ohio, Inc. from a 91% owned subsidiary to a wholly-owned subsidiary of Lincoln National Insurance Associates, Inc. effective April 17, 2000. c. Reinstatement of Lincoln Southwest Financial Group, Inc. in the State of Arizona effective April 25, 2000. 5 MAY 2000 a. Change in ownership percentage of AnnuityNet, Inc. from a wholly-owned subsidiary of The Lincoln National Life Insurance Company to a 44.9% ownership interest effective May 8, 2000. b. Addition of LFA, Limited Liability Company, an Indiana limited liability company and 99% owned subsidiary of The Lincoln National Life Insurance Company, formed May 11, 2000. c. Addition of LFA of Delaware, Limited Liability Company, a Delaware limited liability company and 99% owned subsidiary of The Lincoln National Life Insurance Company, formed May 16, 2000. d. Dissolution of Lynch & Mayer Securities Corp. (Delaware corporation) effective May 9, 2000. NOVEMBER 2000 a. Dissolution of Lynch & Mayer, Inc. (Indiana corporation) effective November 30, 2000. DECEMBER 2000 a. Name change of Sagemark Consulting, Inc. to Lincoln Financial Distributors, Inc. effective December 4, 2000. b. Dissolution of Vantage Global Advisors, Inc. (Delaware corporation) effective December 31, 2000. JANUARY 1, 2001-DECEMBER 31, 2001 JANUARY 2001 a. Dissolution of Lincoln Investment Management, Inc. (Illinois corporation) effective January 11, 2001. FEBRUARY 2001 a. Addition of Lincoln Retirement Services Company, LLC, an Indiana Limited Liability Company and wholly-owned subsidiary of The Lincoln National Life Insurance Company, formed February 28, 2001. APRIL 2001 a. Addition of LFD Insurance Agency, Limited Liability Company, a Delaware Limited Liability Company and 99% owned subsidiary of The Lincoln National Life Insurance Company, formed April 25, 2001. JUNE 2001 a. Addition of Lincoln Re (Ireland) Limited, an Ireland corporation and wholly-owned subsidiary of Lincoln National Reinsurance Company (Barbados) Limited, incorporated June 20, 2001. JULY 2001 a. Addition of Select Capital, LLC, an Indiana Limited Liability Company and wholly-owned subsidiary of The Lincoln National Life Insurance Company, formed July 17, 2001. b. Addition of Pegasus Capital, LLC, an Indiana Limited Liability Company and 99% owned subsidiary of Select Capital, LLC, formed July 17, 2001. AUGUST 2001 a. Lincoln National (UK) PLC makes the following name changes, additions and dissolution of companies as follows: 1) Dissolution of Allied Westminster & Company Limited effective May 8, 2001; 6 2) Dissolution of Culverin Property Services Limited effective May 8, 2001; 3) Dissolution of HUTM Limited effective March 9, 1999; 4) Dissolution of Liberty Life Pension Trustee Company Limited effective April 24, 2001; 5) Dissolution of UK Mortgage Securities Limited effective November 24, 1998; 6) Dissolution of Liberty Press Limited [Printing Services] effective March 23, 1999; 7) Dissolution of Barnwood Developments Limited effective May 22, 2001; 8) Dissolution of British National Life Sales Ltd. effective June 12, 2001; 9) Dissolution of BNL Trustees Limited effective May 8, 2001; 10) Dissolution of CL CR Management Ltd. effective November 17, 1998; 11) Dissolution of Lincoln National Training Services Limited effective March 16, 1999; 12) Name change of ILI Supplies Limited to Liberty Press Limited; 13) Name change of Lincoln ISA Management Limited to Financial Alliances Limited; 14) Reporting change for Laurtrust Limited from Lincoln Financial Group PLC to Lincoln National (UK) PLC; 15) Addition of Lincoln Executive Club Trustee Limited, a wholly-owned subsidiary of Lincoln National (UK) PLC, incorporated February 23, 1999 (currently dormant); 16) Addition of Consumers Financial Education Limited, a wholly-owned subsidiary of Lincoln National (UK) PLC, incorporated December 1, 1999 (currently dormant). DECEMBER 2001 a. Removal of the following companies as a result of the December 7, 2001, sale to Swiss Re: 1) The Kyoei Lincoln Reinsurance Services Co., Ltd. 2) Lincoln National (China) Inc. 3) Lincoln National Health & Casualty Insurance Company 4) Lincoln National Intermediaries, Inc. 5) Lincoln National Management Services, Inc. 6) Lincoln National Reassurance Company 7) Lincoln National Reinsurance Company Limited 8) Lincoln National Risk Management, Inc. 9) Lincoln National Structured Settlement, Inc. 10) Lincoln National Underwriting Services, Ltd. 11) Lincoln Re Risk Management Services, Inc. 12) Lincoln Re, S.A. 13) Linsco Reinsurance Company 14) Old Fort Insurance Company, Ltd. 15) Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. 16) Solutions Holdings, Inc. 17) Solutions Reinsurance Limited 18) Special Pooled Risk Administrators, Inc. JANUARY 1, 2002 - DECEMBER 31, 2002 JANUARY 2002 a. Lincoln National (UK) PLC makes the following changes: 1) Dissolution of Lincoln Pension Trustees Limited effective January 15, 2002; 2) Reporting change for Financial Alliances Limited to Lincoln National (UK) PLC; 3) Reporting change for Lincoln Insurance Services Limited to Lincoln National (UK) PLC. 7 MARCH 2002 a. Addition of Lincoln Administration Services Limited, a wholly-owned subsidiary of Lincoln National (UK) PLC, incorporated March 11, 2002 (currently inactive). APRIL 2002 a. Dissolution of Financial Investment Services, Inc. (Indiana corporation) effective April 2, 2002. b. Dissolution of Financial Alternative Resources, Inc. (Kansas corporation) effective April 3, 2002. c. Dissolution of Financial Investments, Inc. (Indiana corporation) effective April 26, 2002. d. Change in ownership interest of AnnuityNet, Inc. from a 44.9% combined LNL and LNC ownership interest to a 24.0% combined LNL and LNC ownership interest effective April 5, 2002. MAY 2002 a. Dissolution of the following corporate agency subsidiaries of Lincoln Life and Annuity Distributors, Inc: 1) Colorado-Lincoln Financial Group, Inc. (Colorado) effective December 17, 2001; 2) Lincoln National Financial Services, Inc. (Florida) effective December 17, 2001; 3) CMP Financial Services, Inc. (Illinois) effective January 11, 2002; 4) Lincoln Financial Group of Northern Indiana, Inc. (Indiana) effective December 13, 2001; 5) Financial Planning Partners, Ltd. (Kansas) effective December 18, 2001; 6) The Lincoln National Financial Group of Louisiana, Inc. (Louisiana) effective December 20, 2001; 7) Lincoln Cascades, Inc. (Oregon) effective December 21, 2001. b. Delaware Investments makes the following changes: 1) Addition of Delaware Investments U.S., Inc., a Delaware corporation and a wholly-owned subsidiary of DMH Corp., incorporated on June 28, 2001; 2) Addition of DIAL Holding Company, Inc., a Delaware corporation and a wholly-owned subsidiary of DMH Corp., incorporated on June 27, 2001; 3) Merger of Delvoy, Inc., a Minnesota corporation and wholly-owned subsidiary of DMH Corp., into Delaware Investments U.S., Inc., effective June 28, 2001; 4) Effective February 28, 2001, LNC Administrative Services Corporation transferred from being a wholly-owned subsidiary of Lincoln National Corporation to being a wholly-owned subsidiary of Retirement Financial Services, Inc. c. Dissolution of the following corporate agency subsidiary of Lincoln Life and Annuity Distributors, Inc.: 1) Lincoln Financial Group of Missouri, Inc. (Missouri) effective June 14, 2002. d. Sale of Lincoln Re (Ireland) Limited to Swiss Re Management Luxembourg S.A. effective May 30, 2002. e. City Financial Partners Limited stock was acquired by Lincoln National (UK) PLC from Lincoln National Corporation effective January 20, 2000. JULY 2002 a. Dissolution of Founders CBO Corporation (Delaware corporation) effective July 15, 2002. AUGUST 2002 a. Cancellation of Founders CBO, L.P. (Delaware Limited Partnership) effective August 15, 2002. [Note: This partnership was dissolved 7/15/02; however, the official partnership cancellation was not effective until the Certificate of Cancellation filing on 8/15/02.] b. Dissolution of The Financial Resources Department, Inc. (Michigan corporation) effective August 22, 2002. 8 c. Acquisition of The Administrative Management Group, Inc., an Illinois corporation and employee benefits recordkeeping firm, as a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective August 30, 2002. d. Acquisition of AMG Service Corp., an Illinois corporation and wholly-owned subsidiary of The Administrative Management Group, Inc., effective August 30, 2002. SEPTEMBER 2002 a. Dissolution of The Investment Center, Inc. (Tennessee corporation) effective September 6, 2002. b. Change in ownership of Lincoln Financial Group, Inc. (an Alabama corporation) from a wholly-owned subsidiary of Lincoln Life and Annuity Distributors, Inc. to a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective September 20, 2002. c. Change in ownership of Lincoln Financial Services and Insurance Brokerage of New England, Inc. (a Massachusetts corporation) from a wholly-owned subsidiary of Lincoln Life and Annuity Distributors, Inc. to a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective September 20, 2002. OCTOBER 2002 a. Dissolution of the following corporate agency subsidiaries of Lincoln Life and Annuity Distributors, Inc.: 1) Financial Consultants of Michigan, Inc. (Michigan) effective August 19, 2002; 2) Lincoln Financial Group, Inc. (New Mexico) effective September 27, 2002; 3) Lincoln Financial Group, Inc. (Utah) effective May 21, 2002. b. Dissolution of The Investment Group, Inc. (New Jersey corporation) effective October 21, 2002. NOVEMBER 2002 a. Change in ownership of Lincoln Financial Advisors Corporation (an Indiana corporation) from a wholly-owned subsidiary of Lincoln Life and Annuity Distributors, Inc. to a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective November 1, 2002. b. Change in ownership of Lincoln Financial and Insurance Services Corporation (a California corporation) from a wholly-owned subsidiary of Lincoln Life and Annuity Distributors, Inc. to a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective November 18, 2002. California Fringe Benefit and Insurance Marketing Corporation will remain as its wholly-owned subsidiary. c. Dissolution of Founders Holdings, Inc. (Delaware General Partner) effective November 27, 2002. DECEMBER 2002 a. Dissolution of Lincoln Life and Annuity Distributors, Inc. (Indiana corporation) effective December 11, 2002 (f/k/a Lincoln Financial Group, Inc. and Lincoln National Sales Corporation). b. Dissolution of The Financial Alternative, Inc. (Utah corporation) effective December 9, 2002. JANUARY 2003 a. Dissolution of the following corporate agency subsidiary of Lincoln Life and Annuity Distributors, Inc.: 1) Benefits Marketing Group, Inc. (Maryland corporation) effective January 16, 2003. FEBRUARY 2003 9 a. Administrative dissolution of Personal Financial Resources, Inc. (Arizona corporation) a subsidiary of Lincoln National Financial Institutions Group, Inc., effective February 7, 2000. b. Dissolution of the following corporate agency subsidiaries of Lincoln Life and Annuity Distributors, Inc.: 1) Beardslee & Associates, Inc. (New Jersey corporation) effective February 11, 2003; 2) Lincoln Southwest Financial Group, Inc. (Arizona corporation) effective February 25, 2003. c. Formation of Lincoln Variable Insurance Products Trust, a Delaware Business Trust, effective February 1, 2003. Legal ownership resides with The Lincoln National Life Insurance Company and Lincoln Life & Annuity Company of New York. Beneficial ownership resides with the contract owners. Under the Holding Company Act, a company is not deemed to be an affiliate of an insurer unless they are under common control with one entity beneficially owning ten percent or more of the voting securities of another entity. The Trust is not considered to be an affiliate and is being shown on the Organization Chart for informational purposes only. MARCH 2003 a. Name change of First Penn-Pacific Securities, Inc. to Lincoln Retirement Advisors, Inc. effective March 25, 2003. APRIL 2003 a. Effective April 30, 2003, the following funds become a series of Lincoln Variable Insurance Products Trust: Aggressive Growth Fund; Bond Fund; Capital Appreciation Fund; Equity-Income Fund; Global Asset Allocation Fund; Growth and Income Fund; International Fund; Managed Fund; Money Market Fund; Social Awareness Fund; Special Opportunities Fund. b. Dissolution of Personal Investment Services, Inc. (Pennsylvania corporation), a subsidiary of Lincoln National Financial Institutions Group, Inc., effective April 10, 2003. MAY 2003 a. Dissolution of Financial Choices, Inc. (Pennsylvania corporation), a subsidiary of Lincoln National Financial Institutions Group, Inc., effective May 16, 2003. JUNE 2003 a. Dissolution of Investment Alternatives, Inc. (Pennsylvania corporation), a subsidiary of Lincoln National Financial Institutions Group, Inc., effective June 2, 2003. JULY 2003 a. Change in ownership interest of AnnuityNet, Inc. from a 24.0% combined LNL and LNC ownership interest to a 13.1% combined LNL and LNC ownership interest effective July 1, 2003. b. Addition of Corporate Benefit Systems, Inc. (a Texas corporation) as a wholly owned subsidiary of The Lincoln National Life Insurance Company effective July 9, 2003. This insurance agency was previously owned by Texas resident officers. c. Addition of Lincoln National Insurance Associates of Texas, Inc. (a Texas corporation) as a wholly-owned subsidiary of Lincoln National Insurance Associates, Inc. effective July 9, 2003. This insurance agency was previously owned by Texas resident officers. NOVEMBER 2003 10 a. Delaware Capital Management Company, Inc. (Delaware Corporation) merged its assets with Vantage Investment Advisers, a series of Delaware Management Business Trust, effective January 1, 2003. The new, merged series has been renamed Delaware Capital Mgmt. b. Dissolution of Delaware Capital Management Company, Inc. (Delaware Corporation), a subsidiary of Delaware Investments U.S., Inc., effective January 1, 2003. JANUARY 2004 a. Dissolution of Lincoln Retirement Advisors, Inc. (formerly First Penn-Pacific Securities, Inc.), an Illinois corporation and subsidiary of First Penn-Pacific Life Insurance Company, effective January 9, 2004. b. Addition of LFA Management Corporation (a Pennsylvania corporation) as a wholly-owned subsidiary of Lincoln Financial Advisors Corporation effective January 1, 2004. APRIL 2004 a. Dissolution of Pegasus Capital, LLC, an Indiana limited liability company and subsidiary of Select Capital, LLC, effective April 19, 2004. b. Dissolution of Select Capital, LLC, an Indiana limited liability company and subsidiary of The Lincoln National Life Insurance Company, effective April 19, 2004. MAY 2004 a. Dissolution of Lincoln National Insurance Associates of Ohio, Inc., an Ohio corporation and subsidiary of Lincoln National Insurance Associates, Inc., effective May 6, 2004. AUGUST 2004 a. Dissolution of Lincoln National Insurance Associates of Texas, Inc., a Texas corporation and subsidiary of Lincoln National Insurance Associates, Inc., effective August 3, 2004. b. Dissolution of Lincoln National Insurance Associates of Alabama, Inc., an Alabama corporation and subsidiary of Lincoln National Insurance Associates, Inc., effective August 10, 2004. SEPTEMBER 2004 a. Addition of Lincoln Reinsurance Company of Bermuda, Limited (Bermuda Corporation) as a wholly-owned subsidiary of Lincoln National Corporation effective September 3, 2004. b. Sale of DIAL Holding Company, Inc., a wholly-owned subsidiary of DMH Corp., with its subsidiary companies Delaware International Advisers, Ltd. and Delaware International Holdings, Ltd. effective September 24, 2004. NOVEMBER 2004 a. Lincoln National (UK) PLC has the following changes to the organization chart: 1. Dissolution of Lincoln Administration Services Limited effective September 9, 2003. 2. Dissolution of Lincoln Executive Club Trustee Limited effective February 24, 2004. 3. Dissolution of Niloda Limited effective October 7, 2003. MAY 2005 a. Addition of Lincoln Financial Holdings, LLC (a Delaware Limited Liability Company) as a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective May 18, 2005. 11 OCTOBER 2005 a. Dissolution of Lincoln National Financial Institutions Group, Inc. (formerly The Richard Leahy Corporation), an Indiana corporation and subsidiary of Lincoln National Corporation, effective October 14, 2005. b. AnnuityNet, Inc. has the following changes to the organization chart: 1. Name change of AnnuityNet, Inc. to Finetre Corporation effective October 19, 2003. 2. Dissolution of AnnuityNet of New Mexico, Inc., a New Mexico corporation and subsidiary of AnnuityNet, Inc., effective July 31, 2000. NOVEMBER 2005 a. The following changes have occurred with Delaware companies: 1. Dissolution of LincAm Properties, Inc., a Delaware corporation and subsidiary of Lincoln National Corporation, effective December 31, 1998 2. Dissolution of Delaware Lincoln Investment Advisers, part of the series of Delaware Management Business Trust, effective November 30, 2003. b. Addition of Quartz Corporation, (a North Carolina corporation) as a wholly-owned subsidiary of Lincoln National Corporation, effective October 6, 2005. c. Addition of LFG South Carolina Reinsurance Company (a South Carolina corporation) as a wholly owned subsidiary of Lincoln Financial Holdings, LLC, effective August 3, 2005. JANUARY 2006 a. Name change of Wakefield Tower Alpha Limited to Lincoln Investment Solutions, Inc. effective January 3, 2006. It has also been de-registered in the Cayman Islands and is now a Delaware corporation. b. Dissolution of AnnuityNet Insurance Agency of Massachusetts, Inc., a subsidiary of Finetre Corporation (formerly AnnuityNet, Inc.), effective November 10, 2005 c. Dissolution of AnnuityNet of Alabama, Inc., a subsidiary of Finetre Corporation (formerly AnnuityNet, Inc.), effective November 17, 2005. d. Dissolution of Liberty Press Limited, a subsidiary of Lincoln National (UK) PLC, effective January 10, 2006. e. Addition of Lincoln JP Company, LLC (an Indiana Limited Liability Company) as a wholly-owned subsidiary of Lincoln National Corporation effective January 17, 2006. f. Addition of Lincoln JP Holdings, L.P. (an Indiana Limited Partnership) with Lincoln National Corporation as limited partner and Lincoln JP Company, LLC as general partner effective January 17, 2006. APRIL 2006 a. Pursuant to an Agreement and Plan of Merger by and among Lincoln National Corporation, Lincoln JP Holdings, L.P., Quartz Corporation and Jefferson-Pilot Corporation the following entities were added as of April 3, 2006: 1. The following are wholly owned subsidiaries of Lincoln JP Holdings, L.P.: - HARCO Capital Corp. (a Delaware corporation) - Hampshire Funding, Inc. (a New Hampshire corporation) - Jefferson-Pilot Capital Trust A (a Delaware business trust) - Jefferson-Pilot Capital Trust B (a Delaware business trust) - Lincoln Financial Media Company (a North Carolina corporation) - Jefferson Pilot Investment Advisory Corporation ( a Tennessee corporation) - Jefferson-Pilot Investments, Inc. (a North Carolina corporation) 12 - Jefferson Pilot Variable Corporation (a North Carolina corporation) - Jefferson-Pilot Life Insurance Company (a North Carolina corporation) - Jefferson-Pilot Securities Corporation (a New Hampshire corporation) - The Guarantee Life Companies Inc. (a Delaware corporation) - TSC Reassurance (Bermuda) Ltd. 2. International Home Furnishing Center, Inc. (a North Carolina corporation), which is 29.074% owned by HARCO Capital Corp. 3. Tomco2 Equipment Company (a Georgia corporation), which is 29.16% owned by HARCO Capital Corp. 4. The following are wholly owned subsidiaries of Lincoln Financial Media Company: - Lincoln Financial Media Company of California (a North Carolina corporation) - Lincoln Financial Media Company of Colorado (a North Carolina corporation) - Lincoln Financial Media Company of Florida (a North Carolina corporation) - Lincoln Financial Media Company of Georgia (a North Carolina corporation) - Lincoln Financial Media Company of North Carolina (a North Carolina corporation) - Lincoln Financial Sports, Inc. (a North Carolina corporation) - WWBT, Inc. (a Virginia corporation) - WBTV, Inc. (a North Carolina corporation) - WCSC, Inc. (a South Carolina corporation) 5. Tall Tower, Inc. (a South Carolina corporation) as a wholly-owned subsidiary of WCSC, Inc. 6. Hampshire Syndications, Inc. (a New Hampshire corporation) as a wholly-owned subsidiary of Jefferson-Pilot Investments, Inc. 7. Jefferson Standard Life Insurance Company (a North Carolina corporation) as a wholly-owned subsidiary of Jefferson-Pilot Life Insurance Company. 8. The following are wholly owned subsidiaries of Jefferson Pilot Securities Corporation: - Allied Professional Advisors, Inc. (a New Hampshire corporation) - Jefferson Pilot Insurance Agency of Alabama, Inc. (an Alabama corporation) - Jefferson Pilot Insurance Agency of Hawaii, Inc. (a Hawaii corporation) - Jefferson Pilot Insurance Agency of Texas, Inc. (a Texas corporation) - Jefferson-Pilot Investor Services of Nevada, Inc. (a Nevada corporation) - JPSC Insurance Services, Inc. (a New Hampshire corporation) - Polaris Advisory Services, Inc. (a Connecticut corporation) - Polaris Financial Services, Inc. (a Connecticut corporation) - Windward Securities Corporation (a New Hampshire corporation) 10. Jefferson Pilot Financial Insurance Company (a Nebraska corporation) which is owned 80.3% by Lincoln JP Holdings, L.P. and 19.7% by The Guarantee Life Companies, Inc. 11. The following are wholly owned subsidiaries of Jefferson Pilot Financial Insurance Company: - Jefferson Pilot Life Insurance Agency of Massachusetts, Inc. (a Massachusetts corporation) - Jefferson Pilot LifeAmerica Insurance Company (a New Jersey corporation) - Westfield Assigned Benefits Company (an Ohio corporation) JUNE 2006 a. Dissolution of The Guarantee Life Companies Inc., a subsidiary of Lincoln JP Holdings, L.P., effective June 1, 2006. b. As a result of the dissolution of The Guarantee Life Companies Inc., Jefferson Pilot Financial Insurance Company became a wholly-owned subsidiary of Lincoln JP Holdings, L.P., effective June 1, 2006. 13 c. Delaware has the following change to the organization chart: 1. Delaware Asset Advisers was organized on August 18, 2005 and is part of the Delaware Management Business Trust. JANUARY 2007 a. Dissolution of Corporate Benefit Systems, Inc., a Texas corporation and subsidiary of The Lincoln National Life Insurance Company, effective December 31, 2006. b. Change in ownership of LFA, Limited Liability Company from 99% ownership by The Lincoln National Life Insurance Company and 1% ownership by First Penn-Pacific Life Insurance Company to a wholly-owned subsidiary of The Lincoln National Life Insurance Company, effective December 31, 2006. c. Change in ownership of LFD Insurance Agency, Limited Liability Company from 99% ownership by The Lincoln National Life Insurance Company and 1% ownership by First Penn-Pacific Life Insurance Company to a wholly-owned subsidiary of The Lincoln National Life Insurance Company, effective December 31, 2006. d. Dissolution of Lincoln Financial Group, Inc., an Alabama corporation and subsidiary of The Lincoln National Life Insurance Company, effective December 28, 2006. e. Dissolution of Lincoln Financial Services and Insurance Brokerage of New England, Inc., a Massachusetts corporation and subsidiary of The Lincoln National Life Insurance Company, effective January 9, 2007. MARCH 2007 a. Dissolution of TSC Reassurance (Bermuda) Ltd., a Bermuda company and subsidiary of Lincoln JP Holdings, L.P., effective December 31, 2006. b. Dissolution of Quartz Corporation, a North Carolina corporation and subsidiary of Lincoln National Corporation, effective February 19, 2007. c. Dissolution of Jefferson Pilot Life Insurance Agency of Massachusetts, Inc., a Massachusetts corporation and subsidiary of Jefferson Pilot Financial Insurance Company, effective February 28, 2007. d. Dissolution of Lincoln JP Company, LLC, an Indiana limited liability company and subsidiary of Lincoln National Corporation, effective March 1, 2007. e. Dissolution of Lincoln JP Holdings, L.P., an Indiana limited partnership and subsidiary of Lincoln National Corporation, effective March 1, 2007. f. As a result of the dissolution of Lincoln JP Holdings, L.P., the following entities became wholly-owned subsidiaries of Lincoln National Corporation, effective March 1, 2007: 1. HARCO Capital Corp. 2. Hampshire Funding, Inc. 3. Jefferson-Pilot Capital Trust A 4. Jefferson-Pilot Capital Trust B 5. Lincoln Financial Media Company 6. Jefferson Pilot Investment Advisory Corporation 7. Jefferson-Pilot Investments, Inc. 8. Jefferson-Pilot Life Insurance Company 9. Jefferson Pilot Securities Corporation 10. Jefferson Pilot Variable Corporation 11. Jefferson Pilot Financial Insurance Company g. Dissolution of Jefferson Pilot Insurance Agency of Alabama, Inc., an Alabama corporation and subsidiary of Jefferson Pilot Securities Corporation, effective March 12, 2007. h. Dissolution of Jefferson Pilot Insurance Agency of Hawaii, Inc., a Hawaii corporation and subsidiary of Jefferson Pilot Securities Corporation, effective March 13, 2007. i. Dissolution of Jefferson Pilot Investor Services of Nevada, Inc., a Nevada corporation and subsidiary of Jefferson Pilot Securities Corporation, effective March 15, 2007. APRIL 2007 a. Jefferson-Pilot Life Insurance Company was merged with and into The Lincoln National Life Insurance Company effective April 2, 2007. b. As a result of the merger of Jefferson-Pilot Life Insurance Company into The Lincoln National Life Insurance Company, Jefferson Standard Life Insurance Company became a wholly owned subsidiary of The Lincoln National Life Insurance Company effective April 2, 2007. c. Lincoln Life & Annuity Company of New York was merged with and into Jefferson Pilot LifeAmerica Insurance Company effective April 2, 2007. Immediately following this merger the surviving entity, Jefferson Pilot LifeAmerica Insurance Company, changed its name to Lincoln Life & Annuity Company of New York; and at the same time, was redomesticated from a New Jersey corporation to a New York corporation. The ownership share of the "new" Lincoln Life & Annuity Company of New York is vested 89.5% in The Lincoln National Life Insurance Company and 10.5% in Jefferson Pilot Financial Insurance Company. MAY 2007 a. Ownership of LNC Administrative Services Corporation was changed from Retirement Financial Services, Inc. to the new owner, The Lincoln National Life Insurance Company effective January 1, 2007. b. Dissolution of LFA of Delaware, Limited Liability Company, a Delaware LLC and subsidiary of The Lincoln National Life Insurance Company (99% ownership) was dissolved, effective April 18, 2007. c. Name change of Jefferson Pilot Investment Advisory Corporation to Lincoln Investment Advisors Corporation effective April 27, 2007. JUNE 2007 a. Ownership of First Penn-Pacific Life Insurance Company was changed from The Lincoln National Life Insurance Company to the new owner, Lincoln National Corporation effective May 2, 2007. b. Dissolution of Lincoln National Insurance Associates of Hawaii, Inc., a Hawaii Corporation and subsidiary of Lincoln National Insurance Associates, Inc., effective May 24, 2007. c. Dissolution of Lincoln National Insurance Associates of Massachusetts, Inc., a Massachusetts Corporation and subsidiary of Lincoln National Insurance Associates, Inc., effective May 24, 2007. d. Dissolution of Jefferson Pilot Life Insurance Agency of Texas, Inc., a Texas Corporation and subsidiary of Jefferson Pilot Securities Corporation, effective June 13, 2007. July 2007 a. Sale of Finetre Corporation, a subsidiary of The Lincoln National Life Insurance Company, along with its subsidiary company, AnnuityNet Insurance Agency, Inc., effective October 2, 2006. b. Jefferson Pilot Financial Insurance Company was merged with and into The Lincoln National Life Insurance Company effective July 2, 2007. c. As a result of the merger of Jefferson-Pilot Life Insurance Company into The Lincoln National Life Insurance Company, Lincoln Life & Annuity Company of New York and Westfield Assigned Benefits Company became wholly owned subsidiaries of The Lincoln National Life Insurance Company effective July 2, 2007. d. Addition of Lincoln National Financial Holdings, LLC (a Delaware Limited Liability Company) as a wholly-owned subsidiary of The Lincoln National Life Insurance Company effective July 13, 2007. e. Dissolution of Polaris Financial Services, Inc., a Connecticut corporation and subsidiary of Jefferson Pilot Securities Corporation, effective July 19, 2007. f. Dissolution of Polaris Advisory Services, Inc., a Connecticut corporation and subsidiary of Jefferson Pilot Securities Corporation, effective July 19, 2007. g. Addition of Lincoln Reinsurance Company of South Carolina (a South Carolina Corporation) as a wholly-owned subsidiary of Lincoln National Financial Holdings, LLC effective July 27, 2007. SEPTEMBER 2007 a. Windward Securities Corporation was merged with and into Jefferson Pilot Securities Corporation effective August 4, 2006. OCTOBER 2007 a. The Administrative Management Group, Inc. was merged with and into Lincoln Retirement Services Company, LLC, effective October 1, 2007. b. As a result of the merger of Administrative Management Group, Inc. into Lincoln Retirement Services Company, LLC, AMG Service Corp. became a wholly-owned subsidiary of Lincoln Retirement Services Company, LLC. effective October 1, 2007. NOVEMBER 2007 a. Dissolution of HARCO Capital Corp., a Delaware corporation and subsidiary of Lincoln National Corporation, effective November 9, 2007. b. As a result of the dissolution of HARCO Capital Corp., the 29.074% ownership interest of International Home Furnishing Center, Inc. and the 29.16% ownership interest of Tomco2Equipment Company previously held by HARCO Capital Corp are transferred to Lincoln National Corporation effective November 9, 2007. c. Dissolution of Lincoln National Insurance Associates, Inc., a Connecticut corporation and subsidiary of The Lincoln National Life Insurance Company, effective November 21, 2007. DECEMBER 2007 a. Sale of Lincoln Financial Sports, Inc., a North Carolina corporation and subsidiary of Lincoln Financial Media Company, to Raycom Sports, LLC. effective November 30, 2007. b. Dissolution of AMG Service Corp., an Illinois corporation and subsidiary of Lincoln Retirement Services Company, effective December 11, 2007. JANUARY 2008 a. Cancellation of Jefferson-Pilot Capital Trust A and Jefferson-Pilot Capital Trust B, Delaware business trusts owned by Lincoln National Corporation, effective January 11, 2008. b. Sale of Lincoln Financial Media Company of North Carolina, a North Carolina corporation and subsidiary of Lincoln Financial Media Company, to Greater Media Radio, Inc. effective January 31, 2008. 14
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