<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1999
1933 ACT REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE
ACCOUNT M
(EXACT NAME OF REGISTRANT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(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
(219) 455-2000
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<S> <C>
Jack D. Hunter, Esquire COPY TO:
The Lincoln National Life Insurance Company Jeremy Sachs, Esquire
200 East Berry Street The Lincoln National Life Insurance
P.O. Box 1110 Company
Fort Wayne, Indiana 46802 350 Church Street
(NAME AND ADDRESS OF AGENT FOR SERVICE) Hartford, CT 06103-1106
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after effective date of
Registration Statement, and continuously thereafter.
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE OF SECURITIES BEING REGISTERED)
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
<TABLE>
<S> <C>
HOME OFFICE LOCATION: ADMINISTRATIVE OFFICE
1300 SOUTH CLINTON STREET PERSONAL SERVICE CENTER MVLI
P.O. BOX 1110 350 CHURCH STREET
FORT WAYNE, INDIANA 46802 HARTFORD, CT 06103-1106
(800) 942-5500 (800) 444-2363
</TABLE>
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A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
This Prospectus describes a flexible premium variable life insurance
contract (the "Policy"), offered by The Lincoln National Life Insurance Company
("Lincoln Life", "Company", "we", "us", "our").
The Policy features:
- flexible premium payments;
- a choice of one of two death benefit options;
- a choice of underlying investment options.
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance contract with the Policy. This
Prospectus and the Prospectuses of the Funds, furnished with this Prospectus,
should be read carefully to understand the Policy being offered.
The mutual funds ("Funds") available through our Flexible Premium Variable
Life Account M ("Separate Account") are:
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST
Baron Capital Asset Fund -- Insurance Shares
BT INSURANCE FUNDS TRUST
EAFE-Registered Trademark- Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND, INC.
Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio -- Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
Growth Opportunities Portfolio -- Service Class
JANUS ASPEN SERIES
Janus Aspen Series Balanced Portfolio
Janus Aspen Series Worldwide Growth Portfolio
LINCOLN NATIONAL (LN)
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton International Fund -- Class 2
Templeton Stock Fund -- Class 2
TO BE VALID, THIS PROSPECTUS MUST HAVE THE CURRENT MUTUAL FUNDS' PROSPECTUSES
WITH IT. KEEP ALL 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. THIS PROSPECTUS ONLY OFFERS THE
POLICY FOR SALE IN JURISDICTIONS WHERE ITS OFFER AND SALE ARE LAWFUL.
PROSPECTUS DATED: , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
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<S> <C>
HIGHLIGHTS..................................... 3
Initial Choices To Be Made................... 3
Level or Varying Death Benefit............... 3
Amount of Premium Payments................... 4
Selection of Funding Vehicles................ 4
No Lapse Provision........................... 5
Charges and Fees............................. 5
Fund Expenses................................ 5
Changes in Specified Amount.................. 8
LINCOLN LIFE, THE SEPARATE ACCOUNT AND THE
GENERAL ACCOUNT............................... 8
BUYING VARIABLE LIFE INSURANCE................. 9
Replacements................................. 10
APPLICATION.................................... 10
OWNERSHIP...................................... 11
BENEFICIARY.................................... 11
THE POLICY..................................... 12
Policy Specifications........................ 12
PREMIUM FEATURES............................... 12
Planned Premiums Additional Premiums......... 12
Limits on Right to Make Payments of
Additional and Planned Premiums............. 13
Premium Load; Net Premium Payment............ 13
RIGHT-TO-EXAMINE PERIOD........................ 13
TRANSFERS AND ALLOCATION AMONG ACCOUNTS........ 13
Allocation of Net Premium Payments........... 13
Transfers.................................... 13
Optional Sub-Account Allocation Programs..... 14
Dollar Cost Averaging...................... 14
Automatic Rebalancing...................... 15
POLICY VALUES.................................. 15
Accumulation Value........................... 15
Separate Account Value....................... 15
Variable Accumulation Unit Value........... 16
Variable Accumulation Units................ 16
Fixed Account and Loan Account Value......... 16
Net Accumulation Value....................... 16
FUNDS.......................................... 17
Substitution of Securities................... 21
Voting Rights................................ 21
Fund Participation Agreements................ 22
CHARGES AND FEES............................... 22
Deductions Made Monthly...................... 22
Administrative Expenses.................... 22
Cost of Insurance Charge................... 23
Mortality and Expense Risk Charge............ 23
Surrender Charges............................ 23
Reduction of Charges -- Purchases on a Case
Basis; Exchanges............................ 24
Transaction Fee for Excess Transfers......... 24
DEATH BENEFITS................................. 25
Death Benefit Options........................ 25
Changes in Death Benefit Options and
Specified Amount............................ 25
<CAPTION>
CONTENTS PAGE
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<S> <C>
Federal Income Tax Definition of Life
Insurance................................... 26
NOTICE OF DEATH OF INSURED..................... 26
PAYMENT OF DEATH BENEFIT PROCEEDS.............. 26
Settlement Options........................... 27
POLICY LIQUIDITY............................... 27
Policy Loans................................. 27
Partial Surrender............................ 28
Surrender of the Policy...................... 29
Surrender Value.............................. 29
Deferral of Payment and Transfers............ 29
ASSIGNMENT; CHANGE OF OWNERSHIP................ 29
LAPSE AND REINSTATEMENT........................ 29
Lapse of a Policy............................ 29
No Lapse Provision........................... 30
Reinstatement of a Lapsed Policy............. 30
COMMUNICATIONS WITH LINCOLN LIFE............... 31
Proper Written Form.......................... 31
Telephone Transaction Privileges............. 31
OTHER POLICY PROVISIONS........................ 31
Issuance..................................... 31
Date of Coverage............................. 31
Incontestability............................. 31
Misstatement of Age or Gender................ 31
Suicide...................................... 32
Nonparticipating Policies.................... 32
Riders....................................... 32
TAX ISSUES..................................... 32
Tax Treatment of Death Benefit............... 32
Federal Income Tax Considerations............ 32
Taxation of Lincoln Life..................... 33
Other Considerations......................... 33
FAIR VALUE OF THE POLICY....................... 34
DIRECTORS AND OFFICERS OF LINCOLN LIFE......... 34
DISTRIBUTION OF POLICIES....................... 36
CHANGES OF INVESTMENT POLICY................... 36
OTHER CONTRACTS ISSUED BY LINCOLN LIFE......... 36
STATE REGULATION............................... 36
REPORTS TO OWNERS.............................. 37
ADVERTISING.................................... 37
PREPARING FOR YEAR 2000........................ 37
LEGAL PROCEEDINGS.............................. 38
EXPERTS........................................ 39
REGISTRATION STATEMENT......................... 39
APPENDIX 1: MONTHLY CHARGE..................... 40
APPENDIX 2: GUARANTEED MAXIMUM COST OF
INSURANCE RATES............................... 41
APPENDIX 3: ILLUSTRATION OF SURRENDER
CHARGES....................................... 42
APPENDIX 4: CORRIDOR PERCENTAGES............... 44
APPENDIX 5: ILLUSTRATION OF ACCUMULATION
VALUES, SURRENDER VALUES AND DEATH BENEFIT
PROCEEDS...................................... 45
</TABLE>
2
<PAGE>
HIGHLIGHTS
This section is an overview of key Policy features.
(Regulations in your state may vary the provisions of your
own Policy.) Your Policy is a flexible premium variable life
insurance policy under which flexible premium payments are
permitted and the Death Benefit and Policy values may vary
with the investment performance of the funding option(s)
selected. Its value may change on a:
1) fixed basis;
2) variable basis; or a
3) combination of both fixed and variable bases.
Review your personal financial objectives and discuss them
with a qualified financial counselor before you buy a
variable life insurance policy. This Policy may, or may not,
be appropriate for your individual financial goals. The
value of the Policy and, under one option, the death benefit
amount depend on the investment results of the funding
options you select.
At all times, your Policy must qualify as life insurance
under the Internal Revenue Code of 1986 (the "Code") to
receive favorable tax treatment under Federal law. If these
requirements are met, you may benefit from such tax
treatment. Lincoln Life reserves the right to return your
premium payments if they result in your Policy failing to
meet Code requirements.
INITIAL CHOICES TO BE MADE
The Policy Owner (the "Owner" or "you") is the person named
in the "Policy Specifications" who has all of the Policy
ownership rights. If no Owner is named, the Insured (the
person whose life is insured under the Policy) will be the
Owner of the Policy. You, as the Owner, have four important
choices to make when the Policy is first purchased. You need
to choose:
1) one of the two Death Benefit Options;
2) the amount of premium you want to pay; and
3) the amount of your Net Premium Payment to be placed in
each of the funding options you select. The Net Premium
Payment is the balance of your Premium Payment that
remains after certain charges are deducted from it.
4) whether to elect the No Lapse Provision.
LEVEL OR VARYING DEATH BENEFIT
The Death Benefit is the amount Lincoln pays to the
Beneficiary(ies) when the Insured dies. Before we pay the
Beneficiary(ies), any outstanding loan account balances or
outstanding amounts due are subtracted from the Death
Benefit. We calculate the Death Benefit payable as of the
date on which the Insured died.
When you purchase your Policy, you must choose one of two
Death Benefit Options:
1) a level death benefit; or
2) a varying death benefit.
If you choose the level Death Benefit Option, the Death
Benefit will be the greater of:
1) the "Specified Amount", which is the amount of the death
benefit in effect for the Policy when the Insured died, less
any indebtedness and partial surrenders (The Specified
Amount may be found on the Policy's Specification Page); or
2) the "Corridor Death Benefit", which is the death benefit
calculated as a percentage of the Accumulation Value.
3
<PAGE>
If you choose the varying Death Benefit Option, the Death
Benefit will be the greater of:
1) the Specified Amount plus the Net Accumulation Value,
less any loan interest accrued, but not yet charged, when
the Insured died; or
2) the Corridor Death Benefit.
(The "Net Accumulation Value" is the total of the balances
in the Fixed Account and the Separate Account. It does not
include any outstanding Loan Account amounts).
See page 25.
If you have borrowed against your Policy or surrendered a
portion of your Policy, your Death Benefit will be reduced
by the Loan Account balance, by any loan interest accrued,
but not yet charged, and any surrendered amount.
AMOUNT OF PREMIUM PAYMENT
When you apply for your Policy, you must decide how much
premium to pay. Premium payments may be changed within the
limits described on page 13.
You may use the value of the Policy to pay the premiums due
and continue the Policy in force if sufficient values are
available for premium payments. Be careful; if the
investment options you choose do not do as well as you
expect, there may not be enough value to continue the Policy
in force without more premium payments. Charges against
Policy values for the cost of insurance (see page 22)
increase as the Insured gets older.
If your Policy lapses because your Monthly Premium Deduction
is larger than the Net Accumulation Value, you may reinstate
your Policy. The Policy will not lapse if, on each Monthly
Anniversary while the No Lapse Provision is in effect, the
Owner has met the No Lapse Premium Requirement. See page 30.
When you first receive your Policy you will have 10 days to
look it over, unless state law requires a greater time. This
is called the "Right-to-Examine" period. Use this time to
review your Policy and make sure it meets your needs. During
this period, your Initial Premium Payment will be deposited
in the Money Market Sub-Account. If you then decide you do
not want your Policy, we will return all Premium Payments to
you with no interest paid. See page 13.
SELECTION OF FUNDING VEHICLES
This Prospectus focuses on the Separate Account investment
information that makes up the "variable" part of the
contract. If you put money into the variable funding
options, you assume all the investment risk on that money.
This means that if the mutual fund(s) you select go up in
value, the value of your Policy, net of charges and
expenses, also goes up. If those funds lose value, so does
your Policy. Each fund has its own investment objective. You
should review each fund's Prospectus before making your
decision.
You must choose the Fund(s) in which you want to place each
Net Premium Payment. The Sub-Accounts make up the Separate
Account. Each Sub-Account invests in shares of a certain
Fund. A Sub-Account is not guaranteed and will increase or
decrease in value according to the particular Fund's
investment performance. See page 17.
You may also use our Fixed Account to fund your Policy. Net
Premium payments put into the Fixed Account:
- become part of our General Account;
- do not share the investment experience of the Separate
Account; and
4
<PAGE>
- have a guaranteed minimum interest rate of 4% per year.
Interest beyond 4% is credited at our discretion. For
additional information on the Fixed Account, see page 9.
NO LAPSE PROVISION
If elected on the application, this policy contains a
ten-year "No Lapse Provision". This means that the Policy
will not lapse during its first ten years regardless of the
gains or losses of the Funds you select as long as you pay
the specified No Lapse Premium. Therefore, the Initial Death
Benefit under your Policy will be guaranteed for ten years
even though your Net Accumulation Value is insufficient to
pay your current Monthly Deductions. Loans or Partial
Surrenders may jeopardize the No Lapse Provision. See page
30. Availability of the No Lapse Provision may vary in some
states.
CHARGES AND FEES
We deduct a premium charge of 5% from each Premium Payment.
We make Monthly Deductions for administrative expenses ($10
per month and, during the first two Policy Years, a monthly
charge per $1,000 of Specified Amount. See page 22 and
Appendix 1. This monthly charge also applies, for 24 months,
to any increase in Specified Amount) along with the Cost of
Insurance and any riders that are placed on your Policy. We
make daily charges against the Separate Account for
mortality and expense risk. This charge is guaranteed at an
annual rate of 0.90% for Policy Years 1-19 and 0.20% for
Policy Years 20 and beyond.
Each Fund has its own management fee charge, also deducted
daily. Each Fund's expense levels will affect its investment
results. The table on page 6 shows you the current expense
levels for each Fund.
Each Policy Year you may make 12 transfers between funding
options without charge. Beyond 12, a $25 fee may apply.
You may borrow within described limits against the Policy.
You may surrender the Policy totally or withdraw part of its
value.
The Surrender Charge is the amount retained by us if you
totally surrender your Policy within the first 15 Policy
Years. We charge you $25, but not more than 2% of the amount
withdrawn, each time you request a partial surrender of your
Policy. See page 23.
If you borrow against your Policy, interest will be charged
to the Loan Account Value. The annual interest rate is 8%.
Lincoln Life will credit interest of 7% per year on the Loan
Account Value. See page 28.
Charges and fees may be reduced in some circumstances. See
page 24.
FUND EXPENSES
The investment advisor for each of the Funds deducts a daily
charge as a percent of the net assets in each fund as an
asset management charge. The charge reflects asset
management fees of the investment advisor (Management Fees),
and other expenses
5
<PAGE>
incurred by the funds (including 12b-1 fees for Class 2
shares and Other Expenses). The charge has the effect of
reducing the investment results credited to the Sub-
Accounts. Future Fund expenses will vary.
<TABLE>
<CAPTION>
TOTAL ANNUAL
FUND
OPERATING TOTAL FUND
EXPENSES OPERATING
WITHOUT TOTAL WAIVERS EXPENSES WITH
MANAGEMENT 12b-1 OTHER WAIVERS OR AND WAIVERS OR
FUND FEES FEES EXPENSES REDUCTIONS REDUCTIONS REDUCTIONS
- ------------------------------ --------------- ----- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund.......... 0.64% -- 0.08% 0.72% -- 0.72%
AIM V.I. International Equity
Fund........................ 0.75% -- 0.16% 0.91% -- 0.91%
AIM V.I. Value Fund........... 0.61% -- 0.05% 0.66% -- 0.66%
Baron Capital Asset
Fund--Insurance Shares
(1)......................... 1.00% 0.25% 6.37% 7.62% (6.17%) 1.45%
BT EAFE Index Fund (2)........ 0.45% -- 1.21% 1.66% (1.01%) 0.65%
BT Equity 500 Index Fund
(2)......................... 0.20% -- 0.99% 1.19% (0.89%) 0.30%
BT Small Cap Index Fund (2)... 0.35% -- 1.23% 1.58% (1.13%) 0.45%
Delaware Group Delchester
Series (3).................. 0.65% -- 0.10% 0.75% -- 0.75%
Delaware Group Devon Series
(3)......................... 0.65% -- 0.06% 0.71% -- 0.71%
Delaware Group Emerging
Markets Series (4).......... 1.25% -- 0.42% 1.67% (0.17%) 1.50%
Delaware Group REIT Series
(5)......................... 0.75% -- 0.27% 1.02% (0.17%) 0.85%
Delaware Group Small Cap Value
Series (6).................. 0.75% -- 0.10% 0.85% -- 0.85%
Delaware Group Trend Series
(6)......................... 0.75% 0.10% 0.85% (0.04%) 0.81%
Fidelity VIPII Contrafund
Portfolio -- Service Class
(7)......................... 0.59% 0.10% 0.11% 0.80% -- 0.80%
Fidelity VIPIII Growth
Opportunities Portfolio --
Service Class (7)........... 0.59% 0.10% 0.11% 0.80% -- 0.80%
Janus Aspen Series Balanced
Portfolio (8)............... 0.72% -- 0.02% 0.74% -- 0.74%
Janus Aspen Series Worldwide
Growth Portfolio (8)........ 0.67% -- 0.07% 0.74% (0.02%) 0.72%
LN Bond Fund.................. 0.44% -- 0.13% 0.57% -- 0.57%
LN Capital Appreciation
Fund........................ 0.76% -- 0.07% 0.83% -- 0.83%
LN Equity-Income Fund......... 0.72% -- 0.07% 0.79% 0.79%
LN Global Asset Allocation
Fund........................ 0.72% -- 0.19% 0.91% -- 0.91%
LN Money Market Fund.......... 0.48% -- 0.11% 0.59% -- 0.59%
LN Social Awareness Fund...... 0.34% -- 0.04% 0.38% -- 0.38%
MFS Emerging Growth Series
(9)......................... 0.75% -- 0.10% 0.85% -- 0.85%
MFS Total Return Series (9)... 0.75% -- 0.16% 0.91% -- 0.91%
MFS Utilities Series (9)...... 0.75% -- 0.26% 1.01% -- 1.01%
AMT Mid-Cap Growth Portfolio
(10)(11).................... 0.85% -- 0.58% 1.43% (0.43%) 1.00%
AMT Partners Portfolio
(10)(11).................... 0.78% -- 0.06% 0.84% -- 0.84%
Templeton International Fund
-- Class 2 (12)............. 0.69% 0.25% 0.17% 1.11% -- 1.11%
Templeton Stock Fund -- Class
2 (12)...................... 0.70% 0.25% 0.19% 1.14% -- 1.14%
</TABLE>
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(1) The Adviser is contractually obligated to reduce its
fee to the extent required to limit Baron Capital Asset
Fund's total operating expenses to 1.5% for the first
$250 million of assets in the Fund, 1.35% for Fund
assets over $250 million, and 1.25% for Fund assets
over $500 million. Without the expense limitations,
total operating expenses for the Fund for the period
October 1, 1998 through December 31, 1998 would have
been 7.62%
(2) Under the Advisory Agreement with Bankers Trust Company
(the "Advisor"), the Funds will pay an advisory fee at
an annual percentage rate of 0.45%, 0.20% and 0.35% of
the average daily net assets of the Funds for the EAFE
Equity Index Fund, Equity 500 Index Fund and Small Cap
Index Fund, respectively. These fees are accrued daily
and paid monthly. The Advisor has voluntarily
undertaken to waive its fees
6
<PAGE>
and to reimburse the Funds for certain expenses so that
the Funds' total operating expenses will not exceed
0.65%, 0.30% and 0.45% of average daily net assets for
the EAFE Equity Index Fund, Equity 500 Index Fund and
Small Cap Index Fund, respectively.
(3) The investment advisor for the Devon Series and
Delchester Series is Delaware Management Company, Inc.
("DMC"). Effective May 1, 1999 through October 31,
1999, DMC has voluntarily agreed to waive its
management fees and reimburse each Series for expenses
to the extent that total expenses will not exceed 0.80%
for the Devon Series and 0.80% for the Delchester
Series. Pursuant to a vote of the Fund's shareholders
on March 17, 1999, a new management fee structure based
on average daily net assets was approved as follows:
0.65% on the first $500 million, 0.60% on the next $500
million, 0.55% on the next $1,500 million, 0.50% on
assets in excess of $2,500 million; all per year.
(4) The investment advisor for the Emerging Markets Series
is Delaware International Advisors, Limited ("DIAL").
Effective May 1, 1999 through October 31, 1999, DIAL
has voluntarily agreed to waive its management fees and
reimburse the Series for expenses to the extent that
total expenses will not exceed 1.50% for the Emerging
Market Series. Pursuant to a vote of the Fund's
shareholders on March 17, 1999, a new management fee
structure based on average daily net assets was
approved as follows: 1.25% on the first $500 million,
1.20% on the next $500 million, 1.15% on the next
$1,500 million, 1.10% on assets in excess of $2,500
million; all per year.
(5) The investment advisor for the REIT Series is Delaware
Management Company, Inc. ("DMC"). Effective May 1, 1999
through October 31, 1999, DMC has voluntarily agreed to
waive its management fees and reimburse the Series for
expenses to the extent that total expenses will not
exceed 0.85% for the REIT Series. There is no change to
the current management fee structure.
(6) The investment advisor for the Trend Series and Small
Cap Value Series is Delaware Management Company, Inc.
("DMC"). Effective May 1, 1999 through October 31,
1999, DMC has voluntarily agreed to waive its
management fee and reimburse each Series for expenses
to the extent that total expenses will not exceed 0.85%
for the Trend Series and 0.85% for the Small Cap Value
Series. Pursuant to a vote of the Fund's shareholders
on March 17, 1999, a new management fee structure based
on average daily net assets was approved as follows:
0.75% on the first $500 million, 0.70% on the next $500
million, 0.65% on the next $1,500 million, 0.60% on
assets in excess of $2,500 million; all per year.
(7) A portion of the brokerage commissions that certain
funds pay was used to reduce funds expenses. In
addition, certain funds, or Fidelity Management &
Research on behalf of certain funds, have entered into
arrangements with their custodian whereby realized as a
result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, the
total operating expenses presented in the table would
have been 0.75% for the VIP II Contrafund Portfolio and
0.79% for the VIP III Growth Opportunities Portfolio.
(8) All expenses are stated both with and without
contractual waivers and fee reductions by Janus
Capital. Fee reductions for the Worldwide Growth and
Balanced Portfolios reduce the Management Fee to the
level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the
Management Fee and then against Other Expenses. Janus
Capital has agreed to continue the waivers and fee
reductions until at least the annual renewal of the
advisory agreement.
(9) Each series has an expense offset arrangement which
reduces the series' custodian fee based upon the amount
of cash maintained by the series with its custodian and
disbursing agent. Each series may enter into other such
arrangements and directed brokerage arrangements, which
would also have the effect of reducing the series'
expenses. Expenses do not take into account these
expense reductions, and are therefore higher than the
actual expenses of the series.
(10) Neuberger Berman Advisers Management Trust is divided
into portfolios ("Portfolios"), each of which invests
all of its net investable assets in a corresponding
series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Management and
Administration Fees" include the aggregate of the
administration fees paid by the Portfolio and the
management fees paid by its corresponding Series.
Similarly, "Other Expenses" includes all other
expenses of the Portfolio and its corresponding
Series.
(11) NBMI has undertaken to reimburse certain operating
expenses, including the compensation of NBMI (except
with respect to Partners Portfolio) and excluding
taxes, interest, extraordinary expenses, brokerage
commissions and transaction costs, that exceed, in the
aggregate, 1% of the Mid-Cap Growth and Partners
Portfolios' average daily net asset value. These
expense reimbursement agreements are subject to
termination upon 60 days written notice with respect
to the Mid-Cap Growth and Partners Portfolios, and
there can be no assurance that these policies will be
continued thereafter.
(12) Class 2 of the Fund has a distribution plan or "Rule
12b-1 plan" which is described in the Fund's
prospectus.
7
<PAGE>
CHANGES IN SPECIFIED AMOUNT
The Initial Specified Amount you choose is the initial Death
Benefit.
Within certain limits, you may decrease or, with
satisfactory evidence of insurability, increase the
Specified Amount. The minimum Specified Amount is currently
$100,000. Such changes will affect other aspects of your
Policy. See page 25.
LINCOLN LIFE, THE SEPARATE ACCOUNT AND
THE GENERAL ACCOUNT
Lincoln Life, an Indiana life insurance company incorporated
in 1905, is among the nation's largest writers of annuities,
individual life insurance and life reinsurance. Wholly-owned
by Lincoln National Corporation ("LNC"), a publicly held
Indiana insurance holding company incorporated in 1968, it
is licensed in all states (except New York), the District of
Columbia, Guam, and the Commonwealth of the Northern Mariana
Islands. Its principal office is at 1300 South Clinton
Street, Fort Wayne, IN 46802. Lincoln Life, LNC and their
affiliates comprise the "Lincoln Financial Group" which
provides a variety of wealth accumulation and protection
products and services.
Lincoln Life Flexible Premium Variable Life Account M
("Account M") is a "separate account" of the company
established on December 2, 1997. Under Indiana law, the
assets of Account M attributable to the Policies, though our
property, are not chargeable with liabilities of any other
business of Lincoln Life and are available first to satisfy
our obligations under the Policies. Account M income, gains,
and losses are credited to or charged against Account M
without regard to our other income, gains, or losses. Its
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 1940
Act and meets the 1940 Act's definition of "separate
account". Such registration does not involve supervision by
the Commission of Account M's or our management, investment
practices, or policies. We have numerous other registered
separate accounts which fund other variable life insurance
policies and variable annuity contracts.
Account M is divided into Sub-Accounts, each of which is
invested solely in the shares of one of the Funds available
as funding vehicles under the Policies. On each Valuation
Day, (any day on which the New York Stock Exchange is open
and trading is unrestricted) Net Premium Payments allocated
to Account M will be invested in Fund shares at net asset
value, and monies necessary to pay for deductions, charges,
transfers and surrenders from Account M are raised by
selling Fund shares at net asset value.
The Funds and their investment objectives, which they may or
may not achieve are on pages 17-21. More Fund information is
in the Funds' prospectuses, which must accompany or precede
this prospectus and should be read carefully. Some Funds
have investment objectives and policies similar to those of
other funds managed by the same investment adviser. Their
investment results may be higher or lower than those of the
other funds. There can be no assurance, and no
representation is made, that a Fund's investment results
will be comparable to the investment results of any other
fund.
We reserve the right to add, withdraw or substitute Funds,
subject to the conditions of the Policy and to compliance
with regulatory requirements if, in our sole discretion,
legal, regulatory, marketing, tax or investment
considerations so warrant or in the event
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a particular Fund is no longer available for investment by
the Sub-Accounts. No substitution will take place without
prior approval of the Commission, to the extent required by
law.
Shares of the Funds may be used by us and other insurance
companies to fund both variable annuity contracts and
variable life insurance policies. While this is not
perceived as problematic, the Funds' governing bodies
(Boards of Directors/Trustees) have agreed to monitor events
to identify any material irreconcilable conflicts which
might arise and to decide what responsive action might be
appropriate. If a Sub-Account were to withdraw its
investment in a Fund because of a conflict, a Fund might
have to sell portfolio securities at unfavorable prices.
A Policy may also be funded in whole or in part through the
"Fixed Account", part of Lincoln Life's General Account
supporting its insurance and annuity obligations. We will
credit interest on amounts held in the Fixed Account as we
determine from time to time, but not less than 4% per year.
Interest, once credited, and Fixed Account principal are
guaranteed. Interests in the Fixed Account have not been
registered under the 1933 Act in reliance on exemptive
provisions. The Commission has not reviewed Fixed Account
disclosures, but they are subject to securities law
provisions relating to accuracy and completeness.
BUYING VARIABLE LIFE INSURANCE
The Policies this Prospectus offers are variable life
insurance policies which provide death benefit protection.
Investors not needing death benefit protection should
consider other forms of investment, as there are extra costs
and expenses of providing the insurance feature. Further,
life insurance purchasers who are risk-aversive or want more
predictable premium levels and benefits may be more
comfortable buying more traditional, non-variable life
insurance. However, variable life insurance is a flexible
tool for financial and investment planning for persons
needing death benefit protection and willing to assume
investment risk and to monitor investment choices they have
made.
Flexibility starts with the ability to make differing levels
of premium payments. A young family just starting out may
only be able to pay modest premiums initially but hope to
increase premium payments over time. At first, this family
would be paying primarily for the insurance feature (perhaps
at ages where the insurance cost is relatively low) and
later use a Policy more as a savings vehicle. A customer at
peak earning capacity may wish to pay substantial premiums
for a limited number of years prior to retirement, after
which Policy values may suffice, based on future expected
return results, though not guaranteed, to keep the Policy
inforce for the expected lifetime and to provide, through
loans, supplemental retirement income. A customer may be
able to pay a large single premium, using the Policy
primarily as a savings and investment vehicle for potential
tax advantages. A parent or grandparent may find a policy on
the life of a child or grandchild a useful gifting
opportunity over a period of years and the basis of an
investment program for the donee. A business may be able to
use a Policy to fund non-qualified executive compensation or
business continuation plans.
Sufficient premiums must always be paid to keep a policy
inforce, and there is a risk of lapse if premiums are too
low in relation to the insurance amount and if investment
results are less favorable than anticipated. The No Lapse
Provision, while in effect, may help to assure a death
benefit even if investment results are unfavorable.
Flexibility also results from being able to select, monitor
and change investment choices within a Policy. With the wide
variety of funding options available, it is possible to fine
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tune an investment mix and change it to meet changing
personal objectives or investment conditions. Policy owners
should be prepared to monitor their investment choices on an
ongoing basis.
Variable life insurance has significant tax advantages under
current tax law. A transfer of values from one fund to
another within the Policy generates no taxable gain or loss.
Any investment income and realized capital gains within a
fund are automatically reinvested without being taxed to the
Policy owners. Policy values therefore accumulate on a tax-
deferred basis. These situations would normally result in
immediate tax liabilities in the case of direct investment
in mutual funds.
While these tax deferral features also apply to variable
annuities, liquidity (the ability of Policy owners to access
Policy values) is normally more easily achieved with
variable life insurance. Unless a policy has become a
"modified endowment contract" (see page 32), an Owner can
borrow Policy values tax-free, without surrender charges and
at very low net interest cost. Policy loans can be a source
of retirement income. Variable annuity withdrawals are
generally taxable to the extent of accumulated income, may
be subject to surrender charges, and will result in penalty
tax if made before age 59 1/2.
Depending on the death benefit option chosen, accumulated
Policy values may also be part of the eventual death benefit
payable. If a Policy is heavily funded and investment
performance is very favorable, the death benefit may
increase even further because of tax law requirements that
the death benefit be a certain multiple of Policy value,
depending on the Insured's age (see page 25). The death
benefit is income-tax free and may, with proper estate
planning, be estate-tax free. A tax advisor should be
consulted.
There are costs and expenses of variable life insurance
ownership which are directly related to Policy values (i.e.
asset based costs), as is true with investment in mutual
funds or variable annuities. A significant additional cost
of variable life insurance is the "cost of insurance" charge
which is imposed on the "amount at risk" (the death benefit
less Policy value) and increases as the insured grows older.
This charge varies by age, underwriting classification,
smoking status and in most states by gender. The effect of
its increase can be seen in illustrations in this Prospectus
(see Appendix 5) or in personalized illustrations available
upon request. Surrender Charges, which decrease over time,
are another significant additional cost if the Policy is not
retained.
REPLACEMENTS
Before purchasing the Policy to replace, or to be funded
with proceeds borrowed or withdrawn from, an existing life
insurance policy, an applicant should consider a number of
matters. Will any commission be paid to an agent or any
other person with respect to the replacement? Are coverages
and comparable values available from the Policy, as compared
to his or her existing policy? The Insured may no longer be
insurable, or the contestability period may have elapsed
with respect to the existing policy, while the Policy could
be contested. You should consider similar matters before
deciding to replace the Policy or withdraw funds from the
Policy for the purchase of funding a new policy of life
insurance.
APPLICATION
Any person who wants to buy a Policy must first complete our
application form.
A completed application identifies and provides sufficient
information about the prospective insured to permit us to
begin underwriting the risks under the Policy. We require a
medical history and examination of the Insured. We may
decline to provide
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insurance, or may place the Insured into a special
underwriting category (these include preferred, non-smoker
standard, smoker standard, non-smoker substandard and smoker
substandard). The amount of the Cost of Insurance deducted
monthly from the Policy value after issue varies among the
underwriting categories as well as by Age and, in most
states, gender of the Insured.
The applicant will initially select the Beneficiary or
Beneficiaries who are to receive Death Benefit Proceeds, the
initial face amount (the "Initial Specified Amount") of the
Death Benefit and which of two methods of computing the
Death Benefit is to be used. (See DEATH BENEFITS, Death
Benefit Options). The applicant will also indicate both the
frequency and amount of Premium Payments, (see PREMIUM
FEATURES), and how Policy values are initially to be
allocated among the available funding options following the
expiration of the Right-to-Examine Period. (See
RIGHT-TO-EXAMINE PERIOD).
OWNERSHIP
The Owner is the person or persons named as "Owner" in the
application, and on the Date of Issue will usually be
identified as "Owner" in the Policy Specifications. If no
person is identified as Owner in the Policy Specifications,
then the Insured is the Owner. The person or persons
designated to be Owner of the Policy must have, or hold
legal title for the sole benefit of a person who has, an
"insurable interest" in the life of the Insured under
applicable state law. The Owner may be the Insured, or any
other natural person or non-natural entity.
The Owner is entitled to exercise rights under the Policy so
long as the Insured is living. These rights include the
power to select and change the Beneficiary, except as state
law may restrict, and the Death Benefit Option. The Owner
generally also has the right to request policy loans, make
partial surrenders or surrender the Policy. The Owner may
also name a new owner, assign the Policy or agree not to
exercise all of the Owner's rights under the Policy.
If the Owner predeceases the Insured, the Owner's rights in
the Policy will belong to the Owner's estate, unless
otherwise specified to us.
BENEFICIARY
The Beneficiary is designated by the Owner or the Applicant
to receive the Death Benefit proceeds payable under the
Policy. The person or persons named in the application as
"Beneficiary" are the Beneficiaries of the Death Benefit
under the Policy, unless subsequently changed. Multiple
Beneficiaries will be paid in equal shares, unless otherwise
specified to us.
Except when we have acknowledged an assignment of the Policy
or an agreement not to change the Beneficiary, or when state
law restricts, the Owner may change the Beneficiary at any
time while the Insured is living. Any request for a change
in the Beneficiary must be submitted to us in a written form
satisfactory to us. When we have recorded the change of
Beneficiary, it will be effective as of the date of
signature or, if there is no such date, the date recorded.
No change of Beneficiary will affect or prejudice us as to
any payment made or action taken by us before it was
recorded.
If any Beneficiary dies before the Insured, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to us. If no named
Beneficiary survives the Insured, any Death Benefit Proceeds
will be paid to the Owner or the Owner's executor,
administrator or assignee.
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THE POLICY
The Policy is the life insurance contract described in the
Prospectus. The Date of Issue is the date on which we begin
life insurance coverage under a Policy, assuming the initial
premium has been paid. A Policy Year is each twelve month
period, beginning with the Date of Issue, during which the
Policy is in effect. The Policy Anniversary is the day of
the year the Policy was issued.
On issuance, we will deliver a life insurance contract
("Policy") to you. Please promptly review the Policy to
confirm that it sets forth the features specified in the
application. The ownership and other options set forth in
the Policy are registered, and may be transferred, solely on
our books and records. Mere possession of the Policy does
not imply ownership rights. If you lose the Policy, we will
issue a replacement on request and may charge a fee.
POLICY SPECIFICATIONS
The Policy includes a "Policy Specifications" page, with
supporting schedules, stating Policy information including
the identity of the Owner, the Date of Issue, the Initial
Specified Amount, the Death Benefit Option selected, the
Insured, the Issue Age, the Beneficiary, the initial Premium
Payment, the Surrender Charges, Expense Charges and Fees,
Guaranteed Maximum Cost of Insurance Rates, and the No Lapse
Premium, if elected.
PREMIUM FEATURES
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 maintain the No Lapse
Provision, if elected. (See LAPSE AND REINSTATEMENT No Lapse
Provision). The initial Premium Payment is due on the
Effective Date (the date on which the initial premium is
applied to the Policy) and must be equal to or exceed the
amount necessary to provide for two Monthly Deductions. If
the Insured is still living upon attaining Age 100, and the
Policy has not lapsed or been surrendered, there are certain
changes under the Policy. We will no longer accept Premium
Payments or transfer amounts to the Sub-Accounts, and will
make no further monthly deductions. Policy Values held in
the Separate Account will be transferred to the Fixed
Account. The Policy will remain in force until surrender or
the Insured's Death.
PLANNED PREMIUMS; ADDITIONAL PREMIUMS
"Planned Premiums" are the amount of premiums (as shown in
the Policy Specifications) the Applicant chooses to pay on a
scheduled basis. This is the amount for which we send a
premium reminder notice.
Any subsequent Premium Payments ("Additional Premiums") must
be sent directly to the Administrative Office. We credit
Additional Premiums when we receive them. Premium Payments
may be billed annually, semiannually, or quarterly.
Pre-authorized automatic Additional Premium Payments can
also be arranged at any time.
Unless specifically otherwise directed, any payment received
(other than any Premium Payment necessary to prevent, or
cure, Policy lapse) will be applied first to reduce Policy
indebtedness. There is no premium load on such payments to
the extent applied to reduce indebtedness.
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LIMITS ON RIGHT TO MAKE PAYMENTS OF ADDITIONAL AND PLANNED
PREMIUMS
You may increase Planned Premiums, or pay Additional
Premiums, subject to the following limitations and our right
to limit the amount or frequency of Additional Premiums.
We may require evidence of insurability if any payment of
Additional Premium (including Planned Premium) would
increase the difference between the Death Benefit and the
Accumulation Value. If we are unwilling to accept the risk,
we will refund the increase in premium without interest and
without participation of such amounts in any underlying
investment.
We may also decline, and would return, any Additional
Premium (including Planned Premium) or a portion thereof
that would result in total Premium Payments exceeding the
maximum limitation for life insurance under federal tax
laws.
PREMIUM LOAD; NET PREMIUM PAYMENT
We deduct a "premium load" of 5% from each Premium Payment,
for certain Policy-related state tax and federal income tax
liabilities and a portion of our sales expenses. The Premium
Payment, net of the premium load, is called the "Net Premium
Payment."
RIGHT-TO-EXAMINE PERIOD
If you mail or deliver the Policy for cancellation to the
Administrative Office on or before 10 days (20 to 30 days in
some states) after delivery of the Policy (longer for
Policies issued in replacement of other insurance), (the
"Right-to-Examine Period"), we will refund to you all
Premium Payments.
Any Premium Payments we receive before the end of the
Right-to-Examine Period will be held in the Money Market
Sub-Account, and will be allocated to the Sub-Accounts
designated by the Owner at the end of the Right-to-Examine
Period. If the Policy is returned for cancellation within
the Right-to-Examine Period, we will return any Premium
Payments within seven days, although refund of a Premium
Payment made by check may be delayed until the check clears.
TRANSFERS AND ALLOCATION AMONG ACCOUNTS
ALLOCATION OF NET PREMIUM PAYMENTS
The allocation of Net Premium Payments among the Fixed
Account and Sub-Accounts may be set forth in the
application. You may change it at any time. The amount
allocated to any Sub-Account must be in whole percentages
and result in a Sub-Account Value of at least $100 or a
Fixed Account Value of $2,500. We may waive minimum balance
requirements on the Sub-Accounts.
TRANSFERS
You may make transfers among the Sub-Account and to the
Fixed Account as set forth below, until the Insured reaches
Age 100. Carefully consider current market conditions and
each Sub-Account's investment policies and related risks
before allocating money to the Sub-Accounts.
Within 30 days after each anniversary of the Date of Issue,
you may transfer up to 20% of the Fixed Account Value (as of
that anniversary date) to one or more Sub-Accounts.
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The cumulative amount of transfers from the Fixed Account
within any such 30 day period cannot exceed 20% of the Fixed
Account Value on the most recent Policy Anniversary. Up to
12 transfer requests (a request may involve more than a
single transfer) may be made in any Policy Year without
charge, and any value remaining in the Fixed Account or in a
Sub-Account after a transfer must be at least $100. We may
impose a minimum transfer amount and a charge for each
transfer request in excess of 12 requests in any Policy
Year, and may further limit transfers from the Fixed Account
at any time.
Transfers must be made in proper written form, unless you
have given us written authorization to accept telephone
transactions. Telephone transaction authorization and
procedures are described in COMMUNICATIONS WITH LINCOLN
LIFE, Telephone Transaction Privileges. Written transfer
requests or adequately authenticated telephone transfer
requests received at the Administrative Office by the close
of the New York Stock Exchange (usually 4:00 PM ET) on a
Valuation Day will be effective as of that day. Otherwise,
requests will be effective as of the next Valuation Day.
Any transfer among the Sub-Accounts or to the Fixed Account
will result in the crediting and cancellation of
Accumulation Units based on the Accumulation Unit values
next determined after the Administrative Office receives a
request in proper written form or adequately authenticated
telephone transfer requests. Any transfer made which causes
the remaining value of Accumulation Units for a Sub-Account
or the Fixed Account to be less than $100 may result in
those remaining Accumulation Units being canceled and their
aggregate value reallocated proportionately among the other
Sub-Accounts and the Fixed Account to which Policy values
are then allocated.
OPTIONAL SUB-ACCOUNT ALLOCATION PROGRAMS
You may participate either in Dollar Cost Averaging or
Automatic Rebalancing programs, currently without charge,
but not in both at once.
DOLLAR COST AVERAGING
Dollar Cost Averaging systematically transfers specified
dollar amounts from the Money Market Sub-Account. Transfer
allocations may be made to one or more of the Sub-Accounts
(not the Fixed Account) on a monthly or quarterly basis.
These transfers do not count against the free transfers
available. 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.
In Dollar Cost Averaging, the value in the Money Market
Sub-Account must be at least $1,000 initially. The minimum
amount that may be allocated is $50 monthly.
An election for Dollar Cost Averaging is effective after the
Administrative Office receives your request in proper
written form or by telephone, if adequately authenticated.
An election is effective within ten business days, but only
if there is sufficient value in the Money Market
Sub-Account. We may waive Dollar Cost Averaging minimum
deposit and transfer requirements.
Dollar Cost Averaging terminates automatically: (1) if the
number of designated transfers has been completed; (2) if
the value in the Money Market Sub-Account is insufficient to
complete the next transfer; (3) within one week after the
Administrative Office receives a request for termination in
proper written form or by telephone, if adequately
authenticated; or (4) if the Policy is surrendered.
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AUTOMATIC REBALANCING
Automatic Rebalancing periodically restores to a
pre-determined level the percentage of Policy value
allocated to each Sub-Account (e.g. 20% Money Market, 50%
Growth, 30% Utilities). The Fixed Account is not subject to
rebalancing. The pre-determined level is the allocation
initially selected on the application, until you change it.
If Automatic Rebalancing is elected, all Net Premium
Payments allocated to the Sub-Accounts will be subject to
Automatic Rebalancing.
You may select Automatic Rebalancing on a quarterly,
semi-annual or annual basis. Automatic Rebalancing may be
elected, terminated or the allocation may be changed at any
time, effective within ten business days after our
Administrative Office receives your request in proper
written form or by telephone, if adequately authenticated.
POLICY VALUES
The Accumulation Value is the sum of the Fixed Account
Value, Separate Account Value and the Loan Account Value.
The Accumulation Value of the Policy depends on the
performance of the underlying investments. Policy values are
used to pay for Policy fees and expenses, including the Cost
of Insurance. Premium Payments to meet your objectives will
vary based on the investment performance of the underlying
investments. A market downturn, affecting the Sub-Accounts
upon which the Accumulation Value of a particular Policy
depends, may require Additional Premium Payments beyond
those expected (unless the No Lapse Provision requirements
have been satisfied) to maintain the level of coverage or to
avoid lapse of the Policy. We strongly suggest you review
periodic statements to determine if Additional Premium
Payments may be necessary to avoid lapse of the Policy.
We will tell you at least annually the Accumulation Value,
the number of Accumulation Units credited to the Policy,
current Accumulation Unit values, Sub-Account values, the
Fixed Account Value and the Loan Account Value.
ACCUMULATION VALUE
The portion of a Premium Payment, after deduction of 5.0%
for the premium load, is the Net Premium Payment. It is the
Net Premium Payment that is available for allocation to the
Fixed Account or Sub-Accounts.
We credit Net Premium Payments to the Policy as of the end
of the Valuation Period in which it is received at the
Administrative Office. The Valuation Period is the time
between Valuation Days, and a Valuation Day is every day on
which the New York Stock Exchange is open and trading is
unrestricted. Accumulation Units are valued on every
Valuation Day.
The "Accumulation Value" of a Policy is determined by: (1)
multiplying the total number of Variable Accumulation Units
credited to the Policy for each Sub-Account by its
appropriate current Variable Accumulation Unit Value; (2) if
a combination of Sub-Accounts is elected, totaling the
resulting values; and (3) adding any values attributable to
the Fixed Account and the Loan Account. The Accumulation
Value will be affected by Monthly Deductions.
SEPARATE ACCOUNT VALUE
The Separate Account Value is the portion of the
Accumulation Value attributable to the Separate Account.
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VARIABLE ACCUMULATION UNIT VALUE
All or a part of a Net Premium Payment allocated to a
Sub-Account is converted into Variable Accumulation Units by
dividing the amount allocated by the value of the Variable
Accumulation Unit for the Sub-Account next calculated after
it is received at the Administrative Office. The Variable
Accumulation Unit Value for each Sub-Account was initially
established at $10.00. It may increase or decrease from one
Valuation Period to the next. Allocations to Sub-Accounts
are made only as of the end of a Valuation Day.
VARIABLE ACCUMULATION UNITS
The "Variable Accumulation Unit" is a unit of measure used
in the calculation of the value of each Sub-Account. 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
if an ex-dividend date occurs 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 Lincoln Life
determines 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 outstanding at the
beginning of the Valuation Period.
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 amount of Monthly Deduction allocated
to each Sub-Account will result in the cancellation of
Variable Accumulation Units that have an aggregate value on
the date of such deduction equal to the total amount by
which the Sub-Account Value is reduced.
The number of Variable Accumulation Units credited to a
Policy will not be changed by any subsequent change in the
value of a Variable Accumulation Unit. Such value may vary
from Valuation Period to Valuation Period to reflect the
investment experience of the Fund used in a particular
Sub-Account and fees and charges under the Policy.
FIXED ACCOUNT AND LOAN ACCOUNT VALUE
The Fixed Account Value and the Loan Account Value reflect
amounts allocated to our general account through payment of
premiums, through transfers from the Separate Account or
loans and interest charged. We guarantee the Fixed Account
Value.
NET ACCUMULATION VALUE
The "Net Accumulation Value" is the Accumulation Value less
the Loan Account Value. The Net Accumulation Value
represents the net value of the Policy and is the basis for
calculating the Surrender Value.
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FUNDS
Each of the Sub-Accounts of the Separate Acount is invested
solely in the shares of one of the Funds available under the
Policies. Each of the Funds is a series of one of sixteen
Massachusetts or Delaware business trusts or Maryland
corporations, collectively referred to below as the
"Trusts." Each such trust or corporation is registered as an
open-end management investment company under the 1940 Act.
All of the Funds except for the Delaware Group REIT Series
and the Delaware Group Emerging Market Series are
diversified under the 1940 Act.
Listed below are the Trusts, their investment advisers and
distributors, and the Funds within each that are available
under the Policies:
AIM VARIABLE INSURANCE FUNDS, INC., managed by A I M
Advisors, Inc., and distributed by A I M Distributors Inc.,
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST, managed by BAMCO, Inc. and
distributed by Baron Capital Inc. 767 Fifth Avenue, New
York, NY 10153
Baron Capital Asset Fund -- Insurance Shares
BT INSURANCE FUNDS TRUST, managed by Bankers Trust Company,
130 Liberty Street (One Bankers Trust Plaza), New York, NY
10006 and distributed by First Data Distributors, Inc., 4400
Computer Drive, Westborough, MA 01581
EAFE-Registered Trademark- Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND, INC., managed by Delaware
Management Company, Inc., One Commerce Square, Philadelphia,
PA 19103 and for International and Emerging Markets,
Delaware International Advisors, Ltd., 80 Cheapside, London,
England ECV2 6EE, and distributed by Delaware Distributors,
L.P., 1818 Market Street, Philadelphia, PA 19103
Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, AND VARIABLE
INSURANCE PRODUCTS FUND III, managed by Fidelity Management
& Research Company and distributed by Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, MA 02109
Fidelity VIP II Contrafund Portfolio -- Service Class
Fidelity VIP III Growth Opportunities Portfolio --
Service Class
JANUS ASPEN SERIES, managed by Janus Capital, 100 Fillmore
St. Denver, CO 80206-4928, and self-distributed.
Janus Aspen Series Balanced Portfolio
Janus Aspen Series Worldwide Growth Portfolio
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LINCOLN NATIONAL FUNDS, managed by Lincoln Investment
Management, Inc., 200 East Berry Street, Fort Wayne IN
46802, and distributed by Lincoln Financial Advisors, Inc.,
350 Church Street, Hartford CT 06103. Sub-advisors are also
noted.
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc. (Sub-advised by Janus
Capital Corp.)
LN Equity-Income Fund, Inc. (Sub-advised by Fidelity
Management Trust Co.)
LN Global Asset Allocation Fund, Inc. (Sub-advised by
Putnam Investment Management, Inc.)
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc. (Sub-advised by Vantage
Investment Advisors, Inc.)
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST, managed
by Massachusetts Financial Services Company and distributed
by MFS Fund Distributors, Inc., 500 Boylston Street, Boston,
MA 02116
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST, managed and
distributed by NB Management Incorporated, 605 Third Avenue,
2nd Floor, New York, NY 10158-0006
NB AMT Mid-Cap Growth Portfolio
NB AMT Partners Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND, managed by
Templeton Investment Counsel, Inc. and its Templeton and
Franklin affiliates and distributed by Franklin/ Templeton
Distributors, Inc., 100 Fountain Parkway, St. Petersburg, FL
33716-1205
Templeton International Fund -- Class 2
Templeton Stock Fund -- Class 2
The investment advisory fees charged the Funds by their
advisers are shown on page 6 of this Prospectus.
Below is a brief description of the investment objective and
program of each Fund. There can be no assurance that any of
the stated investment objectives will be achieved.
AIM V.I. GROWTH FUND (Large Cap Stocks): Seeks growth of
capital primarily by investing in seasoned and better
capitalized companies considered to have strong earnings
momentum. Current income will not be a criterion of
investment selection, and any such income should be
considered incidental.
AIM V.I. INTERNATIONAL EQUITY FUND (Large Cap Stocks --
International): Seeks to provide long-term growth of capital
by investing in a diversified portfolio of international
equity securities whose issuers are considered to have
strong earnings momentum. The fund seeks to meet this
objective by investing at least 70% of its total assets in
marketable equity securities of foreign companies that are
listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market.
AIM V.I. VALUE FUND (Large Cap Stocks): Seeks to achieve
long-term growth of capital by investing primarily in equity
securities judged by its investment advisor to be
undervalued relative to the investment advisor's appraisal
of current or projected earnings of the companies issuing
the securities, or relative to current market values of
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assets owned by the companies issuing the securities or
relative to the equity markets generally. Income is a
secondary objective and would be satisfied principally from
the interest (interest and dividends) generated by the
common stocks, convertible bonds and convertible preferred
stocks that make up the Fund's portfolio.
BARON CAPITAL ASSET FUND -- INSURANCE SHARES (Small/Medium
Cap U.S. Stocks): Seeks capital appreciation through
investments in securities of small sized companies with
market capitalizations of approximately $100 million to $1.5
billion, and medium sized companies with market
capitalizations of $1.5 billion to $5 billion, with
undervalued assets or favorable growth prospects.
BT EAFE-REGISTERED TRADEMARK- FUND (Large Cap Stocks --
International): Seeks to replicate as closely as possible
(before the deduction of Expenses) the total return of the
Europe, Australia, Far East Index (the
EAFE-Registered Trademark- Index) , a
capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United
States.
BT EQUITY 500 INDEX FUND (Large Cap U.S. Stocks): Seeks to
replicate as closely as possible the performance of the
Standard & Poor's 500 Composite Stock Price Index, before
the deduction of Fund expenses.
BT SMALL CAP INDEX FUND (Small/Medium Cap U.S. Stocks):
Seeks to replicate as closely as possible (before the
deduction of Expenses) the total return of the Russell 2000
Small Stock Index (the "Russell 2000"), an index consisting
of approximately 2,000 small-capitalization common stocks.
DELAWARE GROUP DELCHESTER SERIES (High Yield Bonds): Seeks
as high a current income as possible by investing in rated
and unrated corporate bonds (including high yield bonds
commonly known as junk bonds), U. S. government securities
and commercial paper. An investment in this Series may
involve greater risks than an investment in a portfolio
comprised primarily of investment grade bonds.
DELAWARE GROUP DEVON SERIES (Large Cap U.S. Stocks): Seeks
current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on
common stocks that the investment manager believes have the
potential for above-average dividend increases over time.
Under normal circumstances, the Series will invest at least
65% of its total assets in dividend paying common stocks.
DELAWARE GROUP EMERGING MARKETS SERIES (Emerging Markets
Stocks): Seeks to achieve long-term capital appreciation by
investing primarily in equity securities of issuers located
or operating in emerging counties. The Series is an
international fund. As such, under normal market conditions,
at least 65% of the Series' assets will be invested in
equity securities of issuers organized or having a majority
of their assets or deriving a majority of their operating
income in at least three countries that are considered to be
emerging or developing.
DELAWARE GROUP REIT SERIES (Small/Medium Cap U.S.
Stocks/Specialty): Seeks to achieve maximum long-term total
return. Capital appreciation is a secondary objective. It
seeks to achieve its objectives by investing in securities
of companies primarily engaged in the real estate industry.
DELAWARE GROUP SMALL CAP VALUE SERIES (Small/Medium Cap U.S.
Stocks): Seeks capital appreciation by investing primarily
in small cap common stocks whose market value appears low
relative to their underlying value or future earnings and
growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose
value is not yet recognized by the market.
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DELAWARE GROUP TREND SERIES (Small/Medium Cap U.S. Stocks):
Seeks long-term capital appreciation by investing primarily
in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These
securities will have been judged to be responsive to changes
in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective.
FIDELITY VIP II CONTRAFUND PORTFOLIO -- SERVICE CLASS (Large
Cap U.S. Stocks): Seeks capital appreciation by investing
primarily in securities of companies whose value the advisor
believes is not fully recognized by the public.
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO -- SERVICE
CLASS (Large Cap U.S. Stocks): Seeks capital growth by
investing primarily in common stocks.
JANUS ASPEN SERIES BALANCED PORTFOLIO (Balanced): Seeks long
term growth of capital, consistent with the preservation of
capital and balanced by current income. The Portfolio
normally invests 40-60% of its assets in securities selected
primarily for their growth potential and 40-60% of its
assets in securities selected primarily for their income
potential.
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO (Large Cap
Stocks -- Global): Seeks long-term growth of capital in a
manner consistent with the preservation of capital by
investing primarily in common stocks of foreign and domestic
insurers.
LINCOLN NATIONAL BOND FUND (Investment Grade Bonds): Seeks
maximum current income consistent with prudent investment
strategy. The fund invests primarily in medium-and long-term
corporate and government bonds.
LINCOLN NATIONAL CAPITAL APPRECIATION FUND (Large Cap U.S.
Stocks): Seeks long-term growth of capital in a manner
consistent with preservation of capital. The fund invests in
a large number of companies of all sizes if the companies
are competing well and if their products and services are in
high demand. It may also buy some money market securities
and bonds, including junk (high risk) bonds.
LINCOLN NATIONAL EQUITY-INCOME FUND (Large Cap U.S. Stocks):
Seeks to achieve reasonable income by investing primarily in
income-producing equity securities. The fund invests mostly
in high-yielding bonds (including junk bonds)
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND (Balanced --
International): Seeks long-term total return consistent with
preservation of capital. The fund allocates its assets among
several categories of equity and fixed-income securities,
both of U.S. and foreign insurers.
LINCOLN NATIONAL MONEY MARKET FUND (Money Market): Seeks
maximum current income consistent with the preservation of
capital. The fund invests in short term obligations issued
by U.S. corporations, the U.S. government, and
federally-chartered banks and U.S. branches of foreign
banks.
LINCOLN NATIONAL SOCIAL AWARENESS FUND (Large Cap U.S.
Stock/Specialty): Seeks to achieve long-term capital
appreciation, by investing in stocks of established
companies which adhere to certain specific social criteria.
MFS EMERGING GROWTH SERIES (Small/Medium Cap U.S. Stocks):
Seeks to provide long-term growth of capital.
MFS TOTAL RETURN SERIES (Balanced): Seeks primarily to
provide above-average income (compared to a portfolio
invested entirely in equity securities) consistent with the
prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
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MFS UTILITIES SERIES (Small/Medium Cap U.S.
Stocks/Specialty): Seeks capital growth and current income
(income above that available from a portfolio invested
entirely in equity securities).
NB AMT MID-CAP GROWTH PORTFOLIO (Small/Medium Cap U.S.
Stocks): Seeks growth of capital through an investment
approach that is designed to increase capital with
reasonable risk. It invests mainly in common stocks of
mid-to-large capitalization companies.
NB AMT PARTNERS PORTFOLIO (Small/Medium Cap U.S. Stocks):
Seeks growth of capital and invests mainly in common stocks
of mid-to-large capitalization companies using the
value-oriented investment approach.
TEMPLETON INTERNATIONAL FUND -- CLASS 2 (Large Cap Stocks --
International): Seeks long-term capital growth. It invests
primarily in stocks of companies outside the United States,
including emerging markets. Any income realized will be
incidental.
TEMPLETON STOCK FUND -- CLASS 2 (Large Cap Stocks --
Global): Seeks long-term capital growth. Invests primarily
in equity securities issued by companies, large and small,
in various nations throughout the world, including the
United States and emerging markets.
Several of the Funds may invest in non-investment grade,
high-yield, high-risk debt securities (commonly referred to
as "junk bonds"), as detailed in the individual Fund
Prospectuses. Please review the prospectuses carefully.
There is no assurance that the investment objective of any
of the Funds will be met. You assume all of the investment
performance risk for the Sub-Accounts you select. There is
investment performance risk in each of the Sub-Accounts,
although the amount of such risk varies significantly among
the Sub-Accounts. Read each Fund's prospectus carefully and
understand the risks before making or changing investment
choices. Additional Funds may, from time to time, be made
available as underlying investments. The right to select
among Funds will be limited by terms and conditions we
impose (See "Allocation of Net Premium Payments").
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Separate Account or if, in our judgment,
further investment in such shares should cease to be
appropriate in view of the purpose of the Separate Account
or in view of legal, regulatory or federal income tax
restrictions, we may substitute shares of another Fund.
There will be no substitution of securities in any
Sub-Account without prior approval of the Commission.
VOTING RIGHTS
We will vote the shares of each Fund held in the Separate
Account at special meetings of the shareholders of the
particular Fund in accordance with instructions received by
the Administrative Office in proper written form from
persons having a voting interest in the Separate Account.
Lincoln Life will vote shares for which it has not received
instructions in the same proportion as it votes shares in
the Separate Account for which it has received instructions.
The Funds do not hold regular meetings of shareholders.
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The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Fund not more than sixty (60) days prior to the meeting of
the particular Fund. Voting instructions will be solicited
by written communication at least fourteen (14) days prior
to the meeting.
FUND PARTICIPATION AGREEMENTS
Lincoln Life has entered into agreements with the various
Trusts and their advisers or distributors under which
Lincoln Life makes the Funds available under the Policies
and performs certain administrative services. In some cases,
the advisers or distributors may compensate Lincoln Life at
annual rates of between .10% and .25% of assets in a
particular Fund attributable to the Policies.
CHARGES AND FEES
We deduct charges in connection with the Policy to
compensate us for providing the Policy's insurance benefit,
administering the Policy, assuming certain risks under the
Policy and for sales-related expenses we incur.
The nature and amount of these charges are as follows:
DEDUCTIONS MADE MONTHLY
We make various expense deductions monthly. The Monthly
Deductions, including administrative expenses, the Cost of
Insurance Charges, and charges for supplemental riders or
benefits, if any, are deducted proportionately from the Net
Accumulation Value of each underlying investment subject to
the charge. For Sub-Accounts, Variable Accumulation Units
are canceled and the value of the canceled Units withdrawn
in the same proportion as their respective values have to
the Net Accumulation Value. The Monthly Deductions are made
on the "Monthly Anniversary Day", the Date of Issue and the
same day of each month thereafter, or if there is no such
date in a given month, then the first Valuation Day of the
next month. If the day that would otherwise be a Monthly
Anniversary Day 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 period ("Grace
Period") to make a payment sufficient to cover that
deduction. (See Lapse and Reinstatement: Lapse of a Policy)
If the Insured attains Age 100 with the Policy still in
effect, no further Monthly Deductions will be made, the
Separate Account Value will be transferred to the Fixed
Account, and Policy will then remain in force until
surrender or the Insured's death.
ADMINISTRATIVE EXPENSES
There is a flat dollar Monthly Deduction of $10.
In addition, during the first two Policy Years, and for 24
months after any increase in Specified Amount, there is a
monthly charge per $1000 of Specified Amount, or increase
therein, based on the Insured's age nearest birthday at the
Policy's issue date and the date of any increase. That
charge is $0.0283 for ages 15 through 30 (or $2.83 per month
for a Policy with a $100,000 Specified Amount) and rises
gradually to $0.07 for age 40, $0.12 for age 52, $0.2075 for
age 64, $0.32 for age 76, and $0.4242 for ages 81 and older.
A complete table is in Appendix 1.
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These charges compensate us 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.
COST OF INSURANCE CHARGE
The Cost of Insurance is the portion of the Monthly
Deduction designed to compensate us for the anticipated cost
of paying Death Benefits in excess of the Accumulation
Value, not including riders, supplementary benefits or
monthly expense charges.
The Cost of Insurance charge depends on the Age, policy
duration, 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
Accumulation Value. The rate on which the Monthly Deduction
for the Cost of Insurance is based will generally increase
as the Insured ages. The Cost of Insurance charge could
decline if the Net Amount at Risk drops relatively faster
than the Cost of Insurance Rate increases.
The Cost of Insurance charge is determined by dividing the
Death Benefit at the beginning of the Policy month by
1.0032737 (the monthly equivalent of an annual rate of 4%),
subtracting the Accumulation 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 us. The Guaranteed Maximum Cost of Insurance
Rates are in Appendix 2.
MORTALITY AND EXPENSE RISK CHARGE
Lincoln Life deducts a daily mortality and expense risk
charge as a percentage of the assets of the Separate
Account. The mortality risk assumed is that insureds may not
live as long as estimated, and therefore, a greater amount
of death benefit will be payable. The expense risk assumed
is that expenses incurred in issuing and administering the
policies will be greater than estimated. The mortality and
expense risk charge is guaranteed at an annual rate of 0.90%
in Policy Years 1-19 and 0.20% in Policy Years 20 and
beyond.
SURRENDER CHARGES
A generally declining "Surrender Charge" may apply if the
Policy is totally surrendered or lapses during the first
fifteen years following the Date of Issue or the first
fifteen years following an increase in Specified Amount. The
Surrender Charge varies by Age of the Insured, the number of
years since the Date of Issue, and Specified Amount.
The charge is in part a deferred sales charge and in part a
recovery of certain first year administrative costs. The
maximum Surrender Charge is included in each Policy and is
in compliance with each state's nonforfeiture law. Examples
of the Surrender Charge can be seen in Appendix 3.
The surrender charge under a Policy is proportional to the
face amount of the Policy. As a percentage of face amount,
it is higher for older than for younger issue ages. The
surrender charge cannot exceed Policy value. All surrender
charges decline to zero over the 15 years following issuance
of the Policy. See, for example, the illustrations in
Appendix 5.
If the Specified Amount is increased, a new Surrender Charge
will be applicable, in addition to any existing Surrender
Charge. The Surrender Charge applicable to the increase
would be equal to the Surrender Charge on a new Policy whose
Specified Amount was equal to the amount of the increase.
Supplemental Policy Specifications
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will be sent to the Owner upon an increase in Specified
Amount reflecting the maximum additional Surrender Charge in
the Table of Surrender Charges. The minimum allowable
increase in Specified Amount is $1,000. We may change this
at any time.
If the Specified Amount is decreased while the Surrender
Charge applies, the Surrender Charge will remain the same.
No Surrender Charge is imposed on a partial surrender, but
an administrative fee of $25 (not to exceed 2% of the amount
surrendered) is imposed, allocated pro-rata among the
Sub-Accounts from which the partial surrender proceeds are
taken.
Any surrender may result in tax implications. SEE TAX
MATTERS
Based on its actuarial determination, 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 we will incur in
connection with the Policy. Any such shortfall, including
but not limited to payment of sales and distribution
expenses, would be available for recovery from our general
account, which supports insurance and annuity obligations.
REDUCTION OF CHARGES -- PURCHASES ON A CASE BASIS; EXCHANGES
This Policy is available for purchases by corporations and
other groups or sponsoring organizations on a 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 expenses.
We also reserve the right to reduce premium charges or any
other charges under a Policy where it is expected that the
issuance of the Policy will result in savings of sales,
underwriting, administrative or other costs. In particular,
we would expect such savings to apply, and our expenses to
be reduced, whenever a Policy is issued in exchange for
another life insurance policy issued or administered by us,
or issued by a company which controls or is controlled by us
or is under common ownership and control with us.
Some of these reductions may be guaranteed, and others may
be subject to withdrawal or modification by us. In any
event, all such reductions as applicable will be uniformly
applied, and they will not be unfairly discriminatory
against any person, including the affected Policy Owners
funded by the Separate Account.
TRANSACTION FEE FOR EXCESS TRANSFERS
We reserve the right to impose a charge for each transfer
request in excess of 12 in any Policy Year. A single
transfer request, either in writing or by telephone, may
consist of multiple transactions.
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DEATH BENEFITS
The Death Benefit Proceeds is the amount payable to the
Beneficiary upon the death of the Insured, in accordance
with the Death Benefit Option elected. Loans (if any) and
overdue deductions are deducted from the Death Benefit
Proceeds prior to payment.
The applicant must select the Specified Amount of the Death
Benefit, which may not be less than $100,000, and the Death
Benefit Option. The two Death Benefit Options are described
below. The applicant must consider a number of factors in
selecting the Specified Amount, including the amount of
proceeds required when the Insured dies and the Owner's
ability to make Premium Payments. The ability of the Owner
to support the Policy, particularly in later years, is an
important factor in selecting between the Death Benefit
Options, because the greater the Net Amount at Risk at any
time, the more that will be deducted each month from the
value of the Policy to pay the Cost of Insurance.
DEATH BENEFIT OPTIONS
Two different Death Benefit Options are available under the
Policy. The Death Benefit Proceeds payable under the Policy
is the greater of (a) the Corridor Death Benefit or (b) the
amount determined under the Death Benefit Option in effect
on the date of the Insured's Death, less any indebtedness,
as applicable, under the Policy. In the case of Death
Benefit Option 1, the Specified Amount is reduced by the
amount of any partial surrender. The "Corridor Death
Benefit" is the applicable percentage (the "Corridor
Percentage") of the Accumulation Value (rather than by
reference to the Specified Amount) required to maintain the
Policy as a "life insurance contract" for Federal income tax
purposes. The Corridor Percentage is 250% through the time
the insured reaches Age 40 and decreases in accordance with
the table in Appendix 4 to 100% when the Insured reaches Age
95.
Death Benefit Option 1 provides Death Benefit Proceeds equal
to the Specified Amount (a minimum of $100,000). If Option 1
is selected, the Policy pays level Death Benefit Proceeds,
less indebtedness and any partial surrenders, unless the
Minimum Death Benefit exceeds the Specified Amount. (See
DEATH BENEFITS, Federal Income Tax Definition of Life
Insurance).
Death Benefit Option 2 provides Death Benefit Proceeds equal
to the sum of the Specified Amount plus the Net Accumulation
Value as of the date of the Insured's death, less loan
interest accrued but not yet charged. If Option 2 is
selected, the Death Benefit Proceeds increase or decrease
over time, depending on the amount of premium paid and the
investment performance of the underlying Sub-Accounts.
If for any reason the applicant fails to affirmatively elect
a particular Death Benefit Option, Death Benefit Option 1
shall apply until changed as provided below.
Owners who prefer insurance coverage that generally does not
vary in amount and generally has lower Cost of Insurance
Charges should elect Death Benefit Option 1. Owners who
prefer to have favorable investment experience reflected in
increased insurance coverage should select Death Benefit
Option 2. Under Option 1, any Surrender Value at the time of
the Insured's Death will revert to Lincoln Life.
CHANGES IN DEATH BENEFIT OPTIONS AND SPECIFIED AMOUNT
All requests for changes between Death Benefit Options and
changes in the Specified Amount must be submitted in proper
written form to the Administrative Office. The minimum
increase in Specified Amount currently permitted is $1,000.
If requested, a supplemental application and evidence of
insurability must also be submitted to us.
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In a change from Death Benefit Option 1 to Death Benefit
Option 2, the Specified Amount shall be reduced so it
thereafter equals (a) the amount payable under the Death
Benefit Option in effect immediately before the change,
minus (b) the Accumulation Value immediately before the
change. In a change from Death Benefit Option 2 to Death
Benefit Option 1, the Specified Amount shall be increased so
that it thereafter equals the amount payable under the Death
Benefit Option in effect immediately before the change.
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 the Policy.
We may decline any request for a change between Death
Benefit Options or an increase in the Specified Amount. We
may also decline any request for change of the Death Benefit
Option or 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.
Any change is effective on the first Monthly Anniversary Day
on or after the date of approval of the request by Lincoln
Life, unless the Monthly Deduction Amount would increase as
a result of the change. In that case, the change is
effective on the first Monthly Anniversary Day on which the
Accumulation Value is equal to or greater than the Monthly
Deduction Amount, as increased.
FEDERAL INCOME TAX DEFINITION OF LIFE INSURANCE
The amount of the Death Benefit must satisfy certain
requirements under the Code if the policy is to qualify as
insurance for federal income tax purposes. The amount of the
Death Benefit Proceeds required to be paid under the Code to
maintain the Policy as life insurance under each of the
Death Benefit Options (see INSURANCE COVERAGE PROVISIONS,
Death Benefit) is equal to the product of the Accumulation
Value and the applicable Corridor Percentage. A table of
Corridor Percentages is in Appendix 4.
NOTICE OF DEATH OF INSURED
Due Proof of Death must be furnished to us at our
Administrative Office as soon as reasonably practical after
the death of the Insured. "Due Proof of Death" must be in
proper written form and includes 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 of death satisfactory to us.
PAYMENT OF DEATH BENEFIT PROCEEDS
The Death Benefit Proceeds under the Policy will ordinarily
be paid within seven days, if in a lump sum, or in
accordance with any Settlement Option selected by the Owner
or the Beneficiary, after receipt at the Administrative
Office of Due Proof of Death of the Insured. SEE SETTLEMENT
OPTIONS. The amount of the Death Benefit Proceeds under
Option 2 will be determined as of the date of the Insured's
death. Payment of the Death Benefit Proceeds may be delayed
if the Policy is contested or if Separate Account values
cannot be determined.
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SETTLEMENT OPTIONS
There are several ways in which the Beneficiary may receive
the Death Benefit Proceeds, or in which the owner may choose
to receive payments upon surrender of the Policy.
You may elect or change a Settlement Option while the
insured is alive. If you have not irrevocably selected a
Settlement Option, the Beneficiary may within 90 days after
the Insured dies. If no Settlement Option is selected, the
Death Benefit Proceeds will be paid in a lump sum.
If the Policy is assigned as collateral security, we will
pay any amount due the assignee in a lump sum. Any remaining
Death Benefit Proceeds will be paid as elected.
Our Administrative Office must receive your request to
elect, change, or revoke a Settlement Option in proper
written form before payment of the lump sum or under any
Settlement Option. The first payment under the Settlement
Option selected will become payable on the date proceeds are
settled under the option. We will make subsequent payments
on the first day of each month. Once payments have begun,
the Policy cannot be surrendered and neither the payee nor
the Settlement Option may be changed.
There are at least four Settlement Options:
The first Settlement Option is an annuity for the
lifetime of the payee.
The second Settlement Option is an annuity for the
lifetime of the payee, with monthly payments guaranteed
for 60, 120, 180, or 240 months.
The third Settlement Option, provides for monthly
payments for a stated number of years, at least five but
no more than thirty.
Under the fourth Settlement Option, we pay at least 3%
interest annually on the sum left on deposit, and pays
the amount on deposit on the payee's death.
Any other Settlement Option we offer at that time may also
be selected.
POLICY LIQUIDITY
The accumulated value of the Policy is available for loans
or withdrawals. Subject to certain limitations, you may
borrow against the Surrender Value of the Policy, may make a
partial surrender of some of the Surrender Value of the
Policy and may fully surrender the Policy for its Surrender
Value.
POLICY LOANS
You may at any time borrow in the aggregate up to 100% of
the Surrender Value at the time a Policy Loan is made. We
may, however, limit the amount of the loan so that the total
Policy indebtedness will not exceed 90% of the amount of the
Accumulation Value less any Surrender Charge that would be
imposed on a full surrender. You must execute a loan
agreement and assign the Policy to us free of any other
assignments. The Loan Account is the account in which Policy
indebtedness (outstanding loans and interest) accrues once
it is transferred out of the Fixed Account or Sub-Accounts.
Interest on Policy Loans accrues at an annual rate of 8%,
and is payable once a year in arrears on each Policy
Anniversary, or earlier upon full surrender or other payment
of proceeds of a Policy.
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The amount of a loan, plus any accrued but unpaid interest,
is added to the outstanding Policy Loan balance. Unless paid
before due, any loan interest due will be transferred
proportionately from the values in the Fixed Account and
each Sub-Account, and treated as an additional Policy Loan,
and added to the Loan Account Value.
We credit interest on the Loan Account Value of 7% per year
so the net cost of a Policy Loan is 1%.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, transfers from each for loans and
loan interest charged will be made in proportion to the
assets in each Sub-Account at that time, unless you instruct
our Administrative Office otherwise in proper written form.
Repayments on the loan and interest credited on the Loan
Account Value will be allocated according to the most recent
Premium Payment allocation at the time of the repayment.
A Policy Loan affects Death Benefit Proceeds payable and the
Accumulation Value. The longer a Policy Loan is outstanding,
the greater the effect is likely to be. An outstanding
Policy Loan reduces the amount of assets invested. Depending
on the investment results of the Sub-Accounts, the effect
could be favorable or unfavorable.
If at any time the total indebtedness against the Policy,
including interest accrued but not due, equals or exceeds
the then current Accumulation Value less Surrender Charges,
the Policy will terminate without value subject to the
conditions in the Grace Period Provision, unless the No
Lapse Provision is in effect. (SEE LAPSE AND REINSTATEMENT,
Lapse of a Policy)
If a Policy lapses while a loan is outstanding, adverse tax
consequences may result.
PARTIAL SURRENDER
You may make a partial surrender at any time while the
Insured is alive by request to the Administrative Office in
proper written form or by telephone, if you have authorized
telephone transactions. A $25 transaction fee (not to exceed
2% of the amount surrendered) is charged for each partial
surrender. Total partial surrenders may not exceed 90% of
the Surrender Value of the Policy. Each partial surrender
may not be less than $500. Partial surrenders are subject to
other limitations as described below.
Partial surrenders may reduce the Specified Amount and, in
each case, reduce the Death Benefit Proceeds. To the extent
that a requested partial surrender would cause the Specified
Amount to be less than $100,000, we will not permit the
partial surrender. In addition, if following a partial
surrender and the corresponding decrease in the Specified
Amount, the Policy would not comply with the maximum premium
limitations required by federal tax law, the surrender may
be limited to the extent necessary to meet the federal tax
law requirements.
The effect of partial surrenders on the Death Benefit
Proceeds depends on the Death Benefit Option elected under
the Policy. If Death Benefit Option 1 has been elected, a
partial surrender would reduce the Accumulation Value and
the Specified Amount. The reduction in the Specified Amount,
which would reduce any past increases on a last in, first
out basis, reduces the amount of the Death Benefit Proceeds.
If Death Benefit Option 2 has been elected, a partial
surrender would reduce the Accumulation Value, but would not
reduce the Specified Amount. The reduction in the
Accumulation Value reduces the amount of the Death Benefit
Proceeds.
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<PAGE>
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, surrenders from each will be made
in proportion to the assets in each Sub-Account at the time
of the surrender, unless you instruct our Administrative
Office otherwise in proper written form. We may decline any
request for a partial surrender.
SURRENDER OF THE POLICY
You may surrender the Policy at any time. On surrender of
the Policy, we will pay you, or your assignee, the Surrender
Value next computed after our Administrative Office receives
the request in proper written form. Coverage under the
Policy will then automatically terminate.
SURRENDER VALUE
The "Surrender Value" of a Policy is the amount you can
receive in a lump sum by surrendering the Policy. The
Surrender Value is the Net Accumulation Value, less any loan
interest accrued, but not yet charged, less the Surrender
Charge (SEE CHARGES AND FEES, Surrender Charge). All or part
of the Surrender Value may be applied to one or more of the
Settlement Options. Surrender Values are illustrated in
Appendix 4.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of loans or of the Surrender Value from any of the
Sub-Accounts will be made within seven days. We may defer
payment or transfer from the Fixed Account up to six months.
If we do so, interest will accrue and be paid as required by
law from the date the recipient would otherwise have been
entitled to receive the payment.
ASSIGNMENT; CHANGE OF OWNERSHIP
While the Insured is living, you may assign your rights in
the Policy, including the right to change the beneficiary
designation, in proper written form, signed by you and
recorded at the Administrative Office. No assignment will
affect, or prejudice us as to, any payment we make or action
we take before it was recorded. We are not responsible for
any assignment not submitted for recording, or for the
sufficiency or validity of any assignment. Any assignment is
subject to any indebtedness owed us when the assignment is
recorded and any interest later accrued on such
indebtedness.
Once recorded, the assignment remains effective until
released by the assignee in proper written form. While it is
effective, the assignee must give written consent for you to
take any action with respect to the Policy.
So long as the Insured is living, you may name a new Owner
by recording a change in ownership in proper written form at
the Administrative Office. On recordation, the change will
be effective, as of the date of execution of the document of
transfer or, if there is no such date, the date of
recordation. No such change of ownership will affect, or
prejudice us as to, any payment we made or action we took
before it was recorded. We may require you to submit the
Policy for endorsement before making a change.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY
Except as provided by the No Lapse Provision, if at any time
the Net Accumulation Value is insufficient to pay the
Monthly Deduction, or if the amount of indebtedness exceeds
the Accumulation Value less the Surrender Charge(s), the
Policy is subject to
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<PAGE>
lapse and automatic termination of all Policy coverage. The
Net Accumulation Value may be insufficient (1) because it
has been exhausted by earlier deductions, (2) due to poor
investment performance, (3) due to partial surrenders, (4)
due to indebtedness for policy loans, or (5) because of some
combination of the foregoing factors.
If we have not received a Premium Payment or payment of
indebtedness on policy loans necessary so that the Net
Accumulation Value is sufficient to pay the Monthly
Deduction Amount on a Monthly Anniversary Day, we will send
a written notice to you and any assignee of record. The
notice will state the amount of the Premium Payment or
payment of indebtedness on Policy Loans necessary such that
the Net Accumulation Value is at least equal to two times
the Monthly Deduction Amount. If the minimum required amount
set forth in the notice is not paid to us on or before the
day that is the later of (a) 31 days after the date of
mailing of the notice, and (b) 61 days after the date of the
Monthly Anniversary Day with respect to which such notice
was sent (together, the "Grace Period"), then the Policy
shall terminate and all coverage under the Policy shall
lapse without value.
NO LAPSE PROVISION
The No Lapse Premium is the cumulative premium required to
have been paid by each Monthly Anniversary Day to prevent
the Policy from lapsing during the first ten Policy Years.
If this Policy has a No Lapse Premium shown on the
specifications, this Policy will not lapse during the first
ten Policy Years if, at each Monthly Anniversary Day, the
sum of all Premium Payments less any policy loans (including
any accrued loan interest) and partial surrenders is at
least equal to the sum of the No Lapse Premiums (as
indicated in the Policy Specifications) due since the Date
of Issue of the Policy. A Grace Period will be allotted
after each Monthly Anniversary Day on which insufficient
premiums have been paid (see preceding paragraph). The
payment of sufficient additional premiums during the Grace
Period will keep the No Lapse Provision in force.
The No Lapse Provision will be terminated after ten years or
earlier if you fail to meet the premium requirements, if
there is an increase in Specified Amount or if you change
the Death Benefit Option. Once the No Lapse Provision
terminates, it cannot be reinstated.
REINSTATEMENT OF A LAPSED POLICY
After the Policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace
Period, it may be reinstated provided (a) it has not been
surrendered, (b) there is an application for reinstatement
in proper written form, (c) evidence of insurability of the
insured is furnished us and we agree to accept the risk, (d)
we receive a payment sufficient to keep the Policy in force
for at least two months, and (e) any accrued loan interest
is paid. The effective date of the reinstated Policy shall
be the Monthly Anniversary Day after the date on which we
approve the application for reinstatement. Surrender Charges
will be reinstated as of the Policy Year in which the Policy
lapsed.
Any Policy reinstatement is effective on the Monthly
Anniversary Day after our approval. The Accumulation Value
at reinstatement will be the Net Premium Payment then made
less all Monthly Deductions due.
If the Surrender Value is not sufficient to cover the full
Surrender Charge at the time of lapse, the remaining portion
of the Surrender Charge will also be reinstated at the time
of Policy reinstatement.
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<PAGE>
COMMUNICATIONS WITH LINCOLN LIFE
PROPER WRITTEN FORM
Whenever this Prospectus refers to a communication "in
proper written form," it means a written document, in form
and substance reasonably satisfactory to us, received at the
Administrative Office.
TELEPHONE TRANSACTION PRIVILEGES
We allow telephone transactions authorized in proper written
form by you or the applicant. To effect a permitted
telephone transaction, you or your authorized representative
must call the Administrative Office and provide, as
identification, your policy number, a requested portion of
your Social Security number, and such other authenticating
information as we may require. We disclaim all liability for
losses resulting from unauthorized or fraudulent telephone
transactions, but acknowledge that if we do not follow these
procedures, which we believe to be reasonable, we may be
liable for such losses.
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only when the
Insured is at least Age 18 and at most Age 85.
DATE OF COVERAGE
The date of coverage will be the Date of Issue, provided the
initial premium has been paid, the Insured is alive and
prior to any change in the health and insurability of the
Insured as represented in the application.
INCONTESTABILITY
We will not contest payment of the Death Benefit Proceeds
based on the initial Specified Amount after the Policy has
been in force during the Insured's lifetime for two years
from the Date of Issue. We will not contest payment of the
Death Benefit Proceeds based on any increase in Specified
Amount requiring evidence of insurability after two years
after the increase's effective date.
MISSTATEMENT OF AGE OR GENDER
If the Age or gender of the Insured has been misstated, the
affected benefits will be adjusted. The amount of the Death
Benefit Proceeds will be 1. multiplied by 2. and then the
result added to 3. where:
1. is the Net Amount at Risk at the time of the Insured's
Death;
2. is the ratio of the monthly Cost of Insurance applied in
the Policy month of death to the monthly Cost of
Insurance that should have been applied at the true Age
and gender in the Policy month of death; and
3. is the Accumulation Value at the time of the Insured's
Death.
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<PAGE>
SUICIDE
If the Insured dies by suicide, within two years from the
Date of Issue, we will pay no more than the sum of the
premiums paid, less any indebtedness and partial surrenders.
If the Insured dies by suicide, within two years from the
date of any increase in the Specified Amount, we will pay no
more than a refund of the monthly Cost of Insurance charges
for the increased amount.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of Lincoln Life.
RIDERS
A Waiver of Monthly Deduction Rider may be added to the
Policy. Under this Rider, we will maintain the Death Benefit
by paying covered monthly deductions during periods of
disability. Rider availability may vary by state.
TAX ISSUES
Section 7702 of the Code provides that if certain tests are
met, a Policy will be treated as a life insurance policy for
federal tax purposes. We will monitor compliance with these
tests. The Policy should thus receive the same federal
income tax treatment as fixed benefit life insurance.
TAX TREATMENT OF DEATH BENEFIT
The death proceeds payable under a Policy are excludable
from gross income of the Beneficiary under Section 101 of
the Code.
FEDERAL INCOME TAX CONSIDERATIONS
Section 7702A of the Code defines modified endowment
contracts as those policies issued or materially changed on
or after June 21, 1988 on which the total premiums paid
during the first seven years exceed the amount that would
have been paid if the policy provided for paid up benefits
after seven level annual premiums. The Code provides for
taxation of surrenders, partial surrenders, loans,
collateral assignments and other pre-death distributions
from modified endowment contracts in the same way annuities
are taxed. Modified endowment contract distributions are
defined by the Code as amounts not received as an annuity
and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into
the policy. A 10% tax penalty generally applies to the
taxable portion of such distributions unless the Owner is
over 59 1/2 years of Age or disabled.
The Policies offered by this Prospectus may or may not be
issued as modified endowment contracts. We will monitor
premiums paid and will notify you when the Policy is in
jeopardy of becoming a modified endowment contract. If a
Policy is not a modified endowment contract, a cash
distribution during the first 15 years after a Policy is
issued which causes a reduction in death benefits may still
become fully or partially taxable to you pursuant to Section
7702(f)(7) of the Code. You should carefully consider this
potential effect and seek further information before
initiating any changes in the terms of the Policy. Under
certain conditions, a Policy may become a modified endowment
contract as a result of a material change or a reduction in
benefits as defined by Section 7702A(c) of the Code. We will
monitor compliance with these tests.
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<PAGE>
In addition to meeting the tests required under Section 7702
and Section 7702A, Section 817(h) of the Code requires that
the investments of separate accounts such as the Separate
Account be adequately diversified. Regulations issued by the
Secretary of the Treasury set the standards for measuring
the adequacy of this diversification. A variable life
insurance policy that is not adequately diversified under
these regulations would not be treated as life insurance
under Section 7702 of the Code. To be adequately
diversified, each Sub-Account must meet certain tests. We
believe the Separate Account investments meet the applicable
diversification standards.
Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of funds, transfers
between funds, exchanges of funds or changes in investment
objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code, we
reserve the right to take steps required to remain in
compliance.
We will monitor compliance with these regulations and, to
the extent necessary, will change the objectives or assets
of the Sub-Account investments to remain in compliance. We
also reserve the right to make changes in this Policy or to
make distributions from the Policy to the extent it deems
necessary, in its sole discretion, to continue to qualify
this Policy as life insurance.
A total surrender or termination of the Policy by lapse may
have adverse tax consequences. If the amount received by you
plus total Policy indebtedness exceeds the premiums paid
into the Policy, the excess will generally be treated as
taxable income, whether or not the Policy is a modified
endowment contract.
Federal estate and state and local estate, inheritance and
other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Owner or
Beneficiary.
TAXATION OF LINCOLN LIFE
Lincoln Life is taxed as a life insurance company under the
Code. Since the Separate Account is not a separate entity
from Lincoln Life and its operations form a part of Lincoln
Life, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code.
Investment income and realized capital gains on the assets
of the Separate Account are reinvested and taken into
account in determining the value of Variable Accumulation
Units.
Lincoln Life does not initially expect to incur any Federal
income tax liability that would be chargeable to the
Separate Account. Based upon these expectations, no charge
is currently being made against the Separate Account for
federal income taxes. If, however, Lincoln Life determines
that on a separate company basis such taxes may be incurred,
it reserves the right to assess a charge for such taxes
against the Separate Account.
Lincoln Life may also incur state and local taxes in
addition to premium taxes in several states. At present,
these taxes are not significant. If they increase, however,
additional charges for such taxes may be made.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as
tax advice. Counsel and other competent advisers should be
consulted for more complete information. This
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<PAGE>
discussion is based on our understanding of Federal income
tax laws as they are currently interpreted by the Internal
Revenue Service. No representation is made as to the
likelihood of continuation of these current laws and
interpretations.
FAIR VALUE OF THE POLICY
It is sometimes necessary for tax and other reasons to
determine the "fair value" of the Policy. The fair value of
the Policy is measured differently for different purposes.
It is not necessarily the same as the Accumulation Value or
the Net Accumulation Value, although the amount of the Net
Accumulation Value will typically be important in valuing
the Policy for this purpose. For some but not all purposes,
the fair value of the Policy may be the Surrender Value of
the Policy. The fair value of the Policy may be impacted by
developments other than the performance of the underlying
investments. For example, without regard to any other
factor, it increases as the Insured grows older. Moreover,
on the death of the Insured, it tends to increase
significantly. You should consult with your advisors for
guidance as to the appropriate methodology for determining
the fair value of the Policy for a particular purpose.
DIRECTORS AND OFFICERS OF LINCOLN LIFE
The following persons are Directors and Officers of Lincoln
Life. Except as indicated below, the address of each is 1300
South Clinton Street, Fort Wayne, Indiana 46802, and each
has been employed by Lincoln Life or its affiliates for more
than 5 years.
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------
<S> <C>
NANCY J. ALFORD Vice President [4/96-present], (formerly Second Vice
VICE PRESIDENT President [1/90-4/96]), Lincoln National Life
Insurance Co.
ROLAND C. BAKER President [1/95-present], First Penn-Pacific Life
VICE PRESIDENT AND DIRECTOR Insurance Co. Formerly: Chairman and CFO
1801 S. Meyers Road [7/88-1/95], Baker, Ralish, Shipley and Politzer,
Oakbrook Terrace, Ill. 60181 Inc.
JON A. BOSCIA President, CEO and Director, Lincoln National Corp.
DIRECTOR [1/98-present] (Formerly: President and Chief
200 East Berry Street Executive Officer [10/96-1/98] and Chief Operating
Fort Wayne, Ind. 46802 Officer [5/94-10/96]), Lincoln National Life
Insurance Co.; President [7/91-5/94]Lincoln
Investment Management, Inc.
JOHN GOTTA Senior Vice President and General Manager (formerly
SENIOR VICE PRESIDENT Vice President) [1/98-present] Lincoln National Life
AND ASSISTANT SECRETARY Insurance Co. Formerly: Senior Vice President,
350 Church Street Connecticut General Life Insurance Company
Hartford, CT 06103 [3/96-12/97]; Vice President, Connecticut Mutual
Life Insurance Company [8/94-3/96]; Vice President,
CIGNA [3/93-8/94]
J. MICHAEL HEMP President [11/96-Present], Lincoln Financial
SENIOR VICE PRESIDENT Advisors Corp.; Senior Vice President (formerly Vice
350 Church Street President) [10/95-Present], Lincoln National Life
Hartford, CT 06103 Insurance Co. Formerly: Regional Chief Executive
Officer [11/79-10/95], Lincoln Dallas RMO.
STEPHEN H. LEWIS Senior Vice President, [5/94-present] Lincoln
SENIOR VICE PRESIDENT National Life Insurance Co. Formerly: President
[2/85-5/94], First Penn-Pacific Life Insurance Co.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- --------------------------------- ----------------------------------------------------
<S> <C>
H. THOMAS MCMEEKIN President [5/94-present], Lincoln Investment
DIRECTOR Management, Inc.; Executive Vice President
200 East Berry Street [5/94-Present], Lincoln National Corporation
Fort Wayne, Ind. 46802 (formerly Senior Vice President [11/92-5/94])
ARTHUR S. ROSS Vice President, Lincoln National Life Insurance Co.
VICE PRESIDENT
LAWRENCE T. ROWLAND Executive Vice President [10/96-present] (formerly
EXECUTIVE VICE PRESIDENT AND Senior Vice President [1/93-10/96]), Lincoln
DIRECTOR National Life Insurance Co.
One Reinsurance Place
1700 Magnavox Way
Fort Wayne, Ind. 46804
KEITH J. RYAN Vice President and Controller [4/99-present]
VICE PRESIDENT AND Formerly: Senior Vice President [2/98-4/99]; Vice
CONTROLLER President, Chief Financial Officer and Assistant
Treasurer [1/96-present]; Controller [6/95-12/95],
Business Controls Director [11/90-6/95], Lincoln
National Life Insurance Company
GABRIEL L. SHAHEEN President and Chief Executive Officer
PRESIDENT, CHIEF EXECUTIVE [1/98-present], Lincoln National Life Insurance Co.
OFFICER Formerly: Chairman and Managing Director, Lincoln
AND DIRECTOR National (UK) PLC [12/96-1/98]; President, Lincoln
National Reassurance Company [7-95-12/96]; Senior
Vice President, Lincoln National Life Reinsurance
Company [1/93-7/95]
TODD R. STEPHENSON Senior Vice President, Chief Financial Officer and
SENIOR VICE PRESIDENT, Assistant Treasurer [4/99-present] Formerly: Vice
CHIEF FINANCIAL President and Assistant Secretary [1/98-4/99],
OFFICER AND ASSISTANT TREASURER Senior Vice President, Lincoln Financial Advisors
Corporation [1/98-4/99], Senior Vice President,
Treasurer and Chief Financial Officer, American
States Insurance Company [2/95-12/97], and Vice
President -- Corp. Acct., American States Insurance
Company [5/92-2/95]
RICHARD C. VAUGHAN Executive Vice President and Chief Financial Officer
DIRECTOR [1/95-present] (formerly Senior Vice President
200 East Berry Street [4/92-1/95]), Lincoln National Corp.
Fort Wayne, Ind. 46802
MICHAEL R. WALKER Vice President [1/96-present], Lincoln National Life
VICE PRESIDENT Insurance Co. Formerly: Vice President [3/93-1/96],
Employers Health Insurance Co.
ROY V. WASHINGTON Vice President [7/96-present], Lincoln National Life
VICE PRESIDENT Insurance Co. (formerly, Associate Counsel
[2/95-7/96]). Formerly: Director of Compliance
[8/94-2/95], Lincoln Investment Management, Inc.;
Compliance Consultant [8/89-8/94], Lincoln National
Corp.
MICHAEL L. WRIGHT Senior Vice President [3/95-present], Lincoln
SENIOR VICE PRESIDENT National Life Insurance Co. Formerly: Executive Vice
President and Chief Operating Officer [11/88-3/95],
The Associate Group.
</TABLE>
35
<PAGE>
DISTRIBUTION OF POLICIES
Lincoln Life intends to offer the Policy in all
jurisdictions where it is licensed to do business. Lincoln
Life, the principal underwriter for the Policies, is
registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker-dealer and
is a member of the National Association of Securities
Dealers ("NASD"). Our principal business address is 1300
South Clinton Street, Fort Wayne, Indiana 46802.
The Policy may be sold by individuals, who in addition to
being appointed as our life insurance agents, are also
registered representatives of Lincoln Life or other broker-
dealers. These representatives may receive commission and
service fees up to 60% of the first year premium, plus up to
5% of all other premiums paid. In lieu of premium-based
commission, Lincoln Life may pay equivalent amounts based on
Accumulation Value. The selling office receives additional
compensation on the first year premium and all additional
premiums. In some situations, the selling office may elect
to share its commission with the registered representative.
Selling representatives are also eligible for bonuses and
non-cash compensation if certain production levels are
reached. All compensation is paid from our resources, which
include sales charges made under this Policy.
CHANGES OF INVESTMENT POLICY
We may materially change the investment policy of the
Separate Account. We must inform the Owners and obtain all
necessary regulatory approvals. Any change must be submitted
to the various state insurance departments which shall
disapprove it if deemed detrimental to the interests of the
Owners or if it renders our operations hazardous to the
public. If an Owner objects, the 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 not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
OTHER CONTRACTS ISSUED BY LINCOLN LIFE
We offer other variable annuity contracts and other variable
life insurance policies with benefits which vary in
accordance with the investment experience of a separate
account of Lincoln Life.
STATE REGULATION
We are subject to the laws of Indiana governing insurance
companies and to regulation by the Indiana Insurance
Department. An annual statement in a prescribed form is
filed with the Insurance Department each year covering our
operation for the preceding year and its financial condition
as of the end of such year. The Insurance Department
periodically examines for accuracy 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 Indiana Department of Insurance. Such regulation does
not, however, involve any supervision of management or
investment practices or policies.
A blanket bond with a per event limit of $25 million and an
annual policy aggregate limit of $50 million covers all of
the officers and employees of the Company.
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<PAGE>
REPORTS TO OWNERS
We maintain Policy records and will mail to each Owner, at
the last known address of record, an annual statement
showing the amount of the current Death Benefit, the
Accumulation Value, and Surrender Value, premiums paid and
monthly charges deducted since the last report, the amounts
invested in each Sub-Account and any Loan Account Value.
You will also be sent annual reports containing financial
statements for the Separate Account, annual and semi-annual
reports of the Funds as required by the 1940 Act, and
statements of significant transactions, such as changes in
Specified Amount, changes in Death Benefit Option, transfers
among Sub-Accounts, Premium Payments, loans, loan
repayments, reinstatement and termination.
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
us or the Policies. We may also 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.
We are a member of the Insurance Marketplace Standards
Association ("IMSA") and may include the IMSA logo and
information about IMSA membership in our advertisements.
Companies that belong to IMSA subscribe to a set of of
ethical standards covering the various aspects of sales and
services for individually sold life insurance and annuities.
PREPARING FOR YEAR 2000
Many existing computer programs use only two digits in the
date field to identify the year. If left uncorrected these
programs, which were designed and developed without
considering the impact of the upcoming change in the
century, could fail to operate or could produce erroneous
results when processing dates after December 31, 1999. For
example, for a bond with a stated maturity date of July 1,
2000, a computer program could read and store the maturity
date as July 1, 1900. This problem is known by many names,
such as the "Year 2000 Problem", "Y2K", and the "Millenium
Bug".
The Year 2000 problem affects virtually all computer
programs worldwide. It can cause a computer system to
suddenly stop operating. It can also result in a computer
corrupting vital company records, and the problem could go
undetected for a long time. For our products, if left
unchecked it could cause such problems as purchase payment
collection and deposit errors; claim payment difficulties;
accounting errors; erroneous unit values; and difficulties
or delays in processing transfers, surrenders and
withdrawals. In a worst case scenario, this could result in
a material disruption to the operations both of Lincoln Life
and of Delaware Service Company Inc. (Delaware), the
provider of the accounting and valuation services for the
Separate Account.
However, both companies are wholly owned by Lincoln National
Corporation (LNC), which has had Year 2000 processes in
place since 1996. LNC projects aggregate expenditures in
excess of $92 million for its Y2K efforts through the year
2000. Both Lincoln Life and Delaware have dedicated Year
2000 teams and steering committees that are answerable to
their counterparts in LNC.
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<PAGE>
In light of the potential problems discussed above, Lincoln
Life, as part of its Year 2000 updating process, has assumed
responsibility for correcting all high-priority Information
Technology (IT) systems which service the Separate Account.
Delaware is responsible for updating all its high-priority
IT systems to support these vital services. The Year 2000
effort, for both IT and non-IT systems, is organized into
four phases:
- awareness-raising and inventory of all assets (including
third-party agent and vendor relationships);
- assessment and high-level planning and strategy;
- remediation of affected systems and equipment; and
- testing to verify Year 2000 readiness.
The high-priority IT processes and systems -- those Lincoln
Life uses to maintain its customers' records and accounts --
have been assessed and repaired, and testing of those
processes and systems is more than 99% complete. Our efforts
will continue through the end of 1999 to ensure they remain
Y2K-ready. And, we continue to work closely with our key
business partners and suppliers so they can provide the
information and service we need from them. Both companies
are currently on schedule to have their high-priority non-IT
systems (elevators, heating and ventilation, security
systems, etc.) remediated and tested by October 31, 1999.
The work on Year 2000 issues has not suffered significant
delays; however, some uncertainty remains. Specific factors
that give rise to this uncertainty include (but are
certainly not limited to) a possible loss of technical
resources to perform the work; failure to identify all
susceptible systems; and non-compliance by third parties
whose systems and operations impact Lincoln Life. In a
report dated February 26, 1999, entitled, INVESTIGATING THE
IMPACT OF THE YEAR 2000 TECHNOLOGY PROBLEM; S. Rpt. 106-10,
the U.S. Senate Special Committee on the Year 2000
Technology Problem expressed its concern that "Financial
services firms...are particularly vulnerable to...the risk
that a material customer or business partner will fail, as a
result of the computer problems, to meet its obligations".
One important source of uncertainty is the extent to which
the key trading partners of Lincoln Life and of Delaware
will be successful in their own remediation and testing
efforts. Lincoln Life and Delaware have been monitoring the
progress of their trading partners; however, the efforts of
these partners are beyond our control.
Lincoln Life and Delaware expect to have completed their
necessary remediation and testing efforts prior to December
31, 1999. However, given the nature and complexity of the
problem, there can be no guarantee by either company that
there will not be significant computer problems after
December 31, 1999.
LEGAL PROCEEDINGS
Lincoln Life is involved in various pending or threatened
legal proceedings arising from the conduct of its business.
Most of these proceedings are routine and in the ordinary
course of business. In some instances they include claims
for unspecified or substantial punitive damages and similar
types of relief in addition to amounts for equitable relief.
After consultation with legal counsel and a review of
available facts, it is management's opinion that the
ultimate liability, if any, under these suits will not have
a material adverse effect on the financial position of
Lincoln Life.
Lincoln Life is presently defending three lawsuits in which
Plaintiffs seek to represent national classes of
policyholders in connection with alleged fraud, breach of
contract and other claims relating to the sale of
interest-sensitive universal and participating whole life
insurance policies. As of the date of this prospectus, the
courts have not certified a class in any of the suits.
Plaintiffs seek unspecified damages and penalties
38
<PAGE>
for themselves and on behalf of the putative class. Although
the relief sought in these cases is substantial, the cases
are in the preliminary stages of litigation, and it is
premature to make assessments about potential loss, if any.
Management is defending these suits vigorously. The amount
of liability, if any, which may ultimately arise as a result
of these suits cannot be reasonably determined at this time.
EXPERTS
The financial statements of the Separate Account and the
statutory-basis financial statements of Lincoln Life
appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, as
set forth in their reports which also appear elsewhere in
this document and in the registration statement. The
financial statements and schedules audited by Ernst & Young
LLP have been included in this document in reliance on their
reports given on their authority as experts in accounting
and auditing. (Financial statements to be added by
amendment.)
Actuarial matters included in this prospectus have been
examined by Vaughn W. Robbins, FSA as stated in the opinion
filed as an exhibit to the registration statement. (Opinion
to be filed by amendment.)
Legal matters in connection with the Policies described
herein are being passed upon by Robert A. Picarello, Esq.,
as stated in the opinion filed as an exhibit to the
registration statement. (Opinion to be filed by amendment.)
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 hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Separate Account, Lincoln Life, and the Policies offered
hereby. Statements contained in this Prospectus as to the
content of Policies and other legal instruments are
summaries. For a complete statement of the terms thereof,
reference is made to such instruments as filed.
39
<PAGE>
APPENDIX 1 MONTHLY CHARGE
<TABLE>
<CAPTION>
INSURED'S
AGE AT ISSUE EXPENSE
(NEAREST CHARGE
BIRTHDAY) PER $1,000
- --------------- -----------
<S> <C>
0-12 0.0158
13 0.0200
14 0.0242
15-30 0.0283
31 0.0325
32 0.0367
33 0.0408
34 0.0450
35 0.0492
36 0.0533
37 0.0575
38 0.0617
39 0.0658
40 0.0700
41 0.0742
42 0.0783
43 0.0825
44 0.0867
45 0.0908
46 0.0950
47 0.0992
48 0.1033
49 0.1075
50 0.1117
51 0.1158
52 0.1200
53 0.1242
54 0.1283
55 0.1325
56 0.1408
57 0.1492
58 0.1575
59 0.1658
60 0.1742
61 0.1825
62 0.1908
63 0.1992
64 0.2075
65 0.2158
66 0.2242
67 0.2325
68 0.2408
69 0.2492
70 0.2575
71 0.2656
72 0.2742
73 0.2825
74 0.2908
75 0.2992
76 0.3200
77 0.3408
78 0.3617
79 0.3825
80 0.4033
81+ 0.4242
</TABLE>
40
<PAGE>
APPENDIX 2
GUARANTEED MAXIMUM COST OF INSURANCE RATES
The Guaranteed Maximum Cost of Insurance Rates, per $1,000
of Net Amount at Risk, for standard risks are set forth in
the following Table based on the 1980 Commissioners Standard
Ordinary Mortality Tables, Age Nearest Birthday (1980 CSO);
or for unisex rates, on the 1980 CSO-B Table.
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
0 0.34845 0.24089 0.32677
1 0.08917 0.07251 0.08667
2 0.08251 0.06750 0.07917
3 0.08167 0.06584 0.07834
4 0.07917 0.06417 0.07584
5 0.07501 0.06334 0.07251
6 0.07167 0.06084 0.06917
7 0.06667 0.06000 0.06584
8 0.06334 0.05834 0.06250
9 0.06167 0.05750 0.06084
10 0.06084 0.05667 0.06000
11 0.06417 0.05750 0.06250
12 0.07084 0.06000 0.06917
13 0.08251 0.06250 0.07834
14 0.09584 0.06887 0.09001
15 0.11085 0.07084 0.10334
16 0.12585 0.07601 0.11585
17 0.13919 0.07917 0.12752
18 0.14836 0.08167 0.13502
19 0.15502 0.08501 0.14085
20 0.15836 0.08751 0.14502
21 0.15919 0.08917 0.14585
22 0.15752 0.09084 0.14419
23 0.15502 0.09251 0.14252
24 0.15189 0.09501 0.14085
25 0.14752 0.09668 0.13752
26 0.11419 0.09918 0.13585
27 0.14252 0.10168 0.13418
28 0.14169 0.10501 0.13418
29 0.14252 0.10635 0.13585
30 0.14419 0.11251 0.13752
31 0.14836 0.11668 0.14169
32 0.15252 0.12085 0.14585
33 0.15919 0.12502 0.15252
34 0.16889 0.13168 0.15919
35 0.17586 0.13752 0.16836
36 0.18670 0.14669 0.17837
37 0.20004 0.15752 0.19170
38 0.21505 0.17003 0.20588
39 0.23255 0.18503 0.22338
40 0.25173 0.20171 0.24173
41 0.27424 0.22005 0.26340
42 0.29675 0.23922 0.28508
43 0.32260 0.25757 0.31010
44 0.34929 0.27674 0.33428
45 0.37931 0.29675 0.36263
46 0.41017 0.31677 0.39182
47 0.44353 0.33761 0.42268
48 0.47856 0.36096 0.45437
49 0.51777 0.38598 0.49107
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
50 0.55948 0.41350 0.53028
51 0.60870 0.44270 0.57533
52 0.66377 0.47523 0.62539
53 0.72636 0.51276 0.68297
54 0.79730 0.55114 0.74722
55 0.87326 0.59118 0.81566
56 0.95591 0.63123 0.88996
57 1.04192 0.66961 0.96593
58 1.13378 0.70633 1.04609
59 1.23236 0.74556 1.13211
60 1.34180 0.78979 1.22817
61 1.46381 0.84488 1.33511
62 1.60173 0.91417 1.45796
63 1.75809 1.00267 1.59922
64 1.93206 1.10539 1.75725
65 2.12283 1.21731 1.92955
66 2.32623 1.33511 2.11195
67 2.54312 1.45461 2.30614
68 2.77350 1.57247 2.50878
69 3.02328 1.69955 2.72909
70 3.30338 1.84590 2.97466
71 3.62140 2.02325 3.25640
72 3.98666 2.24419 3.58279
73 4.40599 2.51548 3.95978
74 4.87280 2.83552 4.38330
75 5.37793 3.19685 4.84334
76 5.91225 3.59370 5.33245
77 6.46824 4.01942 5.84227
78 7.04089 4.47410 6.36948
79 7.64551 4.97042 6.92851
80 8.30507 5.52957 7.54229
81 9.03761 6.17118 8.22883
82 9.86724 6.91414 9.01216
83 10.80381 7.77075 9.90124
84 11.82571 8.72632 10.87533
85 12.91039 9.76952 11.92213
86 14.03509 10.89151 13.01471
87 15.18978 12.08770 14.15507
88 16.36948 13.35774 15.33494
89 17.57781 14.70820 16.56493
90 18.82881 16.15259 17.85746
91 20.14619 17.71416 19.23699
92 21.57655 19.43814 20.76665
93 23.20196 21.40786 22.49837
94 25.28174 23.63051 24.70915
95 28.27411 27.16158 27.82758
96 33.10577 32.32378 32.78845
97 41.68476 41.21204 41.45783
98 58.01259 57.81394 57.95663
99 90.90909 90.90909 90.90909
</TABLE>
41
<PAGE>
APPENDIX 3
ILLUSTRATION OF SURRENDER CHARGES
The initial Surrender Charge is calculated as (a) plus (b),
with that result not to exceed (c), minus (d), where
(a) is 1.25 times the curtate net level premium for the
Specified Amount of insurance, calculated using the 1980
Commissioners Standard Ordinary mortality table and 4%
interest;
(b) is $10 per $1000 of Specified Amount;
(c) is $50 per $1000 of Specified Amount; and
(d) is the total of the per thousand charges assessed in the
first 24 months.
Algebraically, this formula is equivalent to min{a+b,c}-d.
The Surrender Charge decreases from its initial amount
during the first 15 years. No Surrender Charge is applied in
the 16th policy year or beyond. In general terms, the
initial Surrender Charge is amortized in proportion to a
twenty year life contingent annuity due. In formulas, the
Surrender Charge at a point in time "t" years after issue is
(a) times (b), where
(a) is the initial Surrender Charge; and
(b) is the ratio of a life contingent annuity due beginning
at time t and ending 20 years after issue, divided by a
life contingent annuity due beginning at issue and
ending 20 years after issue, both calculated using the
1980 Commissioners Standard Ordinary mortality table and
4% interest.
EXAMPLE 1: A male, Age 45, purchases a policy with a
Specified Amount of $100,000.
The initial Surrender Charge is computed as follows:
curtate net level premium = $1,987.66
$10 per $1000 of Specified Amount = $1000
$50 per $1000 of Specified Amount = $5000
the total of the per thousand charges = $9.08 per month X 24
months = $217.92
initial Surrender Charge = (1.25 X $1987.66 + $1000) -
$217.92=
$3,484.57- $217.92 = $3,266.65. Note that $3,484.57 is less
than $5000.
This amount decreases as follows:
<TABLE>
<CAPTION>
YEARS INITIAL
AFTER SURRENDER ANNUITY SURRENDER
ISSUE CHARGE RATIO CHARGE
------------ ----------- ------------- -----------
<S> <C> <C> <C>
0 3,266.65 1.00000 3,266.65
1 3,266.65 0.96609 3,155.89
2 3,266.65 0.93101 3,041.30
3 3,266.65 0.89471 2,922.71
4 3,266.65 0.85711 2,799.89
5 3,266.65 0.81818 2,672.70
6 3,266.65 0.77782 2,540.86
7 3,266.65 0.73600 2,404.26
8 3,266.65 0.69265 2,262.65
9 3,266.65 0.64769 2,115.79
10 3,266.65 0.60104 1,963.40
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
YEARS INITIAL
AFTER SURRENDER ANNUITY SURRENDER
ISSUE CHARGE RATIO CHARGE
------------ ----------- ------------- -----------
<S> <C> <C> <C>
11 3,266.65 0.55257 1,805.05
12 3,266.65 0.50212 1,640.25
13 3,266.65 0.44952 1,468.41
14 3,266.65 0.39456 1,288.88
15 3,266.65 0.33701 1,100.90
16 0.00
</TABLE>
EXAMPLE 2: A female, Age 75, purchases a policy with a
Specified Amount of $200,000.
The initial Surrender Charge is computed as follows:
curtate net level premium = $15,727.74
$10 per $1000 of Specified Amount = $2,000
$50 per $1000 of Specified Amount = $10,000
the total of the per thousand charges = $59.84 per month X
24 months = $1,436.16
The value (1.25 X $15,727.74 + $2,000) exceeds $10,000, so
the initial Surrender Charge = $10,000 - $1,436.16 =
$8,563.84
This amount decreases as follows:
<TABLE>
<CAPTION>
YEARS INITIAL
AFTER SURRENDER ANNUITY SURRENDER
ISSUE CHARGE RATIO CHARGE
------------ ----------- ------------- -----------
<S> <C> <C> <C>
0 8,563.84 1.00000 8,563.84
1 8,563.84 0.95375 8,167.79
2 8,563.84 0.90821 7,777.77
3 8,563.84 0.86329 7,393.11
4 8,563.84 0.81888 7,012.72
5 8,563.84 0.77490 6,636.15
6 8,563.84 0.73145 6,264.02
7 8,563.84 0.68868 5,897.71
8 8,563.84 0.64680 5,539.10
9 8,563.84 0.60603 5,189.95
10 8,563.84 0.56635 4,850.10
11 8,563.84 0.52753 4,517.67
12 8,563.84 0.48915 4,189.03
13 8,563.84 0.45058 3,858.68
14 8,563.84 0.41088 3,518.67
15 8,563.84 0.36873 3,157.74
16 0.00
</TABLE>
43
<PAGE>
APPENDIX 4
CORRIDOR PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE OF
THE INSURED CORRIDOR
(NEAREST BIRTHDAY) PERCENTAGE
- ---------------------- -------------
<S> <C>
0-40 250%
41 243%
42 236%
43 229%
44 222%
45 215%
46 209%
47 203%
48 197%
49 191%
50 185%
51 178%
52 171%
53 164%
54 157%
55 150%
56 146%
57 142%
58 138%
59 134%
60 130%
61 128%
62 126%
63 124%
64 122%
65 120%
66 119%
67 118%
68 117%
69 116%
70 115%
71 113%
72 111%
73 109%
74 107%
75-90 105%
91 104%
92 103%
93 102%
94 101%
95-99 100%
</TABLE>
44
<PAGE>
APPENDIX 5
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES, AND
DEATH BENEFIT PROCEEDS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefit
Proceeds under a Policy would vary over time if the
hypothetical gross investment rates of return were a uniform
annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%,
6%, or 12% over a period of years, but fluctuates above or
below those averages for individual years, the Accumulation
Values, Surrender Values and Death Benefit Proceeds may be
different. The illustrations also assume there are no Policy
Loans or Partial Surrenders, no additional Premium Payments
are made other than shown, no Accumulation Values are
allocated to the Fixed Account, and there are no changes in
the Specified Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit Proceeds as of each Policy
Anniversary reflect the fact that charges are made and
expenses applied which lower investment return on the assets
held in the Sub-Accounts. Daily charges are made against the
assets of the Sub-Accounts for assuming mortality and
expense risks. The mortality and expense risk charges are
equivalent to an annual effective rate of 0.90% of the daily
net asset value of the Separate Account in years 1-19 and
0.20% in years 20 and later. In addition, the amounts shown
also reflect the deduction of Fund investment advisory fees
and other expenses which will vary depending on which
funding vehicle is chosen but which are assumed for purposes
of these illustrations to be equivalent to an annual
effective rate of 0.82% of the daily net asset value of the
Separate Account. This rate reflects an arithmetic average
of total Fund portfolio annual expenses for the year ending
December 31, 1998.
Considering charges for mortality and expense risks and the
assumed Fund expenses, gross annual rates of 0%, 6% and 12%
correspond to net investment experience at annual rates of
-1.72%, 4.28% and 10.28% for years 1-19 and -1.02%, 4.98%
and 10.98% in years 20 and later.
The illustrations also reflect the fact that the Company
makes monthly charges for providing insurance protection.
Current values reflect current Cost of Insurance charges and
guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for
Policies which are issued as preferred and standard.
Policies issued on a substandard basis would result in lower
Accumulation Values and Death Benefit Proceeds than those
illustrated.
The illustrations also reflect the fact that the Company
deducts a premium load of 5% from each Premium Payment.
The Surrender Values shown in the illustrations reflect the
fact that the Company will deduct a Surrender Charge from
the Policy's Accumulation Value for any Policy surrendered
in full during the first fifteen Policy Years. Surrender
Charges reflect, in part, age and Specified Amount, and are
shown in the illustrations.
In addition, the illustrations reflect the fact that the
Company deducts a monthly administrative charge at the
beginning of each Policy Month. This monthly administrative
expense charge is a flat dollar charge of $10 per month in
the first year. The illustrations also reflect a monthly
charge per $1,000 of Specified Amount assessed during the
first two Policy Years.
Upon request, the Company will furnish a comparable
illustration based on the proposed insured's age, gender
classification, smoking classification, risk classification
and premium payment requested.
45
<PAGE>
MALE AGE 55 NONSMOKER
PREFERRED -- $8,605 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,035 500,000 500,000 500,000 4,647 5,025 5,404 0 0 0
2 18,522 500,000 500,000 500,000 6,143 7,098 8,104 0 0 0
3 28,483 500,000 500,000 500,000 7,922 9,587 11,427 0 0 0
4 38,942 500,000 500,000 500,000 9,160 11,666 14,573 0 0 0
5 49,924 500,000 500,000 500,000 9,821 13,276 17,486 0 0 0
6 61,455 500,000 500,000 500,000 9,847 14,331 20,082 0 0 1,913
7 73,563 500,000 500,000 500,000 9,166 14,725 22,253 0 0 5,046
8 86,276 500,000 500,000 500,000 7,681 14,325 23,859 0 0 7,644
9 99,625 500,000 500,000 500,000 5,279 12,970 24,726 0 0 9,533
10 113,641 500,000 500,000 500,000 1,845 10,488 24,659 0 0 10,522
15 194,961 0 0 500,000 0 0 1,563 0 0 0
20 298,749 0 0 0 0 0 0 0 0 0
25 431,212 0 0 0 0 0 0 0 0 0
30 600,272 0 0 0 0 0 0 0 0 0
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
46
<PAGE>
MALE AGE 55 NONSMOKER
PREFERRED -- $8,605 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,035 500,000 500,000 500,000 4,647 5,024 5,404 0 0 0
2 18,522 500,000 500,000 500,000 9,204 10,254 11,352 0 0 0
3 28,483 500,000 500,000 500,000 14,425 16,475 18,706 0 0 0
4 38,942 500,000 500,000 500,000 19,527 22,935 26,792 0 2,924 6,780
5 49,924 500,000 500,000 500,000 24,522 29,659 35,701 5,419 10,555 16,597
6 61,455 500,000 500,000 500,000 29,427 36,673 45,538 11,258 18,504 27,369
7 73,563 500,000 500,000 500,000 34,248 43,998 56,411 17,041 26,791 39,204
8 86,276 500,000 500,000 500,000 38,923 51,586 68,368 22,707 35,370 52,153
9 99,625 500,000 500,000 500,000 43,418 59,416 81,497 28,225 44,222 66,303
10 113,641 500,000 500,000 500,000 47,758 67,522 95,949 33,620 53,384 81,811
15 194,961 500,000 500,000 500,000 63,139 108,721 190,170 54,985 100,568 182,017
20 298,749 500,000 500,000 500,000 66,806 151,278 343,711 66,806 151,278 343,711
25 431,212 500,000 500,000 656,230 55,891 199,852 624,981 55,891 199,852 624,981
30 600,272 500,000 500,000 1,153,513 20,061 252,273 1,098,584 20,061 252,273 1,098,584
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
47
<PAGE>
MALE AGE 65 NONSMOKER
PREFERRED -- $13,988 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 14,687 500,000 500,000 500,000 6,503 7,084 7,670 0 0 0
2 30,109 500,000 500,000 500,000 4,621 5,954 7,371 0 0 0
3 46,302 500,000 500,000 500,000 2,748 4,777 7,074 0 0 0
4 63,305 0 500,000 500,000 0 2,115 5,304 0 0 0
5 81,157 0 0 500,000 0 0 1,724 0 0 0
6 99,903 0 0 0 0 0 0 0 0 0
7 119,585 0 0 0 0 0 0 0 0 0
8 140,252 0 0 0 0 0 0 0 0 0
9 161,952 0 0 0 0 0 0 0 0 0
10 184,737 0 0 0 0 0 0 0 0 0
15 316,934 0 0 0 0 0 0 0 0 0
20 485,654 0 0 0 0 0 0 0 0 0
25 700,989 0 0 0 0 0 0 0 0 0
30 975,816 0 0 0 0 0 0 0 0 0
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
48
<PAGE>
MALE AGE 65 NONSMOKER
PREFERRED -- $13,988 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 14,687 500,000 500,000 500,000 6,503 7,085 7,670 0 0 0
2 30,109 500,000 500,000 500,000 12,950 14,534 16,196 0 0 0
3 46,302 500,000 500,000 500,000 20,460 23,525 26,871 625 3,690 7,036
4 63,305 500,000 500,000 500,000 27,602 32,673 38,428 8,641 13,712 19,467
5 81,157 500,000 500,000 500,000 34,624 42,237 51,228 16,547 24,161 33,151
6 99,903 500,000 500,000 500,000 41,549 52,267 65,441 24,367 35,085 48,259
7 119,585 500,000 500,000 500,000 48,328 62,738 81,182 32,051 46,461 64,904
8 140,252 500,000 500,000 500,000 54,973 73,689 98,643 39,609 58,325 83,279
9 161,952 500,000 500,000 500,000 61,393 85,056 117,943 46,951 70,614 103,501
10 184,737 500,000 500,000 500,000 67,479 96,764 139,210 53,969 83,254 125,701
15 316,934 500,000 500,000 500,000 86,745 155,746 280,842 78,419 147,420 272,516
20 485,654 500,000 500,000 551,714 77,536 211,110 525,442 77,536 211,110 525,442
25 700,989 500,000 500,000 1,012,056 32,960 276,470 963,863 32,960 276,470 963,863
30 975,816 0 500,000 1,714,439 0 360,466 1,697,465 0 360,466 1,697,465
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
49
<PAGE>
FEMALE AGE 55 NONSMOKER
PREFERRED -- $6,925 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,271 500,000 500,000 500,000 3,492 3,788 4,085 0 0 0
2 14,906 500,000 500,000 500,000 5,311 6,074 6,876 0 0 0
3 22,922 500,000 500,000 500,000 7,680 9,061 10,580 0 0 0
4 31,340 500,000 500,000 500,000 9,814 11,981 14,470 0 0 0
5 40,178 500,000 500,000 500,000 11,703 14,818 18,553 0 0 2,953
6 49,458 500,000 500,000 500,000 13,322 17,541 22,827 0 2,705 7,991
7 59,202 500,000 500,000 500,000 14,612 20,083 27,252 569 6,040 13,209
8 69,433 500,000 500,000 500,000 15,496 22,356 31,767 2,275 9,135 18,546
9 80,176 500,000 500,000 500,000 15,867 24,236 36,278 3,498 11,866 23,909
10 91,456 500,000 500,000 500,000 15,649 25,624 40,713 4,161 14,136 29,225
15 156,901 500,000 500,000 500,000 4,461 22,888 60,453 0 16,394 53,960
20 240,428 0 0 500,000 0 0 67,729 0 0 67,729
25 347,031 0 0 500,000 0 0 19,991 0 0 19,991
30 483,087 0 0 0 0 0 0 0 0 0
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
50
<PAGE>
FEMALE AGE 55 NONSMOKER
PREFERRED -- $6,925 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,271 500,000 500,000 500,000 3,492 3,788 4,085 0 0 0
2 14,906 500,000 500,000 500,000 7,450 8,279 9,147 0 0 0
3 22,922 500,000 500,000 500,000 12,083 13,731 15,521 0 0 0
4 31,340 500,000 500,000 500,000 16,596 19,374 22,508 260 3,038 6,172
5 40,178 500,000 500,000 500,000 21,018 25,248 30,203 5,418 9,648 14,603
6 49,458 500,000 500,000 500,000 25,343 31,354 38,672 10,507 16,518 23,836
7 59,202 500,000 500,000 500,000 29,553 37,685 47,981 15,510 23,642 33,938
8 69,433 500,000 500,000 500,000 33,675 44,276 58,243 20,454 31,055 45,022
9 80,176 500,000 500,000 500,000 37,687 51,117 69,538 25,318 38,748 57,169
10 91,456 500,000 500,000 500,000 41,601 58,232 81,989 30,113 46,744 70,501
15 156,901 500,000 500,000 500,000 58,581 97,240 165,367 52,088 90,746 158,874
20 240,428 500,000 500,000 500,000 68,272 140,579 300,512 68,272 140,579 300,512
25 347,031 500,000 500,000 568,989 68,215 191,830 541,894 68,215 191,830 541,894
30 483,087 500,000 500,000 998,710 48,714 247,434 951,152 48,714 247,434 951,152
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
51
<PAGE>
FEMALE AGE 65 NONSMOKER
PREFERRED -- $11,501 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12,076 500,000 500,000 500,000 6,056 6,555 7,058 0 0 0
2 24,756 500,000 500,000 500,000 7,579 8,830 10,149 0 0 0
3 38,070 500,000 500,000 500,000 9,701 11,862 14,256 0 0 0
4 52,049 500,000 500,000 500,000 11,144 14,380 18,145 0 0 0
5 66,728 500,000 500,000 500,000 11,856 16,304 21,745 0 0 3,599
6 82,140 500,000 500,000 500,000 11,726 17,488 24,917 0 263 7,691
7 98,323 500,000 500,000 500,000 10,570 17,706 27,433 0 1,424 11,151
8 115,316 500,000 500,000 500,000 8,123 16,636 28,961 0 1,318 13,643
9 133,158 500,000 500,000 500,000 4,065 13,883 29,080 0 0 14,745
10 151,892 0 500,000 500,000 0 9,010 27,311 0 0 13,977
15 260,584 0 0 0 0 0 0 0 0 0
20 399,307 0 0 0 0 0 0 0 0 0
25 576,356 0 0 0 0 0 0 0 0 0
30 802,320 0 0 0 0 0 0 0 0 0
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
52
<PAGE>
FEMALE AGE 65 NONSMOKER
PREFERRED -- $11,501 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 12,076 500,000 500,000 500,000 6,056 6,555 7,058 0 0 0
2 24,756 500,000 500,000 500,000 12,510 13,911 15,377 0 0 0
3 38,070 500,000 500,000 500,000 20,098 22,870 25,883 184 2,956 5,969
4 52,049 500,000 500,000 500,000 27,522 32,183 37,444 8,480 13,141 18,402
5 66,728 500,000 500,000 500,000 34,768 41,852 50,163 16,622 23,706 32,017
6 82,140 500,000 500,000 500,000 41,863 51,923 64,193 24,638 34,698 46,967
7 98,323 500,000 500,000 500,000 48,732 62,337 79,601 32,450 46,055 63,319
8 115,316 500,000 500,000 500,000 55,302 73,041 96,473 39,984 57,723 81,155
9 133,158 500,000 500,000 500,000 61,722 84,196 115,120 47,386 69,861 100,784
10 151,892 500,000 500,000 500,000 67,909 95,747 135,667 54,575 82,413 122,333
15 260,584 500,000 500,000 500,000 91,017 156,191 272,332 83,182 148,356 264,498
20 399,307 500,000 500,000 525,543 88,975 214,215 500,517 88,975 214,215 500,517
25 576,356 500,000 500,000 953,689 56,326 281,249 908,275 56,326 281,249 908,275
30 802,320 0 500,000 1,606,826 0 365,790 1,590,917 0 365,790 1,590,917
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.82% per year.
53
<PAGE>
PART II
FEES AND CHARGES 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.
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of The Lincoln National Life
Insurance Company (LNL) provides that LNL will indemnify certain
persons against expenses, judgments and certain other specified costs
incurred by any such person if he/she is made a party or is
threatened to be made a party to a suit or proceeding because he/she
was a director, officer, or employee of LNL, as long as he/she acted
in good faith and in a manner he/she reasonably believed to be in the
best interests of, or not opposed to the best interests of, LNL.
Certain additional conditions apply to indemnification in criminal
proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LNL in connection with suits
by, or in the right of, LNL.
Please refer to Article VII of the By-Laws of LNL (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the
Securities Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The undertaking to file reports;
The signatures;
Written consents of the following persons:
Robert A. Picarello, Esq. (to be filed by amendment)
Vaughn W. Robbins, FSA (to be filed by amendment)
Ernst & Young, LLP (to be filed by amendment)
<PAGE>
<TABLE>
<S> <C> <C>
The following exhibits correspond to those required by paragraph A of the instructions
1. as to exhibits in Form N-8B-2:
Resolution of the Board of Directors of The Lincoln National Life Insurance Company and
(1) related documents authorizing establishment of the Account.(2)
(2) Not applicable.
(3) (a) Not applicable.
(b) Commission Schedule for Variable Life Policies.(5)
(4) Not applicable.
(5) (a) Proposed Form of Policy LN 680
(b) Proposed Form of Application (2)
(c) Riders. (2)
(6) (a) Articles of Incorporation of The Lincoln National Life Insurance Company.(1)
(b) Bylaws of The Lincoln National Life Insurance Company.(1)
(7) Not applicable.
(8) Fund Participation Agreements.
Forms of Agreements between The Lincoln National Life Insurance Company and:
(a) AIM Variable Insurance Funds, Inc.(9)
(b) Baron Capital Funds Trust(10)
(c) BT Insurance Funds Trust.(6)
(d) Delaware Group Premium Fund, Inc.(3)
(e) Fidelity Variable Insurance Products Fund.(4)
(f) Fidelity Variable Insurance Products Fund II.(4)
(g) Fidelity Variable Insurance Products Fund III*
(h) Janus Aspen Series(10)
(i) Lincoln National Funds(11)
(j) MFS-Registered Trademark- Variable Insurance Trust.(5)
(k) Neuberger & Berman Advisers Management Trust(10)
(l) Templeton Variable Products Series Fund.*
(m) OCC Accumulation Trust.(6)
(9) Services Agreement between The Lincoln National Life Insurance Co. and Delaware
Management Co.(7)
(10) See Exhibit 1(5).
2. See Exhibit 1(5).
3. Opinion and Consent of Robert A. Picarello, Esq.*
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Vaughn Robbins, F.S.A.*
7. Consent of Ernst & Young LLP, Independent Auditors.*
8. Not applicable.
</TABLE>
* To be filed by Amendment.
(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 N-4 (File No.
33-25990) filed on April 22, 1998.
(4) Incorporated by reference to Registration Statement on Form N-4 (File No.
333-04999) filed on September 30, 1998.
(5) Incorporated by reference to Registration Statement on Form S-6 (File No.
333-42479) filed on April 28, 1998.
(6) Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-42479) filed on May 12, 1998.
(7) Incorporated by reference to Registration Statement on Form S-6 (File No.
33-40745) filed on November 21, 1997.
(8) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-42479) filed on December 30, 1998.
(9) Incorporated by reference to the Registration Statement on Form N-4 (File
No. 333-40937) filed on September 3, 1998.
(10) Incorporated by reference to the amendment to the Registration Statement on
Form N-4 (File No. 333-04999) filed on September 30, 1998.
(11) Lincoln National Funds (Eleven Separate Agreements):
LN Aggreessive Growth Fund, Inc., incorporated by reference to Post
Effective Amendment No. 8 to the Registration Statement on Form N-1A (File
No. 33-70742) filed on April 16, 1999.
<PAGE>
LN Bond Fund, Inc., incorporated by reference to Post Effective Amendment
No. 21 to the Registration Statement on Form N-1A (File No. 2-80746) filed
on April 16, 1999.
LN Capital Appreciation Fund, Inc., incorporated by reference to Post
Effective Amendment No. 7 to the Registration Statement on Form N-1A (File
No. 33-70272) filed on April 16, 1999.
LN Equity-Income Fund, Inc., incorporated by reference to Post Effective
Amendment No. 7 to the Registration Statement on Form N-1A (File No.
33-71158) filed on April 16, 1999.
LN Global Asset Allocation Fund, Inc., incorporated by reference to Post
Effective Amendment No. 15 to the Registration Statement on Form N-1A (File
No. 33-13530) filed on April 16, 1999.
LN Growth and Income Fund, Inc., incorporated by reference to Post Effective
Amendment No. 20 to the Registration Statement on Form N-1A (File No.
2-80741) filed on April 16, 1999.
LN International Fund, Inc., incorporated by reference to Post Effective
Amendment No. 11 to the Registration Statement on Form N-1A (File No.
33-38335) filed on April 16, 1999.
LN Managed Fund, Inc., incorporated by reference to Post Effective Amendment
No. 19 to the Registration Statement on Form N-1A (File No. 2-82276) filed
on April 16, 1999.
LN Money Market Fund, Inc., incorporated by reference to Post Effective
Amendment No. 20 to the Registration Statement on Form N-1A (File No.
2-80743) filed on April 16, 1999.
LN Social Awareness Fund, Inc., incorporated by reference to Post Effective
Amendment No. 13 to the Registration Statement on Form N-1A (File No.
33-19896) filed on April 16, 1999.
LN Special Opportunities Fund, Inc., incorporated by reference to Post
Effective Amendment No. 20 to the Registration Statement on Form N-1A (File
No. 2-80731) filed on April 16, 1999.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the registrant has duly caused
this Registration Statement on Form S-6 to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hartford and the State of
Connecticut, on the 12th day of July, 1999.
LINCOLN LIFE FLEXIBLE PREMIUM
VARIABLE LIFE ACCOUNT M
(Name of Registrant)
by: /s/ GARY W. PARKER
------------------------------------
Gary W. Parker
VICE PRESIDENT
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
(Name of Depositor)
by: /s/ GARY W. PARKER
------------------------------------
Gary W. Parker
VICE PRESIDENT
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on July 12, 1999 by the following
persons, as officers and directors of the Depositor, in the capacities
indicated:
SIGNATURE TITLE
- -------------------------------------------------- -------------------------
/s/ GABRIEL L. SHAHEEN* President, Chief
------------------------------------------- Executive Officer and
Gabriel L. Shaheen Director
(Principal Executive
Officer)
/s/ TODD R. STEPHENSON* Senior Vice President,
------------------------------------------- Chief Financial Officer
Todd R. Stephenson and Assistant Treasurer
(Principal Financial
Officer)
/s/ KEITH J. RYAN* Vice President,
------------------------------------------- Controller
Keith J. Ryan and Chief Accounting
Officer
(Principal Accounting
Officer)
/s/ LAWRENCE T. ROWLAND* Executive Vice President
------------------------------------------- and Director
Lawrence T. Rowland
/s/ JOHN A. BOSCIA* Director
-------------------------------------------
John A. Boscia
/s/ H. THOMAS MCMEEKIN* Director
-------------------------------------------
H. Thomas McMeekin
/s/ RICHARD C. VAUGHAN* Director
-------------------------------------------
Richard C. Vaughan
By: /s/ GARY W. PARKER
-----------------------------------
Gary W. Parker
ATTORNEY-IN-FACT, PURSUANT TO
A POWER OF ATTORNEY FILED WITH
THIS REGISTRATION STATEMENT
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company ("Company"), hereby severally constitute and appoint John H.
Gotta, Robert A. Picarello, and Gary W. Parker, 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 Registration Statements
on Forms N-6, S-6 and/or N-8B-2 (including Amendments to those Registration
Statements) which may be filed with the U.S. Securities and Exchange Commission
under the Securities Act of 1933 and/or the Investment Company Act of 1940, as
applicable, on behalf of the Company in its own right or as Depositor for one or
more of its Separate Accounts, hereby ratifying and confirming our signatures as
they may be affixed by any of these attorneys-in-fact to said Registration
Statement(s) or Amendment(s), and hereby revoking any and all Powers of Attorney
previously executed for this purpose.
WITNESS our hands and common seal on this 9th day of July, 1999.
SIGNATURE TITLE
- --------------------------------------------- -------------------------
/s/ TODD R. STEPHENSON Senior Vice President,
-------------------------------------- Chief Financial Officer
Todd R. Stephenson and Assistant Treasurer
(Principal Financial
Officer)
/s/ KEITH J. RYAN Vice President,
-------------------------------------- Controller and Chief
Keith J. Ryan Accounting Officer
(Principal Accounting
Officer)
STATE OF INDIANA
SS:
COUNTY OF ALLEN
Subscribed and sworn to
before me this
9th of July, 1999.
/s/ Kimberly J. DeLong
-------------------------
Commission Expires:
1/29/2007
<PAGE>
Policy Number SPECIMEN
Insured JOHN DOE
Initial Specified Amount $100,000 Date of Issue OCTOBER 15, 1999
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
A Stock Company Home Office Location: Fort Wayne, Indiana
Administrator Mailing Address: The Lincoln National Life
Insurance Company
350 Church Street
Hartford, CT 06103-1106
The Lincoln National Life Insurance Company ("Lincoln Life") agrees to pay the
Death Benefit Proceeds to the Beneficiary upon receipt of due proof of the
Insured's death during the continuance of the policy. Such payment shall be made
as provided under GENERAL PROVISIONS, PAYMENT OF PROCEEDS. Lincoln Life further
agrees to pay the Surrender Value to the Owner upon surrender of the policy.
RIGHT TO EXAMINE THE POLICY. The policy may be returned to the insurance agent
through whom it was purchased or to Lincoln Life within 10 days after receipt of
the policy (20 days after its receipt where required by law for policies issued
in replacement of other insurance). During this period (the "Right-to-Examine
Period"), any premium paid will be placed in the Money Market Fund and, if the
policy is so returned, it will be deemed void from the Date of Issue and Lincoln
Life will refund all premium paid. If the policy is not returned, the premium
payment will be processed as set forth in PREMIUM AND REINSTATEMENT PROVISIONS,
ALLOCATION OF NET PREMIUM PAYMENTS.
ANY BENEFITS AND VALUES PROVIDED BY THE POLICY BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
THE DEATH BENEFIT PROCEEDS ON THE DATE OF ISSUE EQUAL THE INITIAL SPECIFIED
AMOUNT OF THE POLICY. THEREAFTER, THE DEATH BENEFIT PROCEEDS MAY VARY UNDER THE
CONDITIONS DESCRIBED UNDER INSURANCE COVERAGE PROVISIONS.
The policy is issued and accepted subject to the terms set forth on the
following pages, which are made a part of the policy. In consideration of the
application and the payment of premiums as provided, the policy is executed by
Lincoln Life as of the Date of Issue.
/s/ [Illegible]
Registrar PRESIDENT
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Non-Participating Variable life insurance payable upon death of the Insured.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy.
Flexible premiums payable to when the Insured reaches Age 100.
Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages as shown in the Policy
Specifications.
LN680
<PAGE>
TABLE OF CONTENTS
PAGE
Policy Specifications ....................................................... 3
Schedule 1: Surrender Charges ............................................... 5
Schedule 2: Expense Charges and Fees ........................................ 6
Schedule 3: Table of Guaranteed Maximum Cost of Insurance Rates Per $1,000 .. 7
Schedule 4: Corridor Percentages Table ...................................... 8
Definitions ................................................................. 9
Premium and Reinstatement Provisions ........................................ 11
Ownership, Assignment and Beneficiary Provisions ............................ 12
Variable Account Provisions ................................................. 13
Policy Values Provisions .................................................... 14
Transfer Privilege Provision ................................................ 16
Nonforfeiture and Surrender Value Provisions ................................ 17
Loan Provisions ............................................................. 18
Insurance Coverage Provisions ............................................... 19
General Provisions .......................................................... 21
Followed by Optional Methods of Settlement and Any Riders
*Page 4 is intentionally "blank."
LN680 2
<PAGE>
POLICY SPECIFICATIONS
Policy Number SPECIMEN
Insured JOHN DOE
Initial Specified Amount $100,000 Date of Issue OCTOBER 15, 1999
Minimum Specified Amount $100,000 Issue Age 35
Monthly Anniversary Day 15 Premium Class STANDARD
LN660 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
BENEFIT AMOUNT: See Initial Specified Amount
DEATH BENEFIT OPTION: Death Benefit Option is 1. (See INSURANCE COVERAGE
PROVISIONS.)
PREMIUM PAYMENTS: Initial premium paid with application $715.00
Planned Premium $715.00
Additional premium payments may vary by frequency or
amount.
PAYMENT MODE: ANNUALLY
NO LAPSE PREMIUM: A payment of at least $52.61 is due as of the Date of
Issue and each Monthly Anniversary Day during the first
10 policy years thereafter to guarantee the policy will
not lapse during those years. All or a portion of the
remaining monthly premiums can be paid in advance at any
time. (For example, 12 times this amount could be paid
at the beginning of a Policy Year to satisfy the
requirements for that Policy Year. The No Lapse
Provision applies to the first 10 Policy Years only.
See PREMIUM AND REINSTATEMENT PROVISIONS, NO LAPSE
PROVISION.)
NOTE: Except during years when the No Lapse Provision is in effect, the policy
will terminate before the Insured reaches Age 100 if the actual premiums
paid and investment experience are insufficient to continue coverage to
such a date.
LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS: All allocations of Net Premium
Payments must be made in whole percentages and in aggregate must total 100%.
Premium Payments will be allocated net of the Premium Load specified in SCHEDULE
2.
LIMITS ON TRANSFERS FROM THE FIXED ACCOUNT: Transfers from the Fixed Account
shall be made only within the 30 day period after an anniversary of the Date of
Issue. The amount of all such transfers in any such 30 day period shall not
exceed 20% of the Fixed Account Value as of the immediately preceding
anniversary of the Date of Issue. Lincoln Life may limit the dollar amount of
such transfers. (SEE TRANSFER PRIVILEGE PROVISION.)
LN680 3
<PAGE>
POLICY SPECIFICATIONS
Policy Number SPECIMEN
Insured JOHN DOE
Initial Specified Amount $100,000 Date of Issue OCTOBER 15, 1999
Minimum Specified Amount $100,000 Issue Age 35
Monthly Anniversary Day 15 Premium Class STANDARD
OWNER
The Insured
BENEFICIARY
Jane Doe, Wife, if surviving the Insured
LN680 3A-1 of 1
<PAGE>
THIS PAGE INTENTIONALLY BLANK
<PAGE>
SCHEDULE 1: SURRENDER CHARGES
The charge assessed upon full surrender of the policy will be the lesser of the
Surrender Charge shown of the then current Net Accumulation Value. Upon either a
partial surrender or a decrease in Specified Amount, no surrender charge is
applied. An additional surrender charge table will apply to each increase in
Specified Amount permitted by Lincoln Life. The additional table will apply as
of the date of the increase.
<TABLE>
<CAPTION>
SURRENDER CHARGE AS OF
POLICY YEAR BEGINNING OF POLICY YEAR
----------- ------------------------
<S> <C>
1 $2,450.60
2 $2,367.70
3 $2,281.60
4 $2,192.20
5 $2,099.50
6 $2,003.10
7 $1,903.10
8 $1,799.30
9 $1,691.40
10 $1,579.40
11 $1,462.80
12 $1,341.50
13 $1,215.20
14 $1,083.80
15 $946.70
16 and thereafter $0.00
</TABLE>
The procedures for full and partial surrenders and the imposition of surrender
charges for full surrenders are described in greater detail in NONFORFEITURE AND
SURRENDER VALUE PROVISIONS.
A transaction fee of the lesser of $25 or 2% of the amount surrendered is
assessed for each partial surrender and will be processed as set forth in
NONFORFEITURE AND SURRENDER VALUE PROVISIONS, PARTIAL SURRENDER.
LN680 5
<PAGE>
SCHEDULE 2: EXPENSE CHARGES AND FEES
PREMIUM LOAD. Lincoln Life will deduct a Premium Load of 5.0% from each premium
payment.
MONTHLY ADMINISTRATIVE FEE. A Monthly Deduction is made on each Monthly
Anniversary Day from the Net Accumulation Value. (See POLICY VALUES
PROVISIONS. MONTHLY DEDUCTION.) The Monthly Deduction includes an
administrative fee charge, Cost of Insurance charges and any charges for
supplemental riders or optional benefits.
The monthly administrative fee consists of; (a) a fee of $10.00 per month during
each Policy Year; (b) a monthly charge per $1,000 of Initial Specified Amount
for the first 24 months from the Date of Issue, and (c) a monthly charge per
$1,000 for any increase in Specified Amount for the 24 months following the date
of increase. The charge(s) described in (b) and (c) will be determined using the
table below and will be based on the Insured's Age at the Date of Issue and at
the date of any increase in Specified Amount.
CHARGES AND FEES ASSOCIATED WITH THE VARIABLE SUB-ACCOUNTS. Lincoln Life
imposes a mortality and expense risk ("M&E") charge, which is calculated as a
percentage of the value of the Variable Sub-Accounts. The M&E charge is
deducted from each Variable Sub-Account at the end of each Valuation Period.
This charge is equal to an annual rate of .90% of a Variable Sub-Account's
value during Policy Years 1 through 19, and .20% during the 20th and later
Policy Years.
Fund operating expenses may be deducted by each Fund as set forth in its
prospectus.
TRANSFER FEE. A transaction fee of $25 may be applied by Lincoln Life to each
transfer request in excess of 12 made during any Policy Year. A single transfer
request, either in Writing or by telephone, may consist of multiple
transactions.
<TABLE>
<CAPTION>
EXPENSE EXPENSE EXPENSE
CHARGE CHARGE CHARGE
AGE PER $1,000 AGE PER $1,000 AGE PER $1,000
- ------------------------ ------------------------ -----------------------
<S> <C> <C> <C> <C> <C>
0-12 0.0158 46 0.0950 65 0.2158
13 0.0200 47 0.0992 66 0.2242
14 O.0242 48 0.1033 67 0.2325
15-30 0.0283 49 0.1075 68 0.2408
- ------------------------ ------------------------ -----------------------
31 0.0325 50 0.1117 69 0.2492
32 0.0367 51 0.1158 70 0.2575
33 0.0408 52 0.1200 71 0.2658
34 0.0450 53 0.1242 72 0.2742
35 0.0492 54 0.1283 73 0.2825
- ------------------------ ------------------------ -----------------------
36 0.0533 55 0.1325 74 0.2908
37 0.0575 56 0.1408 75 0.2992
38 0.0617 57 0.1492 76 0.3200
39 0.0658 58 0.1575 77 0.3408
40 0.0700 59 0.1658 78 0.3617
- ------------------------ ------------------------ -----------------------
41 0.0742 60 0.1742 79 0.3825
42 0.0783 61 0.1825 80 0.4033
43 0.0825 62 0.1908 81+ 0.4242
44 0.0867 63 0.1992
45 0.0908 64 0.2075
- ------------------------ ------------------------ -----------------------
</TABLE>
6
<PAGE>
SCHEDULE 3: TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(MONTHLY RATES PER $1,000 OF NET AMOUNT AT RISK)
SPECIAL NOTE: The monthly Cost of Insurance Rate charged under the policy
varies based on the sex, Age, duration and premium class of
the person insured, but will not exceed the rates shown in the
table below. However, In determining the Guaranteed Maximum
Cost of Insurance Rates, Lincoln Life will add to the rates
below the amount of the Flat Extra Monthly Insurance Cost, if
any, shown in the POLICY SPECIFICATIONS. If the person insured
is in a rated premium class, the Guaranteed Maximum Cost of
Insurance Rates will be those in the table multiplied by the
Risk Factor, if any, shown In the POLICY SPECIFICATIONS. The
rates below are based on the 1980 CSO Tables (Male or Female as
appropriate).
<TABLE>
<CAPTION>
MALE FEMALE MALE FEMALE MALE FEMALE
MONTHLY MONTHLY MONTHLY MONTHLY MONTHLY MONTHLY
AGE RATE RATE AGE RATE RATE AGE RATE RATE
- -------------------------------- --------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.34845 0.24089 35 0.17586 0.13752 70 3.30338 1.84590
1 0.08917 0.07251 36 0.18670 0.14669 71 3.62140 2.02325
2 0.08251 0.06750 37 0.20004 0.15752 72 3.98666 2.24419
3 0.08167 0.06584 38 0.21505 0.17003 73 4.40599 2.51548
4 0.07917 0.06417 39 0.23255 0.18503 74 4.87280 2.83552
- -------------------------------- --------------------------------- ----------------------------
5 0.07501 0.06334 40 0.25173 0.20171 75 5.37793 3.19685
6 0.07167 0.06084 41 0.27424 0.22005 76 5.91225 3.59370
7 0.06667 0.06000 42 0.29675 0.23922 77 6.46824 4.01942
8 0.06334 0.05834 43 0.32260 0.25757 78 7.04089 4.47410
9 0.06167 0.05750 44 0.34929 0.27674 79 7.64551 4.97042
- -------------------------------- --------------------------------- ----------------------------
10 0.06084 0.05667 45 0.37931 0.29675 80 8.30507 5.52957
11 0.06417 0.05750 46 0.41017 0.31677 81 9.03761 6.17118
12 0.07084 0.06000 47 0.44353 0.33761 82 9.86724 6.91414
13 0.08251 0.06250 48 0.47856 0.36096 83 10.80381 7.77075
14 0.09584 0.06667 49 0.51777 0.38598 84 11.82571 8.72632
- -------------------------------- --------------------------------- ----------------------------
15 0.11085 0.07084 50 0.55948 0.41350 85 12.91039 9.76952
16 0.12585 0.07501 51 0.60870 0.44270 86 14.03509 10.89151
17 0.13919 0.07917 52 0.66377 0.47523 87 15.18976 12.08770
18 0.14836 0.08167 53 0.72636 0.51276 88 16.36948 13.35774
19 0.15502 0.08501 54 0.79730 0.55114 89 17.57781 14.70820
- -------------------------------- --------------------------------- ----------------------------
20 0.15836 0.08751 55 0.87326 0.59118 90 18.82881 16.15259
21 0.15919 0.08917 56 0.95591 0.63123 91 20.14619 17.71416
22 0.15752 0.09084 57 1.04192 0.66961 92 21.57655 19.43814
23 0.15502 0.09251 58 1.13378 0.70633 93 23.20196 21.40786
24 0.15169 0.09501 59 1.23235 0.74556 94 25.28174 23.83051
- -------------------------------- --------------------------------- ----------------------------
25 0.14752 0.09668 60 1.34180 0.78979 95 28.27411 27.16158
26 0.14419 0.09918 61 1.46381 0.84488 96 33.10677 32.32378
27 0.14252 0.10168 62 1.60173 0.91417 97 41.68475 41.21204
28 0.14169 0.10501 63 1.75809 1.00267 98 58.01259 57.81394
29 0.14252 0.10835 64 1.93206 1.10539 99 83.33333 83.33333
- -------------------------------- --------------------------------- ----------------------------
30 0.14419 0.11251 65 2.12283 1.21731
31 0.14836 0.11668 66 2.32623 1.33511
32 0.15252 0.12085 67 2.54312 1.45461
33 0.15919 0.12502 68 2.77350 1.57247
34 0.16669 0.13168 69 3.02328 1.69955
- -------------------------------- ---------------------------------
</TABLE>
7
<PAGE>
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE
As of the Date of Issue of this policy the formula In effect to determine the
amount under item (ii) of INSURANCE COVERAGE PROVISIONS: DEATH BENEFIT PROCEEDS
is based on a percent of the Accumulation Value as determined from the following
table:
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE
- ----------- ---------- --------- ----------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
- ----------- ---------- --------- ----------
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
- ----------- ---------- --------- ----------
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
- ----------- ---------- --------- ----------
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
- ----------- ---------- --------- ----------
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
- ----------- ---------- --------- ----------
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
- ----------- ---------- --------- ----------
</TABLE>
8
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The sum of (i) the Fixed Account value, (II) the Variable
Account value, and (iii) the Loan Account value under the policy.
ADMINISTRATOR MAILING ADDRESS. The Administrator Mailing Address for the policy
is indicated on the front cover.
AGE. The age of the Insured at her or his nearest birthday.
COST OF INSURANCE. See POLICY VALUES PROVISIONS, COST OF INSURANCE.
COST OF INSURANCE RATES. This term is defined in SCHEDULE 3.
DATE OF ISSUE. The date from which Policy Years, Policy Anniversaries, and Age
are determined. The Date of Issue is shown in the POLICY SPECIFICATIONS.
DEATH BENEFIT PROCEEDS. The amount payable to the Beneficiary upon death of the
Insured In accordance with (a) the Death Benefit Option elected, and (b) GENERAL
PROVISIONS, PAYMENT OF PROCEEDS. The two Death Benefit Options are described in
INSURANCE COVERAGE PROVISIONS, DEATH BENEFIT OPTIONS.
DUE PROOF OF DEATH. 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 of death satisfactory to Lincoln Life.
FIXED ACCOUNT. The account under which principal is guaranteed and interest is
credited at a rate of not less than 4% per year. (See POLICY VALUES PROVISION,
INTEREST CREDITED UNDER FIXED ACCOUNT.) Fixed Account assets are general assets
of Lincoln Life and are held in Lincoln Life's general account.
FUND(S). The Funds in the Variable Sub-Account portfolios to which the Owner may
allocate Net Premium Payments or transfer and in THE SHARES OF which such
allocations shall be invested. Each Fund is an open-end management investment
company registered under the 1940 Act.
GRACE PERIOD. See PREMIUM AND REINSTATEMENT PROVISIONS, GRACE PERIOD.
IN WRITING. With respect to any notice to Lincoln Life, this term means a
written form satisfactory to Lincoln Life and received by it at the
Administrator Mailing Address. With respect to any notice by Lincoln Life to the
Owner, any assignee or other person, this term means written notice by ordinary
mail to such person at the most recent address in Lincoln Life's records.
LOAN ACCOUNT. The account in which policy indebtedness (outstanding loans and
interest) accrues once it is transferred out of the Fixed and/or Variable
Sub-Accounts. The Loan Account is part of Lincoln Life's general account.
MONTHLY ANNIVERSARY DAY. The Day of the month, as shown in the POLICY
SPECIFICATIONS, when Lincoln Life makes the Monthly Deduction, or the next
Valuation Day if that day is not a Valuation Day or is nonexistent for that
month.
9
<PAGE>
DEFINITIONS (CONTINUED)
MONTHLY DEDUCTION. The Monthly Deduction is made from the Net Accumulation
Value; this deduction includes the Cost of Insurance, an administrative expense
charge and charges for supplemental riders or benefits, if applicable. (See
POLICY VALUES PROVISIONS, MONTHLY DEDUCTION.) The first Monthly Deduction is
made as of the Date of Issue. Monthly Deductions occur thereafter on each
Monthly Anniversary Day.
MORTALITY AND EXPENSE RISK (M&E) RATE. A daily rate assessed by Lincoln Life as
a percentage of the value of the Variable Sub-Accounts for its assumption of
mortality and expense risks. The M&E Rate is specified in SCHEDULE 2.
NET ACCUMULATION VALUE. The Accumulation Value less the Loan Account Value.
NET PREMIUM PAYMENT. The portion of a premium payment, after deduction of the
Premium Load as specified in SCHEDULE 2, available for allocation to the Fixed
and/or Variable Sub-Accounts.
1940 ACT. The Investment Company Act of 1940, as amended.
NO LAPSE PREMIUM. The premium required to be paid to guarantee the policy will
not lapse during the first 10 policy years. (See PREMIUM AND REINSTATEMENT
PROVISIONS. NO LAPSE PROVISION.)
NYSE. New York Stock Exchange.
POLICY ANNIVERSARY. The day of the year the policy was issued, or the next
Valuation Day if that day is not a Valuation Day or is nonexistent for that
year.
POLICY YEAR. Each twelve-month period, beginning on the Date of Issue, during
which the policy is in effect.
RIGHT-TO-EXAMINE PERIOD. See RIGHT TO EXAMINE THE POLICY, on the Cover of the
policy.
SEC. The Securities and Exchange Commission.
SPECIFIED AMOUNT. The Specified Amount is shown in the Policy Specifications or
in subsequent Policy Specifications, if later changed. The Specified Amount is
chosen by the Owner and used in determining the amount of the Death Benefit
Proceeds. It may be increased or decreased as described in INSURANCE COVERAGE
PROVISIONS; CHANGES IN SPECIFIED AMOUNT AND DEATH BENEFIT OPTIONS.
SUB-ACCOUNT. The Investment options available under this policy, including
Variable Sub-Accounts and the Fixed Account.
SURRENDER VALUE. See NONFORFEITURE AND SURRENDER VALUE PROVISIONS. SURRENDER
VALUE.
VALUATION DAY. Any day on which the NYSE is open for business, except a day
during which trading on the NYSE is restricted or on which an SEC-determined
emergency exists or on which the valuation or disposal of securities is not
reasonably practicable, as determined under applicable law.
VALUATION PERIOD. The period beginning immediately after the close of business
on a Valuation Day and ending at the close of business on the next Valuation
Day.
10
<PAGE>
DEFINITIONS (CONTINUED)
VARIABLE LIFE ACCOUNT M. The Lincoln Life Flexible Premium Variable Life
Account consisting of all Variable Sub-Account(s) invested in shares of the
Fund(s). Variable Account assets are separate account assets of Lincoln Life,
the Investment performance of which is kept separate from that of the general
assets of Lincoln Life. Variable Account assets are not chargeable with the
general liabilities of Lincoln Life.
VARIABLE ACCUMULATION UNIT. A unit of measure used to calculate the value of
a Variable Sub-Account.
PREMIUM AND REINSTATEMENT PROVISIONS
PREMIUMS. The initial premium must be paid for coverage to be effective (see
INSURANCE COVERAGE PROVISIONS, DATE OF COVERAGE). Additional premium may be
paid, with the consent of Lincoln Life and subject to the requirements under
ADDITIONAL PREMIUMS, at any time before the insured reaches Age 100. There is
no minimum premium requirement. However, except as provided under the NO
LAPSE PROVISION, the policy will lapse subject to the terms set forth in the
GRACE PERIOD if the Net Accumulation Value is insufficient to pay a Monthly
Deduction.
PAYMENT OF PREMIUM. The initial premium is payable at the Administrator
Mailing Address or to an authorized representative of Lincoln Life. All
subsequent premium payments are payable at the Administrator Mailing Address.
PLANNED PREMIUM. If the Owner chooses to make periodic premium payments,
Lincoln Life shall send premium reminder notices In Writing for the amounts
and with the frequency elected by the Owner. Changes in the amounts or
frequency of such payments will be subject to the consent of Lincoln Life.
ADDITIONAL PREMIUM. In addition to any planned premium, it is possible to
make additional premium payments of no less than $100 at any time before the
Insured reaches Age 100. Lincoln Life reserves the right to limit the amount
or frequency of any such additional premium payments. If a payment of any
additional premium would increase the difference between the Death Benefit
Proceeds and the Accumulation Value, Lincoln Life may reject the additional
premium payment unless satisfactory evidence of insurability is furnished to
Lincoln Life. If a payment of additional premium would cause the policy to
cease to qualify as insurance for federal income tax purposes, Lincoln Life
may reject all or such excess portion of the additional premium. Any
additional payment received by Lincoln Life shall be applied to repay any
outstanding loans and to that extent shall not be treated as premium, unless
Lincoln Life is specifically instructed otherwise In Writing by the Owner.
ALLOCATION OF NET PREMIUM PAYMENTS. Net Premium Payments may be allocated to
the Fixed and/or Variable Sub-Accounts under the policy subject to POLICY
SPECIFICATIONS, LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS. All Net Premium
Payments received before the end of the Right-to-Examine Period shall be
allocated upon the expiration of the Right-to-Examine Period in accordance
with the allocation percentages specified in the application. Subsequent Net
Premium Payments shall be allocated on the same basis as the most recent Net
Premium Payment unless Lincoln Life is otherwise instructed In Writing.
LN680 11
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
NO LAPSE PROVISION. If elected on the application, this policy includes a No
Lapse Provision during the first 10 policy years. The No Lapse Premium due on
or before each Monthly Anniversary Day is specified in the POLICY
SPECIFICATIONS. As long as the sum of all premium payments less any
indebtedness and partial surrenders is at least equal to the sum of the No
Lapse Premiums due since the Date of Issue, the policy will not lapse during
those years even if the Net Accumulation Value is insufficient to meet the
Monthly Deductions.
A period of 61 days will be granted for payment of the No Lapse Premium if on
any Monthly Anniversary Day it is determined that the No Lapse Premium
requirement has not been met. At least 31 days before the end of that period,
Lincoln Life will notify the Owner of the amount of premium necessary to
maintain the No Lapse Provision.
The No Lapse Provision will terminate at the beginning of the 11th Policy Year,
or sooner if (a) the No Lapse Premium requirements are not met, (b) there is
an increase in the Specified Amount, or (c) there is a change in the Death
Benefit Option. Once the No Lapse Provision is terminated, it cannot be
reinstated. The No Lapse Provision applies for the first 10 policy years only.
Continuing to pay the No Lapse Premium amount beyond the expiration of the no
Lapse Provision does not guarantee that the policy will not lapse.
GRACE PERIOD. Except as provided under the NO LAPSE PROVISION. If on any
Monthly Anniversary Day the Net Accumulation Value is insufficient to cover
the current Monthly Deduction, or if the amount of indebtedness exceeds the
Accumulation Value less the surrender charge(s), Lincoln Life shall send a
notice In Writing to the Owner and any assignee of record. Such notice shall
state the amount which must be paid to avoid termination. The Net Premium
Payment due will be at least equal to (a) the amount by which the Monthly
Deduction Amount exceeds the Net Accumulation Value, or (b) the amount by
which the indebtedness exceeds the Accumulation Value less the surrender
charge(s), and (c) enough additional premium to maintain the policy in force
for at least two months.
If the amounts set forth in the notice are not paid to Lincoln Life on or
before the day that is the later of (a) 31 days after the date of mailing of
the notice, and (b) 61 days after the Monthly Anniversary Day with respect to
which such notice applies (together, the "Grace Period"), then the policy
shall terminate. All coverage under the policy will then lapse without value.
REINSTATEMENT. After the policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace Period, the policy
may be reinstated provided (a) the policy has not been surrendered, (b) there
is an application for reinstatement In Writing, (c) satisfactory evidence of
insurability is furnished to Lincoln Life, (d) enough premium is paid to keep
the policy in force for at least 2 months, and (e) any accrued loan interest
is paid. The reinstated policy shall be effective as of the Monthly
Anniversary Day after the date on which Lincoln Life approves the application
for reinstatement. The surrender charges set forth in SCHEDULE 1 will be
reinstated as of the Policy Year in which the policy lapsed.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
OWNER. The Owner on the Date of Issue will be the person designated in the
POLICY SPECIFICATIONS. If no person is designated as Owner, the insured will
be the Owner.
RIGHTS OF OWNER. While the insured is alive except as provided below and
subject to any applicable state law, the Owner may exercise all rights and
privileges under the policy including the right to: (a) release or surrender
the policy to Lincoln Life, (b) agree with Lincoln Life to any change in or
amendment to the policy, (c) transfer all rights and privileges to another
person, (d) change the Beneficiary, and (e) assign the policy.
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OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS (CONTINUED)
The Owner may exercise any rights and privileges under the policy without the
consent, subject to any applicable state law, of any designated Beneficiary if
the Owner has reserved the right to change the Benecificiary. If there is an
assignment of the policy recorded with Lincoln Life, the Owner may exercise the
rights and privileges under the policy only with the consent of the recorded
assignee.
Unless provided otherwise, if the Owner is a person other then the Insured and
dies before the Insured, all of the rights and privileges of the owner under the
policy shag vast in the Owner's executors, administrators or assigns.
TRANSFER OF OWNERSHIP. The Owner may transfer all rights and privileges of
the Owner. On the date of transfer, the transferee shall become the Owner
and shall have all the rights and privileges of the Owner. The Owner may
revoke any transfer before the date of transfer.
A transfer, or a revocation of transfer, shall be In Writing and shall take
effect the later of the date of transfer specified by the Owner or the date it
is recorded by Lincoln Life, and any payment made or any action taken or allowed
by Lincoln Life before such time in reliance on the recorded ownership of the
policy shall be without prejudice to Lincoln Life.
Unless otherwise directed by the Owner, with the consent of any assignee
recorded with Lincoln Life, a transfer shall not effect the interest of any
Beneficiary designated before the date of transfer.
ASSIGNMENT. Assignment of the policy shall be In Writing and shall be
effective when Lincoln Life receives it. Lincoln Life shall not be
responsible for the validity or sufficiency of any assignment. An assignment
of the policy shall remain effective only so long as the assignment remains
in force. If an assignment so provides, it shall transfer the interest of
any designated transferee or of any Beneficiary if the Owner has reserved the
right to change the Beneficiary.
BENEFICIARY. The Beneficiary on the Date of Issue shall be the person
designated in the POLICY SPECIFICATIONS. Unless provided otherwise, the
interest of any Beneficiary who dies before the Insured shall vest in the
Owner or the Owner's executors, administrators or assigns.
CHANGE OF BENEFICIARY. The Beneficiary may be changed from time to time. Unless
provided otherwise, the right to change the Beneficiary is reserved to the
Owner. A request for change of Beneficiary shall be In Writing, signed by the
Owner and, if the right to change the Beneficiary has not been reserved to the
Owner, signed by the existing Beneficiary. A change of Beneficiary shall be
effective, retroactive to the date of request, only when the change recorded by
Lincoln Life, and any payment made or any action taken or allowed by Lincoln
Life before such time in reliance on its records as to the identity of the
Beneficiary shall be without prejudice to Lincoln Life.
VARIABLE ACCOUNT PROVISIONS
VARIABLE ACCOUNT AND VARIABLE SUB-ACCOUNTS. Assets invested on a variable
basis are hold in the separate account ("Variable Account") which is
designated in the Definitions provision of the policy. The separate account
was established by a resolution of Lincoln Life's Board of Directors as a
"separate account" under the insurance law of the State of Indiana, Lincoln
Life's state of domicile and is registered as a unit investment trust under
the 1940 Act. The assets of the Variable Account (except assets in excess of
the reserves and other contract liabilities of the Variable Account) shall
not be chargeable with liabilities arising out of any other business
conducted by Lincoln Life and the income, gains or losses from the Variable
Account assets shall be credited or charged against the Variable Account
without regard to the income, gains or losses of Lincoln Life. The Variable
Account assets are owned and controlled exclusively by Lincoln Life, and
Lincoln Life is not a trustee with respect to such assets.
LN680 13
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VARIABLE ACCOUNT PROVISIONS (CONTINUED)
The Variable Account is divided into Variable Sub-Accounts. The assets of
each Variable Sub-Account shall be invested fully and exclusively in shares
of the appropriate Fund for such Variable Sub-Account. The investment
performance of each Variable Sub-Account shall reflect the investment
performance of the appropriate Fund. For each Variable Sub-Account, Lincoln
Life shall maintain Variable Accumulation Units as a measure of the
investment performance of the Fund shares held in such Variable Sub-Account.
Subject to any vote by persons entitled to vote thereon under the 1940 Act,
Lincoln Life may elect to operate the Variable Account as a management
company instead of a unit investment trust under the 1940 Act or, if
registration under the 1940 Act is no longer required, to deregister the
Variable Account. In the event of such a change, Lincoln Life shall endorse
the policy to reflect the change and may take any other necessary or
appropriate action required to effect the change. Any changes in the
investment policies of the Variable Account shall first be approved by the
Indiana Insurance Commissioner and approved or filed, as required, in any
other state or other jurisdiction where the policy was issued.
INVESTMENTS OF THE VARIABLE SUB-ACCOUNTS. All amounts allocated or
transferred to a Variable Sub-Account will be used to purchase shares of the
appropriate Fund. Each Fund shall at all times be registered under the 1940
Act as an open-end management investment company. The Funds available for
investment and for which Variable Sub-Accounts have been established as of
the Date of Issue are listed in the application for the policy. Lincoln
Life, after due consideration of appropriate factors, may add additional
Funds at any time or may eliminate or substitute Funds in accordance with
FUND WITHDRAWAL AND SUBSTITUTED SECURITIES. Any and all distributions made
by a Fund will be reinvested in additional shares of that Fund at net asset
value. Deductions by Lincoln Life from a Variable Sub-Account will be made
by redeeming a number of Fund shares at net asset value equal in total value
to the amount to be deducted.
INVESTMENT RISK. Fund share values fluctuate, reflecting the risks of
changing economic conditions and the ability of a Fund's investment adviser
or sub-adviser to manage that Fund and anticipate changes in economic
conditions. As to the Variable Account assets, the Owner bears the entire
investment risk of gain or loss.
FUND WITHDRAWAL AND SUBSTITUTED SECURITIES. If a particular Fund ceases to be
available for investment by the Variable Account, or Lincoln Life determines
that further investment in the particular Fund is not appropriate in view of
the purposes of the Variable Account (including without limitation that it is
not appropriate in light of legal, regulatory or federal income tax
considerations), Lincoln Life may withdraw the particular Fund as a possible
investment in the Variable Account and may substitute shares of a new or
different Fund for shares of the withdrawn Fund. Lincoln Life shall obtain
any necessary regulatory or other approvals. Lincoln Life may make
appropriate endorsements to the policy to the extent reasonably required
to reflect any withdrawal or substitution.
POLICY VALUES PROVISIONS
ACCUMULATION VALUE. The Accumulation Value equals the sum of (i) the Fixed
Account value, (ii) the Variable Account value, and (iii) the Loan Account
value. At any point in time, therefore, the Accumulation Value reflects (a)
Net Premium Payments made, (b) the amount of any partial surrenders, (c) any
increases or decreases as a result of market performance in the Variable
Sub-Accounts, (d) interest credited under the Fixed Account, (e) interest
credited under the Loan Account, and (f) all expenses and fees as specified
under SCHEDULE 2.
LN680 14
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POLICY VALUES PROVISIONS (CONTINUED)
FIXED ACCOUNT VALUE. The Fixed Account value, if any, with respect to the
policy, at any point in time, is equal to the sum of the Net Premium Payments
allocated or other amounts (net of any charges) transferred to the Fixed
Account plus interest credited to such account less the portion of the
Monthly Deductions applied to the Fixed Account and less any partial
surrenders or amounts transferred from the Fixed Account.
INTEREST CREDITED UNDER FIXED ACCOUNT. Lincoln Life will credit interest to
the Fixed Account daily. The interest rate applied to the fixed account will
be the greater of; (a) a compounded daily rate of 0.010746% (equivalent to a
compounded annual rate of 4%), or (b) a rate determined by Lincoln Life from
time to time. Such rate will be established on a prospective basis.
LOAN ACCOUNT VALUE. The Loan Account value, if any, with respect to the policy,
is the amount of any outstanding loan(s), including any interest charged on the
loan(s). (SEE LOAN PROVISIONS, LOAN ACCOUNT.)
INTEREST RATE CREDITED ON LOAN ACCOUNT VALUE. The annual rate at which
interest is credited on the Loan Account Value will be 7%.
VARIABLE ACCOUNT VALUE. The Variable Account value, if any, with respect to
the policy, for any Valuation Period is equal to the sum of the then stated
values of all Variable Sub-Accounts under the policy. The stated value of
each Variable Sub-Account is determined by multiplying the number of Variable
Accumulation Units, if any, credited or debited to such Variable Sub-Account
with respect to the policy by the Variable Accumulation Unit Value of the
particular Variable Sub-Account for such Valuation Period.
VARIABLE ACCUMULATION UNIT VALUE. Net Premium Payments, or portions thereof,
allocated, or amounts transferred, to each Variable Sub-Account are converted
into Variable Accumulation Units. The Variable Accumulation Unit value for a
Variable Sub-Account for any Valuation Period after the inception of the
Variable Sub-Account is determined as follows:
1. The total value of Fund shares held in the Variable Sub-Account is
calculated by multiplying the number of Fund shares owned by the Variable
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 Variable Sub-Account at the end of the Valuation
Period; such liabilities include daily charges imposed on the Variable
Sub-Account and may include a charge or credit with respect to any taxes
paid or reserved for by Lincoln Life that Lincoln Life determines result
from the operations of the Variable Account; and
3. The result of (1) minus (2) is divided by the number of Variable
Accumulation Units for that Variable Sub-Account outstanding at the
beginning of the Valuation Period.
The daily charges imposed on a Variable Sub-Account for any Valuation Period are
equal to the M&E charge multiplied by the number of calendar days in the
Valuation Period.
The Variable Accumulation Unit Value may increase or decrease from Valuation
Period to Valuation Period.
LN680 15
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POLICY VALUES PROVISIONS (CONTINUED)
COST OF INSURANCE. The Cost of insurance is determined monthly. Such cost is
calculated as (1), multiplied by the result of (2) minus (3), where:
(1) is the Cost of Insurance Rate as described in COST OF INSURANCE RATES,
(2) is the Death Benefit at the beginning of the policy month, divided by
1.0032737, and
(3) is the Accumulation Value at the beginning of the policy month prior to the
deduction for the monthly Cost of Insurance.
COST OF INSURANCE RATES. The Cost of Insurance Rates are determined from time
to time by Lincoln Life based on its expectations of future mortality and
vary as set forth in SCHEDULE 3. The actuarial formula used to make such
determination has been filed with the insurance supervisory official of the
jurisdiction in which the policy is delivered. Any change in Cost of
Insurance Rates will apply to all individuals of the same class as the
Insured. The Cost of Insurance Rates shall not exceed the amounts described
in SCHEDULE 3.
MONTHLY DEDUCTION. Each month, on the Monthly Anniversary Day, Lincoln Life
will deduct the Monthly Deduction by withdrawing the amount from the Fixed
and Variable Sub-Accounts in proportion to which the balances invested in
such Fixed and Variable Sub-Accounts bear to the Net Accumulation Value as of
the date on which the deduction is made, unless otherwise agreed In Writing
by Lincoln Life and the Owner. The Monthly Deduction for a policy month will
be calculated as Charge (1) plus Charge (2) where:
CHARGE (1) is the Cost of Insurance (as described in COST OF INSURANCE) and the
cost of any supplemental riders or optional benefits, and
CHARGE (2) is the Monthly Administrative Fee as described under SCHEDULE 2,
BASIS OF COMPUTATIONS. The Cost of Insurance Rates are guaranteed to be no
greater than that calculated based on the applicable 1960 Commissioners Standard
Ordinary Mortality Table (Age nearest birthday).
All policy values are at least equal to that required by the jurisdiction in
which the policy is delivered. A detailed statement of the method of computing
values has been filed with the insurance supervisory official of that
jurisdiction.
TRANSFER PRIVILEGE PROVISION
TRANSFER PRIVILEGE. At any time while the policy is in force, other than
during the Right-to-Examine Period, the Owner has the right to transfer
amounts among the Fixed and Variable Sub-Accounts then available under the
policy. All such transfers are subject to the following provisions. Transfers
may be made In Writing, or by telephone if telephone transfers have been
previously authorized In Writing. Transfer requests must be received at the
Administrator Mailing Address prior to the time of day set forth in the
prospectus and provided the NYSE is open for business, in order to be
processed as of the close of business on the date the request is received;
otherwise, the transfer will be processed on the next business day the NYSE
is open for business. Lincoln Life shall not be responsible for (a) any
liability for acting in good faith upon any transfer instructions given by
telephone, or (b) the authenticity of such instructions. A single transfer
request, either In Writing or by telephone, may consist of multiple
transactions.
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TRANSFER PRIVILEGE PROVISION (CONTINUED)
Transfers from the Fixed Account are subject to the POLICY SPECIFICATIONS,
LIMITS ON TRANSFERS. Transfers to the Fixed Account will earn interest as
specified under POLICY VALUES PROVISIONS, INTEREST CREDITED UNDER FIXED
ACCOUNT. Transfers involving Variable Sub-Accounts will reflect the purchase
or cancellation of Variable Accumulation Units having an aggregate value
equal to the dollar amount being transferred to or from a particular Variable
Sub-Account. The purchase or cancellation of such units shall be made using
Variable Accumulation Unit values of the applicable Variable Sub-Account for
the Valuation Period during which the transfer is effective.
Unless otherwise changed by Lincoln Life to be less restrictive, transfers
shall be subject to the following conditions: (a) Up to 12 transfer requests
may be made during any Policy Year without charge, however, for each transfer
request in excess of 12, a transfer fee as set forth in SCHEDULE 2 may be
deducted on a pro-rata basis from the Fixed and/or Variable Sub-Accounts from
which the transfer is being made; (b) The amount being transferred may not be
less than $50 unless the entire value of the Fixed or Variable Sub-Account is
being transferred; (c) The amount being transferred may not exceed Lincoln
Life's maximum amount limit then in affect; (d) Transfers among the Variable
Sub-Accounts or from a Variable Sub-Account to the Fixed Account can be made
at any time; (e) Transfers involving Variable Sub-Account(s) shall be subject
to such additional terms and conditions as may be Imposed by the Funds; and
(f) Any value remaining in the Fixed or a Variable Sub-Account following a
transfer may not be less then $100.
NONFORFEITURE AND SURRENDER VALUE PROVISIONS
SURRENDER. Surrender of the policy is effective on the business day of receipt
by Lincoln Life of the policy and a request for surrender in Writing, provided
that at the time of such receipt the policy is in force.
SURRENDER VALUE. The amount payable on surrender of the policy (the "Surrender
Value") shall be the Net Accumulation Value less any accrued loan interest not
yet charged, and less any Surrender Charges as determined under the provision of
SCHEDULE 1.
The Surrender Value shall be paid by Lincoln Life in a lump sum or as provided
under the OPTIONAL METHODS OF SETTLEMENT rider. Any deferment of payments by
Lincoln Life will be subject to GENERAL PROVISIONS, DEFERMENT OF PAYMENTS.
CONTINUATION OF COVERAGE. Unless otherwise agreed to by the Owner and Lincoln
Life, if the Insured is still living at Age 100 and the policy has not lapsed
or been surrendered, the Variable Account value, if any, will be transferred
to the Fixed Account on the next Monthly Anniversary Day after the Insured
becomes Age 100. Lincoln Life will continue to credit interest to the
Accumulation Value as defined in POLICY VALUES PROVISIONS, INTEREST CREDITED
UNDER FIXED ACCOUNT, and no further Monthly Deductions will be made. The
policy will remain in force until it is surrendered or the Death Benefit
Proceeds become payable.
PARTIAL SURRENDER. A partial surrender may be made from the policy on any
Valuation Day in accordance with the following as long as the policy is in
force. A partial surrender must be requested in Writing or, if previously
authorized, by telephone. A partial surrender may only be made if the amount
of the partial surrender, excluding the transaction fee as specified in
SCHEDULE 1, (a) is not less than $500; (b) is not more than 90% of the
Surrender Value of the policy as of the end of the Valuation Period ending on
the Valuation Day on which the request is accepted by Lincoln Life; and (c)
would not cause the Specified Amount to decline below the Minimum Specified
Amount set forth in the POLICY SPECIFICATIONS. The amount of the partial
surrender and the transaction fee shall be withdrawn from the Fixed and/or
Variable Sub-Accounts in proportion to the balances invested in such
Sub-Accounts.
LN680 17
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NONFORFEITURE AND SURRENDER VALUE PROVISIONS (CONTINUED)
Any surrender results in a withdrawal of funds from all of the Fixed and/or
Variable Sub-Accounts which have balances allocated to them. Any surrender
from a Variable Sub-Account will result in the cancellation of Variable
Accumulation Units which have an aggregate value on the date of the surrender
equal to the total amount by which the Variable Sub-Account is reduced. The
cancellation of such units will be based on the Variable Accumulation Unit
value of the Variable Sub-Account determined at the close of the Valuation
Period during which the surrender is effective.
EFFECT OF PARTIAL SURRENDERS ON ACCUMULATION VALUE AND SPECIFIED AMOUNT. As
of the end of the Valuation Day on which there is a partial surrender, (a)
the Accumulation Value shall be reduced by the sum of (i) the amount of the
partial surrender, plus (ii) the transaction fee specified in SCHEDULE 1; and
(b) if DEATH BENEFIT OPTION 1 is in effect, the Specified Amount shall be
reduced by the amount of the partial surrender.
LOAN PROVISIONS
POLICY LOANS. If the policy has Surrender Value, Lincoln Life will grant a
loan against the policy provided: (a) a proper loan agreement is executed and
(b) a satisfactory assignment of the policy to Lincoln Life is made. The loan
may be for any amount up to 100% of the then current Surrender Value;
however, Lincoln Life reserves the right to limit the amount of such loan so
that total indebtedness will not exceed 90% of an amount equal to the then
current Accumulation Value less the surrender charge(s) as set forth under
SCHEDULE 1. The amount borrowed will be paid within seven days of Lincoln
Life's receipt of such request, except as Lincoln Life may be permitted to
defer the payment of amounts as specified under GENERAL PROVISIONS, DEFERMENT
OF PAYMENTS.
The minimum loan amount is $500. Lincoln Life reserves the right to modify
this amount in the future. Lincoln Life will withdraw such loan from the
Fixed and/or Variable Sub-Accounts in proportion to the then current account
values, unless the Owner instructs Lincoln Life otherwise in Writing.
LOAN ACCOUNT. The amount of any loan will be transferred out of the Fixed
and/or Variable Sub-Accounts as described above. Such amount will become part
of the Loan Account Value. The outstanding loan balance at any time includes
accrued interest on the loan.
LOAN REPAYMENT. The outstanding loan balance (i.e. indebtedness) may be
repaid at any time during the lifetime of the insured, however, the minimum
loan repayment is $100 or the amount of the outstanding indebtedness, if
less. The Loan Account will be reduced by the amount of any loan repayment.
Any repayment of indebtedness, other than loan interest, will be allocated to
the Fixed and/or Variable Sub-Accounts in the same proportion in which Net
Premium Payments are currently allocated, unless the Owner and Lincoln Life
agree otherwise in Writing.
INTEREST RATE CHARGED ON LOAN ACCOUNT. Interest charged on the Loan Account
will be at a rate equivalent to 8% per year, payable in arrears.
Interest charged on the Loan Account is payable annually on each Policy
Anniversary or as otherwise agreed in Writing by the Owner and Lincoln Life.
Such loan interest amount, if not paid when due, will be transferred out of
the Fixed and/or Variable Sub-Accounts in proportion to the then current Net
Accumulation Value and into the Loan Account, unless both the Owner and
Lincoln Life agree otherwise.
INDEBTEDNESS. The term "indebtedness" means money which is owed on this
policy due to an outstanding loan and interest accrued thereon but not yet
charged. A loan, whether or not repaid, will have a permanent effect on the
Net Accumulation Value and may have a permanent effect on the Death Benefit
Proceeds. Any indebtedness at time of settlement will reduce the proceeds
payable under the policy. A policy loan reduces the then current Net
Accumulation Value under the policy while repayment of a loan will cause
an increase in the than current Net Accumulation Value.
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LOAN PROVISIONS (CONTINUED)
If at any time the total indebtedness against the policy, including interest
accrued but not due, equals or exceeds the then current Accumulation Value
less any applicable surrender charge(s), a notice will be sent at least 31
days before the end of the grace period to the Owner and to assignees, if
any, that this policy will terminate unless the indebtedness is repaid. The
policy will thereupon terminate without value at the end of the grace period
subject to the conditions in PREMIUM AND REINSTATEMENT PROVISIONS, GRACE
PERIOD.
INSURANCE COVERAGE PROVISIONS
DATE OF COVERAGE. The date of coverage will be the Date of Issue provided the
initial premium has been paid and the policy accepted by the Owner (a) while
the Insured is alive, and (b) prior to any change in health and insurability
as represented In the application.
For any insurance that has been reinstated, the date of coverage will be the
Monthly Anniversary Day that coincides with or next follows the day the
application for reinstatement is approved by Lincoln Life, provided the
Insured is alive on such day. (SEE PREMIUM AND REINVESTMENT PROVISIONS,
REINSTATEMENT.)
TERMINATION OF COVERAGE. All coverage under the policy terminates on the
first to occur of the following:
1. Surrender of the policy;
2. Death of the Insured; or
3. Failure to pay the amount of premium necessary to avoid termination before
the end of any applicable Grace Period.
No action by Lincoln Life after such a termination of the policy, including
any Monthly Deduction made after termination of coverage, shall constitute a
reinstatement of the policy or waiver of the termination. Any such deduction
will be refunded.
DEATH BENEFIT PROCEEDS. If the Insured dies while the policy is in force,
Lincoln Life shall pay Death Benefit Proceeds equal to the sum of the greater
of (i) the amount determined under the Death Benefit Option in effect at the
time of the Insured's death, or (ii) an amount determined by Lincoln Life
equal to that required by the Internal Revenue Code to maintain the contract
as a life insurance policy. (SEE SCHEDULE 4.)
DEATH BENEFIT OPTIONS. Following are the Death Benefit Options available
under the policy:
DEATH BENEFIT OPTION 1:
THE SPECIFIED AMOUNT. The Specified Amount on the date of death, less any
indebtedness and partial surrenders.
DEATH BENEFIT OPTION 2:
SUM OF THE SPECIFIED AMOUNT AND THE ACCUMULATION VALUE. The sum of the
Specified Amount plus the Net Accumulation Value on the date of death,
less loan interest accrued, but not yet charged.
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INSURANCE COVERAGE PROVISIONS (CONTINUED)
Unless DEATH BENEFIT OPTION 2 is elected, the Owner will be deemed to have
elected DEATH BENEFIT OPTION 1.
CHANGES IN SPECIFIED AMOUNT AND DEATH BENEFIT OPTION. Unless provided otherwise,
a change in Specified Amount or Death Benefit Option may be effected any time
while this policy is in force, provided the request for change is In Writing and
filed at the Administrator Mailing Address. All such changes are subject to the
consent of Lincoln Life and the following conditions.
CHANGES IN SPECIFIED AMOUNT:
1. If a decrease in the Specified Amount is requested, the decrease will
become effective on the Monthly Anniversary Day that coincides with or next
follows the receipt of the request provided any requirements, as determined
by Lincoln Life, are met.
In such event, Lincoln Life will reduce the existing Specified Amount
against the most recent increase first, then against the next most recent
increases successively, and finally, against insurance provided under the
original application; however, Lincoln Life reserves the right to limit the
amount of any decrease so that the Specified Amount will not be less than
the Minimum Specified Amount shown in the POLICY SPECIFICATIONS.
2. If an increase in the Specified Amount is requested:
(a) a supplemental application must be submitted and evidence of
insurability of the insured satisfactory to Lincoln Life must be
furnished; and
(b) any other requirements as determined by Lincoln Life must be met.
If Lincoln Life approves the request, the increase will become effective
upon (i) the Monthly Anniversary Day that coincides with or next follows
the date the request is approved by Lincoln Life and (ii) the deduction
from the Accumulation Value (in proportion to the then current account
values of the Fixed and/or Variable Sub-Accounts) of the first month's
Cost of Insurance for the increase, provided the Insured is alive on
such day.
CHANGES IN DEATH BENEFIT OPTION:
1. On a change from DEATH BENEFIT OPTION 1 to DEATH BENEFIT OPTION 2:
The Specified Amount will be reduced by the Accumulation Value as of the
Monthly Anniversary Day that coincides with or next follows the data of
receipt of the request for change.
2. On a change from DEATH BENEFIT OPTION 2 to DEATH BENEFIT OPTION 1:
The Specified Amount will be increased by the Accumulation Value and
the date of the change will be the Monthly Anniversary Day that coincides
with or next follows the date of receipt of the request for change.
Lincoln Life will not allow a decrease in the amount of insurance below the
minimum amount required to maintain this contract as a life insurance policy
under the Internal Revenue Code.
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<PAGE>
GENERAL PROVISIONS
THE POLICY. The policy and the application for the policy constitute the entire
contract between the parties. All statements made in the application shall, in
the absence of fraud, be deemed representations and not warranties. No statement
may be used in defense of a claim under the policy unless it is contained in the
application and a copy of the application is attached to the policy when issued.
Only the President, a Vice President, an Assistant Vice President, a Secretary,
a Director or an Assistant Director of Lincoln Life may execute or modify the
policy.
The policy is executed at the Administrator Mailing Address located on the front
cover of the policy.
NON-PARTICIPATION. The policy is not entitled to share in surplus distribution.
NOTICE OF CLAIM. Due Proof of Death must be furnished to Lincoln Life as soon as
reasonably practicable after the death of the Insured. Such notice shall be
given to Lincoln Life In Writing by or on behalf of the Owner.
PAYMENT OF PROCEEDS. Proceeds, as used in this policy, means the amount payable
(a) upon the surrender of this policy, or (b) upon the Insured's death.
The amount payable upon receipt of due proof of death will be the Death Benefit
Proceeds as of the date of death. (SEE INSURANCE COVERAGE PROVISIONS, DEATH
BENEFIT PROCEEDS.) Death Benefit Proceeds are payable from the Administrator
Mailing Address upon the Insured's death subject to the receipt of Due Proof of
Death and will include interest as required by any applicable state law. If the
death occurs during the GRACE PERIOD, Lincoln Life will pay the Death Benefit
Proceeds for the Death Benefit Option in effect immediately prior to the GRACE
PERIOD, reduced by any overdue monthly deductions.
If the policy is surrendered, the proceeds will be the Surrender Value described
in NONFORFEITURE AND SURRENDER VALUE PROVISIONS.
The proceeds are subject to the further adjustments described in the following
provisions:
1. Misstatement of Age or Sex;
2. Incontestability; and
3. Suicide.
When settlement is made, Lincoln Life may require return of the policy.
DEFERMENT OF PAYMENTS. Any amounts payable as a result of loans, surrender, or
partial surrenders will be paid within 7 days of Lincoln Life's receipt of such
request. However, payment of amounts from the Variable Sub-Accounts may be
postponed when the NYSE is closed or when the SEC declares an emergency.
Additionally, Lincoln Life reserves the right to defer the payment of such
amounts from the Fixed Account for a period not to exceed 6 months from the date
written request is received by Lincoln Life; during any such deferred period,
the amount payable will bear interest as required by law.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Insured is misstated,
Lincoln Life will adjust all benefits to the amounts that would have been
purchased for the correct age and sex according to the basis specified in
SCHEDULE 3.
LN680 21
<PAGE>
GENERAL PROVISIONS (CONTINUED)
SUICIDE. If the Insured commits suicide, within 2 years from the Date of Issue,
the Death Benefit Proceeds will be limited to a refund of premiums paid, less
(a) any Indebtedness against the policy and (b) the amount of any partial
surrenders. If the Insured commits suicide, within 2 years from the date of any
increase in the Specified Amount, the Death Benefit Proceeds with respect to
such 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 limited to the
amount of Death Benefit Proceeds applicable before such increase was made
provided that the increase became effective at least 2 years from the Date of
Issue of the policy.
INCONTESTABILITY. Except for nonpayment of Monthly Deductions, this policy will
be incontestable after it has been in force during the lifetime of the Insured
for 2 years from its Date of Issue. This means that Lincoln Life will not use
any misstatement in the application to challenge a claim or avoid liability
after that time. Any increase in the Specified Amount effective after the Date
of Issue will be incontestable only after such increase has been in force for 2
years during the lifetime of the Insured.
The basis for contesting an increase in Specified Amount will be limited to
material misrepresentations made in the supplemental application for the
increase. The basis for contesting after reinstatement will be (a) limited for a
period of 2 years from the date of reinstatement and (b) limited to material
misrepresentations made in the reinstatement application.
ANNUAL REPORT. Lincoln Life will send a report to the Owner at least once a year
without charge. The report will show the Accumulation Value as of the reporting
date and the amounts deducted from or added to the Accumulation Value since the
last report. The report will also show (a) the current Death Benefit Proceeds,
(b) the current policy values, (c) premiums paid and all deductions made since
the last report, and (d) outstanding policy loans.
PROJECTION OF BENEFITS AND VALUES. Lincoln Life will provide a projection of
illustrative future Death Benefit Proceeds and values to the Owner at any time
upon written request and payment of a service fee, if any.
CHANGE OF PLAN. This policy may be exchanged for another policy only if Lincoln
Life consents to the exchange and all requirements for the exchange as
determined by Lincoln Life are met.
POLICY CHANGES - APPLICABLE LAW. This policy must qualify initially and
continue to qualify as life insurance under the Internal Revenue Code in
order for the Owner to receive the tax treatment accorded to life insurance
under Federal law. Therefore, to maintain this qualification to the maximum
extent permitted by law, Lincoln Life reserves the right to return any premium
payments that would cause this policy to fail to qualify as life insurance
under applicable tax law as interpreted by Lincoln Life. Further, Lincoln
Life reserves the right to make changes in this policy or to make
distributions from the policy to the extent it deems necessary, in its sole
discretion, to continue to qualify this policy as life insurance. Any such
changes will apply uniformly to all policies that are affected. The Owner
will be given advance written notice of such changes.
LN680 22
<PAGE>
OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the policy to which it is attached as of the Date of
Issue. Upon written request, the Company will agree to pay in accordance with
any one of the options shown below all or part of the net proceeds that may be
payable under the policy.
While the Insured is alive, the request, including the designation of the payee,
may be made by the Owner. At the time a Death Benefit becomes payable under the
policy, the request, including the designation of the payee, may then be made by
the Beneficiary. Once Income Payments have begun, the policy cannot be
surrendered and the payee cannot be changed, nor can the settlement option be
changed.
PAYMENT DATES. The first Income Payment under the settlement option selected
will become payable on the date proceeds are settled under the option.
Subsequent payments will be made on the first day of each month in accordance
with the manner of payment selected.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an Income
Payment at least equal to the minimum payment amount in accordance with the
Company's rules then in effect. If at any time payments are less then the
minimum payment amount, the Company has the right to change the frequency to an
interval that will provide the minimum payment amount. If any amount due is
less than the minimum per year, the Company may make other arrangements that are
equitable.
INCOME PAYMENTS. Income Payments will remain constant pursuant to the terms of
the settlement option(s) selected. The amount of each Income Payment shall be
determined in accordance with the terms of the settlement option and the
table(s) set forth in this rider, as applicable. The mortality table used is the
1983 Individual Annuitant Mortality (IAM) Table "a" and 3% interest. In
determining the settlement amount, the settlement age of the payee will be
reduced by one year when the first installment is payable during the 1990's,
reduced by two years when the first installment is payable during the decade
2000-2009, and so on.
FIRST OPTION: LIFE ANNUITY. An annuity payable monthly to the payee during the
lifetime of the payee, ceasing with the last payment due prior to the death of
the payee.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD. An annuity providing monthly
income to the payee for a fixed period of 60, 120, 180, or 240 months (as
selected), and for as long thereafter as the payee shall live.
THIRD OPTION: ANNUITY CERTAIN. An amount payable monthly for the number of years
selected which may be from 5 to 30 years.
FOURTH OPTION: AS A DEPOSIT AT INTEREST. The Company will retain the proceeds
while the payee is alive and will pay interest annually thereon at a rate of not
less than 3% per year. Upon the payee's death, the amount on deposit will be
paid.
EXCESS INTEREST. At the sole discretion of the Company, excess interest may be
paid or credited from time to time in addition to the payments guaranteed under
any Optional Method of Settlement.
ADDITIONAL OPTIONS. Any proceeds payable under the policy may also be settled
under any other method of settlement offered by the Company at the time of the
request.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
/s/ [ILLEGIBLE]
PRESIDENT
LR434 LL Page 1
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000
APPLIED - MALE
<TABLE>
<CAPTION>
Settlement age of Number of installments certain
payee nearest
birthday 60 120 180 240
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
10 $2.67 $ 2.67 $2.67 $2.87 $2.87
11 2.69 2.69 2.69 2.88 2.88
12 2.90 2.90 2.90 2.90 2.90
13 2.92 2.92 2.91 2.91 2.91
14 2.93 2.93 2.93 2.93 2.92
15 2.95 2.95 2.95 2.94 2.94
16 2.96 2.96 2.96 2.96 2.96
17 2.98 2.98 2.98 2.98 2.97
18 3.00 3.00 3.00 2.99 2.99
19 3.02 3.02 3.01 3.01 3.01
20 3.04 3.04 3.03 3.03 3.03
21 3.06 3.05 3.05 3.05 3.05
22 3.08 3.08 3.07 3.07 3.07
23 3.10 3.10 3.09 3.09 3.09
24 3.12 3.12 3.12 3.11 3.11
25 3.14 3.14 3.14 3.14 3.13
26 3.17 3.17 3.16 3.16 3.15
27 3.19 3.19 3.19 3.19 3.18
28 3.22 3.22 3.22 3.21 3.20
29 3.25 3.25 3.24 3.24 3.23
30 3.28 3.28 3.27 3.27 3.26
31 3.31 3.31 3.30 3.30 3.29
32 3.34 3.34 3.33 3.33 3.32
33 3.37 3.37 3.37 3.36 3.35
34 3.41 3.41 3.40 3.39 3.38
35 3.44 3.44 3.44 3.43 3.41
36 3.46 3.48 3.48 3.46 3.45
37 3.52 3.52 3.52 3.50 3.48
38 3.57 3.56 3.56 3.54 3.52
39 3.61 3.61 3.60 3.58 3.56
40 3.66 3.65 3.65 3.63 3.60
41 3.71 3.70 3.69 3.67 3.64
42 3.76 3.75 3.74 3.72 3.66
43 3.81 3.81 3.79 3.77 3.73
44 3.87 3.86 3.85 3.82 3.77
45 3.93 3.92 3.90 3.87 3.82
46 3.99 3.96 3.96 3.92 3.87
47 4.05 4.05 4.02 3.98 3.92
48 4.12 4.11 4.09 4.04 3.97
49 4.19 4.18 4.15 4.10 4.03
50 4.27 4.26 4.22 4.17 4.08
51 4.34 4.33 4.30 4.23 4.14
52 4.43 4.41 4.37 4.30 4.20
53 4.51 4.50 4.45 4.37 4.26
54 4.60 4.59 4.54 4.45 4.32
55 4.70 4.68 4.62 4.53 4.39
56 4.80 4.76 4.72 4.61 4.45
57 4.91 4.89 4.82 4.69 4.51
58 5.03 5.00 4.92 4.78 4.58
59 5.15 5.12 5.03 4.87 4.65
60 5.28 5.25 5.14 4.96 4.71
61 5.43 5.39 5.27 5.06 4.78
62 5.58 5.53 5.39 5.16 4.84
63 5.74 5.69 5.53 5.26 4.90
64 5.91 5.85 5.66 5.36 4.98
65 6.10 6.03 5.81 5.46 5.02
66 6.30 6.21 5.96 5.56 5.08
67 6.51 6.41 6.12 5.66 5.13
68 6.73 6.62 6.28 5.77 5.18
69 6.97 6.84 6.44 5.86 5.23
70 7.23 7.07 6.61 5.96 5.27
71 7.51 7.32 6.79 6.05 5.31
72 7.80 7.58 6.96 6.14 5.34
73 8.12 7.85 7.14 6.23 5.37
74 8.46 8.14 7.32 6.31 5.40
75 8.82 8.45 7.50 6.38 5.42
76 9.21 8.76 7.67 6.45 5.44
77 9.63 9.10 7.84 6.51 5.45
78 10.08 9.44 8.01 6.57 5.47
79 10.56 9.80 8.17 6.62 5.48
80 11.07 10.17 8.33 6.66 5.49
81 11.62 10.56 8.48 6.70 5.49
82 12.20 10.94 8.61 6.73 5.50
83 12.82 11.33 8.74 6.76 5.50
84 13.47 11.73 8.86 6.79 5.51
85 14.17 12.12 8.97 6.81 5.51
</TABLE>
LR434 Page 2
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000
APPLIED - FEMALE
<TABLE>
<CAPTION>
Settlement age of Number of installments certain
payee nearest
birthday 60 120 180 240
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
10 $2.80 $ 2.80 $2.80 $2.80 $2.80
11 2.81 2.81 2.81 2.81 2.81
12 2.82 2.82 2.82 2.82 2.82
13 2.83 2.83 2.83 2.83 2.83
14 2.85 2.85 2.85 2.84 2.84
15 2.86 2.86 2.86 2.86 2.86
16 2.87 2.87 2.87 2.87 2.87
17 2.89 2.89 2.89 2.88 2.88
18 2.90 2.90 2.90 2.90 2.90
19 2.92 2.92 2.92 2.91 2.91
20 2.93 2.93 2.93 2.93 2.93
21 2.95 2.95 2.95 2.95 2.94
22 2.96 2.96 2.96 2.96 2.96
23 2.98 2.98 2.98 2.98 2.98
24 3.00 3.00 3.00 3.00 2.99
25 3.02 3.02 3.02 3.02 3.01
26 3.04 3.04 3.04 3.03 3.03
27 3.06 3.06 3.06 3.06 3.05
28 3.08 3.08 3.08 3.08 3.07
29 3.10 3.10 3.10 3.10 3.09
30 3.13 3.13 3.12 3.12 3.12
31 3.15 3.15 3.15 3.14 3.14
32 3.18 3.18 3.17 3.17 3.16
33 3.20 3.20 3.20 3.20 3.19
34 3.23 3.23 3.23 3.22 3.22
35 3.26 3.26 3.26 3.25 3.24
36 3.29 3.29 3.29 3.28 3.27
37 3.32 3.32 3.32 3.31 3.30
38 3.35 3.35 3.35 3.34 3.33
39 3.39 3.39 3.38 3.38 3.37
40 3.42 3.42 3.42 3.41 3.40
41 3.46 3.46 3.46 3.45 3.43
42 3.50 3.50 3.50 3.49 3.47
43 3.54 3.54 3.54 3.53 3.51
44 3.59 3.59 3.58 3.57 3.55
45 3.64 3.63 3.63 3.61 3.59
46 3.68 3.68 3.67 3.66 3.63
47 3.73 3.73 3.72 3.71 3.68
48 3.79 3.79 3.77 3.76 3.72
49 3.84 3.84 3.83 3.81 3.77
50 3.90 3.90 3.89 3.86 3.82
51 3.97 3.96 3.95 3.92 3.88
52 4.03 4.03 4.01 3.98 3.93
53 4.10 4.10 4.08 4.04 3.99
54 4.18 4.17 4.15 4.11 4.04
55 4.25 4.25 4.22 4.18 4.11
56 4.34 4.33 4.30 4.25 4.17
57 4.42 4.41 4.38 4.32 4.23
58 4.52 4.51 4.47 4.40 4.30
59 4.61 4.60 4.56 4.46 4.37
60 4.72 4.70 4.66 4.57 4.44
61 4.83 4.81 4.76 4.66 4.51
62 4.95 4.93 4.87 4.75 4.58
63 5.06 5.05 4.98 4.85 4.65
64 5.21 5.18 5.10 4.95 4.72
65 5.36 5.32 5.22 5.05 4.79
66 5.51 5.47 5.36 5.16 4.86
67 5.67 5.63 5.50 5.26 4.93
68 5.85 5.80 5.65 5.37 5.00
69 6.04 5.98 5.80 5.49 5.06
70 6.25 6.18 5.97 5.60 5.12
71 6.47 6.39 6.14 5.71 5.18
72 6.71 6.62 6.32 5.83 5.23
73 6.96 6.86 6.50 5.94 5.28
74 7.26 7.12 6.69 6.04 5.32
75 7.57 7.40 6.89 6.14 5.35
76 7.90 7.69 7.09 6.24 5.39
77 8.26 8.01 7.29 6.33 5.41
78 8.65 8.34 7.49 6.41 5.43
79 9.05 8.70 7.69 6.49 5.45
80 9.54 9.07 7.89 6.55 5.47
81 10.03 9.47 8.05 6.61 5.48
82 10.58 9.88 8.26 6.66 5.49
83 11.16 10.31 8.43 6.70 5.49
84 11.80 10.75 8.59 6.74 5.50
85 12.48 11.20 8.74 6.77 5.50
</TABLE>
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
Number of years Amount of each instalment
during which
instalments will be
paid Annual Monthly
- -----------------------------------------------------------------
<S> <C> <C>
5 $211.99 $17.91
6 179.22 15.14
7 155.83 13.16
8 138.31 11.68
9 124.69 10.53
10 113.62 9.61
11 104.83 8.86
12 97.54 8.24
13 91.29 7.71
14 85.95 7.26
15 81.33 6.67
16 77.29 6.53
17 73.74 6.23
18 70.59 5.96
19 67.78 5.73
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
</TABLE>
LR434 Page 3
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Non-participating Variable life insurance payable upon death of the Insured.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy.
Flexible premiums payable to when the Insured reaches Age 100.
Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages
as shown in the Policy Specifications.
LN680
<PAGE>
SCHEDULE 3: TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(MONTHLY RATES PER $1,000 OF NET AMOUNT AT RISK)
SPECIAL NOTE: The monthly Cost of Insurance Rate charged under the policy
varies based on the Age, duration and premium class of the person
Insured, but will not exceed the rates shown in the table below.
However, in determining the Guaranteed Maximum Cost of Insurance
Rates, Lincoln Life will add to the rates below the amount of the
Flat Extra Monthly Insurance Cost, if any, shown in the POLICY
SPECIFICATIONS. If the person insured is in a rated premium
class, the Guaranteed Maximum Cost of Insurance Rates, will be
those in the table multiplied by the Risk Factor, if any, shown
in the POLICY SPECIFICATIONS. The rates below are based on the
1980 CSO Table B.
<TABLE>
<CAPTION>
MONTHLY MONTHLY MONTHLY
AGE RATE AGE RATE AGE RATE
- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C>
0 0.32677 35 0.16836 70 2.97466
1 0.08667 36 0.17837 71 3.25640
2 0.07917 37 0.19170 72 3.58279
3 0.07834 38 0.20588 73 3.95978
4 0.07584 39 0.22338 74 4.38330
- ------------------------ ------------------------ ------------------------
5 0.07251 40 0.24173 75 4.84334
6 0.06917 41 0.26340 76 5.33245
7 0.06584 42 0.28508 77 5.84227
8 0.06250 43 0.31010 78 6.36948
9 0.06084 44 0.33428 79 6.92851
- ------------------------ ------------------------ ------------------------
10 0.06000 45 0.36263 80 7.54229
11 0.06250 46 0.39182 81 8.22883
12 0.06917 47 0.42268 82 9.01216
13 0.07834 48 0.46437 83 9.90124
14 0.09001 49 0.49107 84 10.87533
- ------------------------ ------------------------ ------------------------
15 0.10334 50 0.53028 85 11.92213
16 0.11585 51 0.57533 86 13.01471
17 0.12752 52 0.62539 87 14.15507
18 0.13502 53 0.68297 88 15.33494
19 0.14085 54 0.74722 89 16.56493
- ------------------------ ------------------------ ------------------------
20 0.14502 55 0.81566 90 17.85746
21 0.14585 56 0.88996 91 19.23899
22 0.14419 57 0.96593 92 20.76665
23 0.14252 58 1.04609 93 22.49837
24 0.14085 59 1.13211 94 24.70915
- ------------------------ ------------------------ ------------------------
25 0.13752 60 1.22817 95 27.82758
26 0.13585 61 1.33511 96 32.78845
27 0.13418 62 1.45796 97 41.45783
28 0.13418 63 1.59922 98 57.95663
29 0.13585 64 1.75725 99 83.33333
- ------------------------ ------------------------ ------------------------
30 0.13752 65 1.92955
31 0.14169 66 2.11195
32 0.14585 67 2.30614
33 0.15252 68 2.50878
34 0.15919 69 2.72909
- ------------------------ ------------------------
</TABLE>
LN680 NW-U 7
<PAGE>
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE
As of the Date of Issue of this policy the formula in effect to determine the
amount under item (ii) of INSURANCE COVERAGE PROVISIONS; DEATH BENEFIT PROCEEDS
Is based on a percent of the Accumulation Value as determined from the
following table:
<TABLE>
<CAPTION>
CORRIDOR CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE
------------ ------------ ------------ ------------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
------------ ------------ ------------ ------------
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
------------ ------------ ------------ ------------
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
------------ ------------ ------------ ------------
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
------------ ------------ ------------ ------------
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
------------ ------------ ------------ ------------
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
------------ ------------ ------------ ------------
</TABLE>
LN680 8
<PAGE>
GENERAL PROVISIONS
THE POLICY. The policy and the application for the policy constitute the
entire contract between the parties. All statements made in the application
shall, in the absence of fraud, be deemed representations and not warranties.
No statement may be used in defense of a claim under the policy unless it is
contained in the application and a copy of the application is attached to the
policy when issued.
Only the President, a Vice President, an Assistant Vice President, a Secretary,
a Director or an Assistant Director of Lincoln Life may execute or modify the
policy.
The policy is executed at the Administrator Mailing Address located on the front
cover of the policy.
NON-PARTICIPATION. The policy is not entitled to share in surplus distribution.
NOTICE OF CLAIM. Due Proof of Death must be furnished to Lincoln Life as soon
as reasonably practicable after the death of the Insured. Such notice shall
be given to Lincoln Life In Writing by or on behalf of the Owner.
PAYMENT OF PROCEEDS. Proceeds, as used in this policy, means the amount
payable (a) upon the surrender of this policy, or (b) upon the Insured's
death.
The amount payable upon receipt of due proof of death will be the Death
Benefit Proceeds as of the date of death. (SEE INSURANCE COVERAGE
PROVISIONS, DEATH BENEFIT PROCEEDS.) Death Benefit Proceeds are payable from
the Administrator Mailing Address upon the Insured's death subject to the
receipt of Due Proof of Death and will include interest as required by any
applicable state law. If the death occurs during the GRACE PERIOD, Lincoln
Life will pay the Death Benefit Proceeds for the Death Benefit Option in
effect immediately prior to the GRACE PERIOD, reduced by any overdue monthly
deductions.
If the policy is surrendered, the proceeds will be the Surrender Value
described in NONFORFEITURE AND SURRENDER VALUE PROVISIONS.
The proceeds are subject to the further adjustments described in the following
provisions:
1. Misstatement of Age;
2. Incontestability; and
3. Suicide.
When settlement is made, Lincoln Life may require return of the policy.
DEFERMENT OF PAYMENTS. Any amounts payable as a result of loans, surrender,
or partial surrenders will be paid within 7 days of Lincoln Life's receipt of
such request. However, payment of amounts from the Variable Sub-Accounts may
be postponed when the NYSE is closed or when the SEC declares an emergency.
Additionally, Lincoln Life reserves the right to defer the payment of such
amounts from the Fixed Account for a period not to exceed 6 months from the
date written request is received by Lincoln Life; during any such deferred
period, the amount payable will bear interest as required by law.
MISSTATEMENT OF AGE. If the age of the Insured is misstated, Lincoln Life
will adjust all benefits to the amounts that would have been purchased for
the correct age according to the basis specified in SCHEDULE 3.
LN680 NW-U 21
<PAGE>
GENERAL PROVISIONS (CONTINUED)
SUICIDE. If the Insured commits suicide, within 2 years from the Date of
Issue, the Death Benefit Proceeds will be limited to a refund of premiums
paid, less (a) any indebtedness against the policy and (b) the amount of any
partial surrenders. If the Insured commits suicide, within 2 years from the
date of any increase in the Specified Amount, the Death Benefit Proceeds with
respect to such 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
limited to the amount of Death Benefit Proceeds applicable before such
increase was made provided that the increase became effective at least 2
years from the Date of Issue of the policy.
INCONTESTABILITY. Except for nonpayment of Monthly Deductions, this policy
will be incontestable after it has been in force during the lifetime of the
Insured for 2 years from its Date of Issue. This means that Lincoln Life
will not use any misstatement in the application to challenge a claim or
avoid liability after that time. Any increase in the Specified Amount
effective after the Date of Issue will be incontestable only after such
increase has been in force for 2 years during the lifetime of the Insured.
The basis for contesting an increase in Specified Amount will be limited to
material misrepresentations made in the supplemental application for the
increase. The basis for contesting after reinstatement will be (a) limited
for a period of 2 years from the date of reinstatement and (b) limited to
material misrepresentations made in the reinstatement application.
ANNUAL REPORT. Lincoln Life will send a report to the Owner at least once a
year without charge. The report will show the Accumulation Value as of the
reporting date and the amounts deducted from or added to the Accumulation
Value since the last report. The report will also show (a) the current Death
Benefit Proceeds, (b) the current policy values, (c) premiums paid and all
deductions made since the last report, and (d) outstanding policy loans.
PROJECTION OF BENEFITS AND VALUES. Lincoln Life will provide a projection of
illustrative future Death Benefit Proceeds and values to the Owner at any
time upon written request and payment of a service fee, if any.
CHANGE OF PLAN. This policy may be exchanged for another policy only if
Lincoln Life consents to the exchange and all requirements for the exchange
as determined by Lincoln Life are met.
POLICY CHANGES - APPLICABLE LAW. This policy must qualify initially and
continue to qualify as life insurance under the Internal Revenue Code in
order for the Owner to receive the tax treatment accorded to life insurance
under Federal law. Therefore, to maintain this qualification to the maximum
extent permitted by law, Lincoln Life reserves the right to return any
premium payments that would cause this policy to fail to qualify as life
insurance under applicable tax law as interpreted by Lincoln Life. Further,
Lincoln Life reserves the right to make changes in this policy or to make
distributions from the policy to the extent it deems necessary, in its sole
discretion, to continue to qualify this policy as life insurance. Any such
changes will apply uniformly to all policies that are affected. The Owner
will be given advance written notice of such changes.
LN680 22
<PAGE>
OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the policy to which it is attached as of the Date
of Issue. Upon written request, the Company will agree to pay in accordance
with any one of the options shown below all or part of the net proceeds that
may be payable under the policy.
While the Insured is alive, the request, including the designation of the
payee, may be made by the Owner. At the time a Death Benefit becomes payable
under the policy, the request, including the designation of the payee, may
then be made by the Beneficiary. Once Income Payments have begun, the policy
cannot be surrendered and the payee cannot be changed, nor can the settlement
option be changed.
PAYMENT DATES. The first Income Payment under the settlement option selected
will become payable on the date proceeds are settled under the option.
Subsequent payments will be made on the first day of each month in accordance
with the manner of payment selected.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an
Income Payment at least equal to the minimum payment amount in accordance
with the Company's rules then in effect. If at any time payments are less
than the minimum payment amount, the Company has the right to change the
frequency to an interval that will provide the minimum payment amount. If
any amount due is less than the minimum per year, the Company may make other
arrangements that are equitable.
INCOME PAYMENTS. Income Payments will remain constant pursuant to the terms
of the settlement option(s) selected. The amount of each Income Payment
shall be determined in accordance with the terms of the settlement option and
the table(s) set forth in this rider, as applicable. The mortality table
used is the 1983 Individual Annuitant Mortality (IAM) Table "a" and 3%
Interest. In determining the settlement amount, the settlement age of the
payee will be reduced by one year when the first installment is payable
during the 1990's, reduced by two years when the first installment is payable
during the decade 2000-2009, and so on.
FIRST OPTION: LIFE ANNUITY. An annuity payable monthly to the payee during
the lifetime of the payee, ceasing with the last payment due prior to the
death of the payee.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD. An annuity providing monthly
income to the payee for a fixed period of 60, 120, 180, or 240 months (as
selected), and for so long thereafter as the payee shall live.
THIRD OPTION: ANNUITY CERTAIN. An amount payable monthly for the number of
years selected which may be from 5 to 30 years.
FOURTH OPTION: AS A DEPOSIT AT INTEREST. The Company will retain the proceeds
while the payee is alive and will pay interest annually thereon at a rate of
not less than 3% per year. Upon the payee's death, the amount on deposit
will be paid.
EXCESS INTEREST. At the sole discretion of the Company, excess interest may
be paid or credited from time to time in addition to the payments guaranteed
under any Optional Method of Settlement.
ADDITIONAL OPTIONS. Any proceeds payable under the policy may also be settled
under any other method of settlement offered by the Company at the time of
the request.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
/s/Illegible
PRESIDENT
LR435LL Page 1
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
<TABLE>
<CAPTION>
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - UNISEX
- ------------------------------------------------------------------------------------------------------------------------------------
SETTLEMENT AGE OF NUMBER OF INSTALMENTS CERTAIN SETTLEMENT AGE OF NUMBER OF INSTALMENTS CERTAIN
PAYEE NEAREST PAYEE NEAREST
BIRTHDAY 60 120 180 240 BIRTHDAY 60 120 180 240
- ------------------------------------------------------------------------------------------------------------------------------------
AGE LIFE ANNUITY AGE LIFE ANNUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $2.84 $2.84 $2.84 $2.84 $2.83 35 $3.35 $3.35 $3.35 $3.34 $3.33
11 2.85 2.85 2.85 2.85 2.85 36 3.39 3.39 3.38 3.36 3.36
12 2.86 2.86 2.86 2.86 2.86 37 3.42 3.42 3.42 3.41 3.40
13 2.88 2.88 2.88 2.87 2.87 38 3.46 3.46 3.46 3.45 3.43
14 2.89 2.89 2.89 2.89 2.89 39 3.50 3.50 3.49 3.48 3.47
15 2.91 2.90 2.90 2.90 2.90 40 3.54 3.54 3.54 3.52 3.50
16 2.92 2.92 2.92 2.92 2.91 41 3.59 3.59 3.58 3.56 3.54
17 2.94 2.94 2.93 2.93 2.93 42 3.63 3.63 3.62 3.61 3.58
18 2.95 2.95 2.95 2.95 2.95 43 3.68 3.68 3.67 3.65 3.62
19 2.97 2.97 2.97 2.96 2.96 44 3.73 3.73 3.72 3.70 3.67
20 2.99 2.99 2.98 2.98 2.98 45 3.78 3.78 3.77 3.74 3.71
21 3.00 3.00 3.00 3.00 3.00 46 3.84 3.84 3.82 3.79 3.76
22 3.02 3.02 3.02 3.02 3.01 47 3.90 3.89 3.88 3.85 3.80
23 3.04 3.04 3.04 3.04 3.03 48 3.96 3.95 3.93 3.90 3.85
24 3.06 3.06 3.06 3.06 3.05 49 4.02 4.02 3.99 3.96 3.91
25 3.08 3.08 3.08 3.08 3.07 50 4.09 4.08 4.06 4.02 3.96
26 3.11 3.11 3.10 3.10 3.10 51 4.16 4.15 4.13 4.08 4.01
27 3.13 3.13 3.13 3.12 3.12 52 4.23 4.22 4.20 4.15 4.07
28 3.15 3.15 3.15 3.15 3.14 53 4.31 4.30 4.27 4.21 4.13
29 3.18 3.18 3.17 3.17 3.16 54 4.39 4.36 4.35 4.28 4.19
30 3.20 3.20 3.20 3.20 3.19 55 4.46 4.47 4.43 4.36 4.25
31 3.23 3.23 3.23 3.22 3.22 56 4.57 4.56 4.51 4.43 4.32
32 3.26 3.26 3.26 3.25 3.24 57 4.67 4.65 4.60 4.51 4.38
33 3.29 3.29 3.29 3.28 3.27 58 4.78 4.76 4.70 4.60 4.45
34 3.32 3.32 3.32 3.31 3.30 59 4.89 4.87 4.80 4.66 4.51
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------
SETTLEMENT AGE OF NUMBER OF INSTALMENTS CERTAIN
PAYEE NEAREST
BIRTHDAY 60 120 180 240
- -----------------------------------------------------------
AGE LIFE ANNUITY
<S> <C> <C> <C> <C> <C>
60 $5.00 $4.98 $4.91 $4.77 $4.58
61 5.13 5.10 5.02 4.87 4.65
62 5.27 5.23 5.13 4.96 4.72
63 5.41 5.37 5.26 5.06 4.79
64 5.56 5.52 5.39 5.16 4.85
65 5.73 5.68 5.52 5.27 4.92
66 5.90 5.84 5.67 5.37 4.98
67 6.09 6.02 5.82 5.48 5.04
68 6.29 6.21 5.97 5.58 5.10
69 6.51 6.41 6.13 5.69 5.15
70 6.74 6.63 6.30 5.79 5.20
71 6.99 6.86 6.47 5.90 5.25
72 7.25 7.10 6.65 6.00 5.29
73 7.54 7.36 6.83 6.09 5.33
74 7.85 7.63 7.02 6.19 5.36
75 8.19 7.92 7.21 6.27 5.39
76 8.55 8.23 7.38 6.36 5.42
77 8.93 8.66 7.58 6.43 5.44
78 9.35 8.90 7.77 6.50 5.45
79 9.80 9.26 7.95 6.56 5.47
80 10.29 9.63 8.12 6.61 5.46
81 10.81 10.02 8.29 6.66 5.49
82 11.37 10.42 8.45 6.70 5.49
83 11.98 10.83 8.60 6.74 5.50
84 12.62 11.25 8.74 6.76 5.50
85 13.31 11.67 8.86 6.79 5.51
- -----------------------------------------------------------
</TABLE>
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF YEARS AMOUNT OF EACH INSTALMENT NUMBER OF YEARS AMOUNT OF EACH INSTALMENT
DURING WHICH DURING WHICH
INSTALMENTS WILL BE INSTALMENTS WILL BE
PAID ANNUAL MONTHLY PAID ANNUAL MONTHLY
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 $211.99 $17.91 12 $97.54 $8.24
6 179.22 15.14 13 91.29 7.71
7 155.83 13.16 14 85.95 7.26
8 138.31 11.68 15 81.33 6.87
9 124.69 10.53 16 77.29 6.53
10 113.82 9.61 17 73.74 6.23
11 104.93 8.86 18 70.59 5.96
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------
NUMBER OF YEARS AMOUNT OF EACH INSTALMENT
DURING WHICH
INSTALMENTS WILL BE
PAID ANNUAL MONTHLY
- ------------------------------------------------------------
<S> <C> <C>
19 $67.78 $5.73
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
- ------------------------------------------------------------
</TABLE>
LR435 Page 2
