<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2000
1933 ACT REGISTRATION NO. 333-43107
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 TO
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
SEPARATE ACCOUNT R
(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
<TABLE>
<S> <C>
Elizabeth Frederick, Esquire COPY TO:
The Lincoln National Life Insurance Company Jeremy Sachs, Esquire
1300 South Clinton Street 350 Church St.
P.O. Box 1110 Hartford, CT 06103
Fort Wayne, Indiana 46802
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Continuous
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE OF SECURITIES BEING REGISTERED)
An indefinite amount of the securities being offered by the Registration
Statement has been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Form 24F-2 for Registrant for the fiscal year
ending December 31, 1999 is not yet due.
It is proposed that this filing will become effective:
<TABLE>
<CAPTION>
<C> <S>
- -- immediately upon filing pursuant to Rule 485(b).
- -- on May 3, 1999 pursuant to Rule 485(b).
X on May 1, 2000 pursuant to Rule 485(a).
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
<TABLE>
<CAPTION>
ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
- ------------------- ----------------------
<S> <C>
1 Cover Page Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 Lincoln Life, the Separate Account and the
General Account
6(a) Lincoln Life, the Separate Account and the
General Account
6(b) *
9 Legal Proceedings
10(a)-(c) Right-to-Examine Period; Surrenders; Accumulation
Value; Reports to Policy Owners
10(d) Right to Exchange the Policy; Policy Loans;
Surrenders; Allocation of Net Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefits;
Payment of Death Benefit Proceeds; Policy Values;
Settlement Options
11 The Funds
12 The Funds
13 Charges; Fees
14 Issuance
15 Premium Payments; Transfers
16 Lincoln Life, the Separate Account and the
General Account
17 Surrenders
18 Lincoln Life, the Separate Account and the
General Account
19 Reports to Policy Owners
20 *
21 Policy Loans
22 *
23 Lincoln Life, the Separate Account and the
General Account
24 Incontestability; Suicide; Misstatement of Age or
Gender
25 Information about Lincoln Life and the Separate
Account
26 Fund Participation Agreements
27 Lincoln Life, the Separate Account and the
General Account
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM OF FORM N-8B-2 LOCATION IN PROSPECTUS
- ------------------- ----------------------
<S> <C>
28 Directors and Officers of Lincoln Life
29 Lincoln Life, the Separate Account and the
General Account
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrenders
47 Lincoln Life, the Separate Account and the
General Account; Surrenders, Transfers
48 *
49 *
50 Lincoln Life, the Separate Account and the
General Account
51 Cover Page; Highlights; Premium Payments; Right
to Exchange the Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
</TABLE>
* Not Applicable
<PAGE>
The Prospectuses included in Post-Effective Amendment No. 3 to this Registration
Statement on Form S-6, File #333-43107, is incorporated herein by this
reference.
<PAGE>
PROSPECTUS 3
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R
HOME OFFICE LOCATION:
1300 SOUTH CLINTON STREET
P.O. BOX 1110
FORT WAYNE, INDIANA 46802
(800) 942-5500
ADMINISTRATIVE OFFICE
PERSONAL SERVICE CENTER MVLI
350 CHURCH STREET
HARTFORD, CT 06103-1106
(800)444-2363
- --------------------------------------------------------------------------------
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
BENEFITS PAYABLE ON DEATH OF SECOND OF TWO INSUREDS
- --------------------------------------------------------------------------------
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 provides death
benefits when the second of the two named Insureds dies (a "Second Death
Policy").
The Policy features:
- flexible premium payments;
- a choice of one of two death benefit options; and
- 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 Lincoln Life's Separate Account
R ("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 Balanced Portfolio
Janus Aspen 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, AND THIS PROSPECTUS ONLY OFFERS
THE POLICY FOR SALE IN JURISDICTIONS WHERE SUCH OFFER AND SALE ARE LAWFUL.
PROSPECTUS DATED: MAY 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
HIGHLIGHTS............................ 3
Initial Choices To Be Made.......... 3
Level or Varying Death Benefit...... 3
Amount of Premium Payment........... 4
Selection of Funding Vehicles....... 4
Charges and Fees.................... 5
Fund Expenses....................... 6
Changes in Specified Amount......... 9
LINCOLN LIFE, THE SEPARATE ACCOUNT AND
THE GENERAL ACCOUNT.................. 9
BUYING VARIABLE LIFE INSURANCE........ 10
Replacements........................ 11
APPLICATION........................... 11
OWNERSHIP............................. 12
BENEFICIARY........................... 12
INSUREDS.............................. 13
THE POLICY............................ 13
Policy Specifications............... 13
PREMIUM FEATURES...................... 13
Planned Premiums; Additional
Premiums........................... 14
Limits on Right to Make Payments
of Additional and Planned
Premiums......................... 14
Premium Load; Net Premium
Payment.......................... 14
RIGHT-TO-EXAMINE PERIOD............... 14
TRANSFERS AND ALLOCATION AMONG
ACCOUNTS............................. 15
Allocation of Net Premium
Payments........................... 15
Transfers........................... 15
Optional Sub-Account Allocation
Programs........................... 15
Dollar Cost Averaging............. 16
Automatic Rebalancing............. 16
POLICY VALUES......................... 16
Accumulation Value.................. 17
Separate Account Value.............. 17
Variable Accumulation Unit
Value............................ 17
Variable Accumulation Units....... 17
Fixed Account and Loan Account
Value.............................. 18
Net Accumulation Value.............. 18
FUNDS................................. 18
Substitution of Securities.......... 23
Voting Rights....................... 23
Fund Participation Agreements....... 23
CHARGES AND FEES...................... 23
Deductions Made Monthly............. 24
Monthly Deduction................. 24
Cost of Insurance Charge.......... 24
MORTALITY AND EXPENSE RISK CHARGE..... 25
Surrender Charges................... 25
Transaction Fee for Excess
Transfers.......................... 26
DEATH BENEFITS........................ 26
Death Benefit Options............... 26
Changes in Death Benefit Options and
Specified Amount................... 27
</TABLE>
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
Federal Income Tax Definition of
Life Insurance..................... 27
NOTICE OF DEATH OF INSUREDS........... 27
PAYMENT OF DEATH BENEFIT PROCEEDS..... 28
Settlement Options.................. 28
POLICY LIQUIDITY...................... 29
Policy Loans........................ 29
Partial Surrender................... 29
Surrender of the Policy............. 30
Surrender Value................... 30
Deferral of Payment and Transfers... 30
ASSIGNMENT; CHANGE OF OWNERSHIP....... 31
LAPSE AND REINSTATEMENT............... 31
Lapse of a Policy................... 31
No Lapse Provision................ 31
Reinstatement of a Lapsed Policy.... 32
COMMUNICATIONS WITH LINCOLN LIFE...... 32
Proper Written Form................. 32
Telephone Transaction Privileges.... 32
OTHER POLICY PROVISIONS............... 33
Issuance............................ 33
Date of Coverage.................... 33
Right to Exchange the Policy........ 33
Incontestability.................... 33
Misstatement of Age or Gender....... 33
Suicide............................. 34
Nonparticipating Policies........... 34
TAX ISSUES............................ 34
Tax Treatment of Death Benefit...... 34
Federal Income Tax Considerations... 34
Taxation of Lincoln Life............ 35
Other Considerations................ 36
FAIR VALUE OF THE POLICY.............. 36
DIRECTORS AND OFFICERS OF LINCOLN
LIFE................................. 36
DISTRIBUTION OF POLICIES.............. 38
CHANGES OF INVESTMENT POLICY.......... 38
OTHER CONTRACTS ISSUED BY LINCOLN
LIFE................................. 38
STATE REGULATION...................... 38
REPORTS TO OWNERS..................... 39
ADVERTISING........................... 39
LEGAL PROCEEDINGS..................... 39
EXPERTS............................... 40
REGISTRATION STATEMENT................ 40
APPENDIX 1............................ 41
CORRIDOR PERCENTAGES................ 41
APPENDIX 2............................ 42
ILLUSTRATION OF ACCUMULATION VALUES,
SURRENDER VALUES, AND DEATH BENEFIT
PROCEEDS........................... 42
FINANCIAL STATEMENTS..................
Separate Account.................... R-1
Lincoln Life........................ S-1
</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. Your Policy insures two Insureds. If one
of the Insureds dies, the Policy pays no death benefit. Your
Policy will pay the death benefit only when the second
Insured dies. A "second-to-die" policy might be suitable
when both of the Insureds have income of their own and only
want to provide financial support for their dependents if
both of them should die, or to provide liquidity to heirs
when the Second Insured dies. If replacement income or
immediate cash liquidity is needed upon the death of one
Insured, this type of policy may not be suitable.
The Policy's 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
"second-to-die" variable life insurance policy. As a death
benefit is only paid upon the second Insured's death, this
Policy may, or may not, be appropriate for your financial
goals. The value of the Policy and, under one option, the
death benefit amount, depends 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. You, as the Owner, have three 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.
LEVEL OR VARYING DEATH BENEFIT
The Death Benefit is the amount Lincoln pays to the
Beneficiary(ies) when the second 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 of the second Insured's death.
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.
3
<PAGE>
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 second Insured
died (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. The
Net Accumulation Value is the total of the balances in the
Fixed Account and the Separate Account minus any outstanding
Loan Account amounts.
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 when
the second Insured died; or
2) the Corridor Death Benefit.
See page 26 for more details.
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 14.
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 24)
increase as the Insureds get older.
If your Policy lapses because your Monthly Premium Deduction
is larger than the Net Accumulation Value, you may reinstate
your Policy. More information is on page 32.
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" time period. Use this time
to review your Policy and make sure that it meets your
needs. During this time 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 14.
SELECTION OF FUNDING VEHICLES
This Prospectus focuses on the Separate Account investment
information that makes up the "variable" part of the Policy.
If you put money into the variable funds, you take all the
investment risk on that money. This means that if the mutual
funds(s) you select go up in value, the value of your
Policy, net of charges and expenses, also goes up. If they
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. These "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 18.
4
<PAGE>
You may also use Lincoln Life's Fixed Account to fund your
Policy. Net Premium Payments made into the Fixed Account:
- become part of Lincoln Life's General Account;
- do not share the investment experience of the Separate
Account; and
- have a guaranteed minimum interest rate of 4% per year.
Interest beyond 4% is credited at Lincoln Life's discretion.
For additional information, see page 10.
CHARGES AND FEES
You will be charged:
- A premium load of no more than 8% from each Premium
Payment during the first 15 Policy Years, and no more
than 5% thereafter.
- A $10 monthly deduction for administrative purposes.
- A monthly maximum charge of $0.15 per $1000 of initial
Specified Amount for distribution associated expenses for
the first 120 months from issue date or from the date of
an increase in Specified Amount. If an increase occurs,
your current insurance age will be your issue age for the
new coverage.
- A Cost of Insurance charge based on sex, issue age,
duration and premium class of each Insured.
- A daily mortality and expense risk charge which is at an
annual rate of 0.80% and is guaranteed not to exceed
that.
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 will be allowed to make 12 transfers
between funding options. Beyond 12, a $25 fee may apply. See
page 15.
You may surrender the Policy in full or withdraw part of its
value. A Surrender Charge is applied if the Policy is
surrendered totally and is the amount retained by us if the
Policy is surrendered. We charge you an administrative fee
of $25, but not more than 2% of the amount withdrawn, each
time you request a partial surrender of your Policy. If you
totally surrender your Policy within the first 15 years, a
surrender charge will be deducted in computing what will be
paid you. If you surrender your Policy within the first 15
years after an increase in the Specified Amount, a surrender
charge will also be imposed, in addition to any existing
surrender charge. See page 25.
You may borrow within described limits against the Policy.
If you borrow against your Policy, interest will be charged
to the Loan Account at an annual interest rate of 8%. For
the first ten Policy Years interest will be credited to the
Loan Account Value at the annual rate of interest charged
for a loan minus 1%. For Policy Years eleven and beyond,
interest will be credited at an annual rate equal to the
current interest charged. See page 29.
5
<PAGE>
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 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 TOTAL FUND
OPERATING OPERATING
EXPENSES TOTAL EXPENSES
WITHOUT WAIVERS 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.......
AIM V.I. International
Equity Fund..............
AIM V.I. Value Fund........
Baron Capital Asset Fund--
Insurance Shares (1).....
BT EAFE Index Fund (2).....
BT Equity 500 Index Fund
(2)......................
BT Small Cap Index Fund
(2)......................
Delaware Group Delchester
Series (3)...............
Delaware Group Devon
Series (3)...............
Delaware Group Emerging
Markets Series (4).......
Delaware Group REIT
Series (5)...............
Delaware Group Small Cap
Value
</TABLE>
(to be filed by amendment)
<TABLE>
<CAPTION>
TOTAL
ANNUAL
FUND TOTAL FUND
OPERATING OPERATING
EXPENSES TOTAL EXPENSES
WITHOUT WAIVERS WITH
MANAGEMENT 12B-1 OTHER WAIVERS OR AND WAIVERS OR
FUND FEES FEES EXPENSES REDUCTIONS REDUCTIONS REDUCTIONS
--------------------------- ----------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Series (6)...............
Delaware Group Trend
Series (6)...............
Fidelity VIPII Contrafund
Portfolio -- Service
Class (7)................
Fidelity VIPIII Growth
Opportunities Portfolio
-- Service Class (7).....
Janus Aspen Series Balanced
Portfolio (8)............
Janus Aspen Series
Worldwide
Growth Portfolio (8).....
LN Bond Fund...............
LN Capital Appreciation
Fund.....................
LN Equity Income Fund......
LN Global Asset Allocation
Fund.....................
LN Money Market Fund.......
LN Social Awareness Fund...
MFS Emerging Growth
Series (9)...............
MFS Total Return
Series (9)...............
MFS Utilities Series (9)...
AMT MidCap Growth Portfolio
(10)(11).................
AMT Partners Portfolio
(10)(11).................
Templeton International
Fund -- Class 2 (12).....
Templeton Stock Fund --
Class 2 (12).............
</TABLE>
---------------------------------------------------
(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
6
<PAGE>
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 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.
7
<PAGE>
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.
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CHANGES IN SPECIFIED AMOUNT
The Initial Specified Amount is the amount originally chosen
by the Policy Owner and is equal to the Death Benefit.
Within certain limits, you may decrease or, with
satisfactory evidence of insurability, increase the
Specified Amount. The minimum specified amount is currently
$250,000. Such changes will affect other aspects of your
Policy. See page 27.
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 R
("Account R") is a "separate account" of the company
established on December 2, 1997. Under Indiana law, the
assets of Account R 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 R income, gains,
and losses are credited to or charged against Account R
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
("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 R's or our management, investment
practices, or policies. We have numerous other registered
separate accounts which fund our variable life insurance
policies and variable annuity contracts.
Account R 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),
Net Premium Payments allocated to Account R will be invested
in Fund shares at net asset value, and monies necessary to
pay for deductions, charges, transfers and surrenders from
Account R 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 18-22. 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, and 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.
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, if elected, 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 fund options available, it is possible to
finetune 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.
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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.
And 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 34), 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 Insureds' ages (see page 26). The death
benefit is income-tax free and may, with proper estate
planning, be estate-tax free. A tax advisor should be
consulted.
Certain costs and expenses of variable life insurance
ownership which are directly related to Policy values (i.e.
asset based costs) are not unlike those incurred through
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 2) 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, a number of matters should be considered
by the applicant. 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? For example, the
Insureds may no longer be insurable, or the contestability
period may have elapsed with respect to the existing policy,
while the Policy could be contested. The Owner 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 an
application on a form provided by Lincoln Life.
A complete application identifies the prospective Insureds
and provides sufficient information about them to permit
Lincoln Life to begin underwriting the risks under the
Policy. We require a medical history and examination of each
of the Insureds. Lincoln Life may decline to provide
insurance on the lives of the Insureds or, if it agrees to
11
<PAGE>
provide insurance, it may place one or both Insureds 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 Insureds.
The applicant will select the Beneficiary or Beneficiaries
who are to receive Death Benefit Proceeds payable on the
Second Death, 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). The applicant must also
determine 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 Insureds are 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 lives of each of the Insureds
under applicable state law. The Owner may be either or both
of the Insureds, or any other natural person or non-natural
entity. The Owner owns and exercises the rights under the
Policy prior to the Second Death.
The Owner is the person who is ordinarily entitled to
exercise the rights under the Policy so long as either of
the Insureds is living. These rights include the power to
select the Beneficiary 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 is a person other than the last surviving
Insured, and that Owner dies before the Second Death, the
Owner's rights in the Policy will belong to the Owner's
estate, unless otherwise specified to Lincoln Life.
BENEFICIARY
The Beneficiary is designated by the owner or the Applicant
and is the person who will 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 Beneift under the Policy.
Multiple Beneficiaries will be paid in equal shares, unless
otherwise specified to Lincoln Life.
Except when Lincoln Life has acknowledged an assignment of
the Policy or an agreement not to change the Beneficiary,
the Owner may change the Beneficiary at any time while
either of the Insureds is living. Any request for a change
in the Beneficiary must be in a written form satisfactory to
Lincoln Life and submitted to Lincoln Life. Unless the Owner
has reserved the right to change the Beneficiary, such a
request must be signed by both the Owner and the
Beneficiary. On recordation, the change of Beneficiary 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 Lincoln Life as to, any payment made or
action taken by Lincoln Life before it was recorded.
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If any Beneficiary dies before the Second Death, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to Lincoln Life.
If no named Beneficiary survives the Second Death, any Death
Benefit Proceeds will be paid to the Owner or the Owner's
executor, administrator or assignee.
INSUREDS
There are two Insureds under the Policy. At the Date of
Issue of the Policy the Owner must have an insurable
interest in each of the Insureds. On the Second Death, a
Death Benefit is payable under the Policy.
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. A Policy Year is the
twelve month period, beginning on 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, a Policy will be delivered to the Owner. The
Policy sets forth the terms of the Policy, as applicable to
the Owner, and should be reviewed by the Owner on receipt 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
the books and records of Lincoln Life. Possession of the
Policy does not represent ownership or the right to exercise
the incidents of ownership with respect to the Policy. If
the Owner loses the form of Policy, Lincoln Life will issue
a replacement on request. Lincoln Life may impose a Policy
replacement fee.
POLICY SPECIFICATIONS
The Policy includes a "Policy Specifications" page, with
supporting schedules, in which is set forth certain
information applicable to the specific Policy. This
information includes the identity of the Owner, the Date of
Issue, the Initial Specified Amount, the Death Benefit
Option selected, the Insureds, the issue Ages, the
Beneficiary, the initial Premium Payment, the Surrender
Charges, Expense Charges and Fees, Guarantee Maximum Cost of
Insurance Rates, and the No Lapse Premium if the No Lapse
Provision has been selected.
PREMIUM FEATURES
The Policy permits flexible Premium Payments, meaning that
the frequency and the amount of Premium Payments may be
selected by the Owner. After the Initial Premium Payment is
paid there is no minimum premium required, unless to
maintain the No Lapse Provision. (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 or, if selected, the No Lapse Premium.
If at least one of the Insureds is still living when the
younger Insured attains or would have attained Age 100, and
the Policy has not been surrendered, there are certain
changes under the Policy. We will no longer accept Premium
Payments, and will make no further monthly deductions.
Policy Values held in the Separate Account will be
transferred to the Fixed Account. We will no longer transfer
amounts to Sub-Accounts. The Policy will remain in force
until surrender or the Second Death.
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<PAGE>
PLANNED PREMIUMS; ADDITIONAL PREMIUMS
"Planned Premiums" are the amount of premium (as shown in
the Policy Specifications) the applicant chooses to pay
Lincoln Life 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. Additional
Premiums will be credited only when actually received by
Lincoln Life. Premium Payments may be billed with an annual,
semiannual, or quarterly frequency. 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.
LIMITS ON RIGHT TO MAKE PAYMENTS OF ADDITIONAL AND PLANNED
PREMIUMS
The Owner may increase Planned Premiums, or pay Additional
Premiums, subject to the following limitations and Lincoln
Life's right to limit the amount or frequency of Additional
Premiums.
Lincoln Life 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 Lincoln Life is unwilling to
accept the risk, the increase in premium will be refunded
without interest and without participation of such amounts
in any underlying investment.
Lincoln Life may also decline 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. The
excess amount would be returned.
PREMIUM LOAD; NET PREMIUM PAYMENT
We deduct a maximum of 8% up-front from each premium payment
during the first 15 years and a maximum of 5% up-front
thereafter. This amount, sometimes referred to as "premium
load," covers certain Policy-related state tax and federal
income tax liabilities and a portion of the sales expenses
incurred by Lincoln Life. The Premium Payment, net of the
premium load, is called the "Net Premium Payment."
RIGHT-TO-EXAMINE PERIOD
The Owner may return the Policy to Lincoln Life for
cancellation as follows. If the Owner mails or delivers the
Policy 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) and notice of surrender rights to the Owner,
Lincoln Life will refund to the Owner all Premium Payments.
Any Premium Payments received by Lincoln Life 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 a
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 any
refund of a Premium Payment made by check may be delayed
until the check clears.
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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. An Owner may change the allocation of future
Net Premium Payments at any time. In any allocation, the
amount allocated to any Sub-Account must be in whole
percentages. No allocation can be made which would result in
a Sub-Account Value of less than $50 or a Fixed Account
Value of less than $2,500. Lincoln Life, at its sole
discretion, may waive minimum balance requirements on the
Sub-Accounts.
TRANSFERS
The Owner may make transfers among the Sub-Accounts, on the
terms set forth below, at any time before the younger
Insured reaches or would have reached Age 100. The Owner
should carefully consider current market conditions and each
Sub-Account's investment policies and related risks before
allocating money to the Sub-Accounts.
Transfer of amounts of at least $500 from one Sub-Account to
another or from the Sub-Accounts to the Fixed Account are
possible at any time. Within 30 days after each anniversary
of the Date of Issue, the Owner may transfer up to 20% of
the Fixed Account Value (as of the preceding anniversary of
the Date of Issue) to one or more Sub-Accounts. 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 a Sub-Account after a
transfer must be at least $500. Lincoln Life reserves the
right to impose a charge for each transfer request in excess
of 12 requests in any Policy Year. Lincoln Life may further
limit transfers from the Fixed Account at any time.
Transfers must be made in proper written form, unless the
Owner has given written authorization to Lincoln Life to
accept telephone transactions. Authorization to engage in
telephone transactions and permitted telephone transactions
must be made in accordance with the procedures 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
effected 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 $500 will 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
The Owner may elect to participate in programs providing for
Dollar Cost Averaging or Automatic Rebalancing, but may
participate in only one program at any time.
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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
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, an Owner may reduce exposure to market
volatility. Dollar Cost Averaging will not assure a profit
or protect against a declining market.
If the Owner elects Dollar Cost Averaging, 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 a request from the Owner 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. Lincoln Life may, in its sole
discretion, 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.
Currently, there is no charge for Dollar Cost Averaging, but
Lincoln Life reserves the right to impose a charge.
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 changed by the
Owner. If Automatic Rebalancing is elected, all Net Premium
Payments allocated to the Sub-Accounts will be subject to
Automatic Rebalancing.
The Owner 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 upon receipt by the
Administrative Office of a request in proper written form or
by telephone, if adequately authenticated.
Currently, there is no charge for Automatic Rebalancing, but
Lincoln Life reserves the right to impose a charge.
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 fund 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
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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 which remain credited to
the Policy, the current Accumulation Unit values, the
Sub-Account values, the Fixed Account Value and the Loan
Account Value.
ACCUMULATION VALUE
The portion of a Premium Payment, after the deduction 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 the 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.
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 thereafter 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
A "Variable Accumulation Unit" is a unit of measure used in
the calculation of the value of each Sub-Account. The
Variable Accumulation Unit value will be as determined for
the Valuation Period during which a Premium Payment or
request for transfer is received by Lincoln Life. The
Variable Accumulation Unit value for a Sub-Account for any
later 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
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<PAGE>
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 (2) is divided by the number of Variable
Accumulation Units outstanding at the beginning of the
Valuation Period.
The daily charges imposed on a Sub-Account for any Valuation
Period are equal to the daily mortality and expense risk
charge multiplied by the number of calendar days in the
Valuation Period. 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 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 Lincoln Life's general account through
payment of premiums or through transfers from the Separate
Account. Lincoln Life guarantees 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.
FUNDS
Each of the Sub-Accounts of the Separate Account 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. 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
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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
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
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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
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.
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<PAGE>
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 (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.
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.
21
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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
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.
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.
22
<PAGE>
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. Owners should 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 the terms and
conditions imposed by Lincoln Life (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 the judgment of
Lincoln Life, 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, Lincoln Life 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
Lincoln Life 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.
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
Trust 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
Lincoln Life deducts charges in connection with the Policy
to compensate it for providing the insurance benefit set
forth in the Policy, administering the Policy, assuming
certain risks in connection with the Policy and for
incurring expenses associated with the distribution of the
Policy.
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<PAGE>
The nature and amount of these charges are as follows:
DEDUCTIONS MADE MONTHLY
We make various expense deductions monthly. The Monthly
Deduction, including the Cost of Insurance Charge is made
from the Net Accumulation Value.
The Monthly Deductions are deducted proportionately from the
value of each underlying investment subject to the charge.
For Sub-Accounts, Variable Accumulation Units are canceled
and the value of the canceled Variable Accumulation Units is
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, 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 either Insured is still living when the younger Insured
would have attained Age 100 and the Policy has not been
surrendered, no further Monthly Deductions will be made and
the Separate Account Value will be transferred to the Fixed
Account. The Policy will then remain in force until
surrender or the Second Death.
MONTHLY DEDUCTION
You will be charged a monthly maximum charge of 0.15 per
$1,000 of initial Specified Amount for the first 120 months
from Issue Date or from the date of an increase in Specified
Amount. If an increase occurs, your current insurance age
will be your issue age for the new coverage. You will be
charged a $10 monthly fee for administrative purposes.
These charges compensate Lincoln Life 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" charge is the portion of the Monthly
Deduction designed to compensate Lincoln Life 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,
underwriting category and gender (in accordance with state
law) of both Insureds and the current "Net Amount at Risk"
(Death Benefit minus the Accumulated Value). The rate on
which the Monthly Deduction for the Cost of Insurance is
based will generally increase as the Insureds age, although
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 previous Monthly Anniversary Day by
1.0032737 (the monthly equivalent of an annual rate of 4%),
subtracting the Accumulation Value at the previous Monthly
Anniversary Day, and multiplying the result (the Net Amount
at Risk) by the applicable Cost of
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<PAGE>
Insurance Rate as determined by Lincoln Life. The Guaranteed
Maximum Cost of Insurance Rates, per $1,000 of Net Amount at
Risk, for standard risks are based on the 1980 Commissioners
Standard Ordinary Mortality Tables, Age Nearest Birthday
(1980 CSO, Male or Female); or, for unisex rates, on the
1980 CSO-B Table.
MORTALITY AND EXPENSE RISK CHARGE
Lincoln Life deducts a daily charge as a percentage of the
assets of the Separate Account as a mortality and expense
risk charge. The mortality risk assumed is that insureds may
live for a shorter period than estimated, and therefore, a
greater amount of death benefit will be payable. The expense
risk assumed is that expenses incurred is issuing and
administering the policies will be greater than estimated.
The mortality and expense risk charge is currently at an
annual rate of .80% and guaranteed not to exceed that.
SURRENDER CHARGES
A generally declining Surrender Charge will 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 Insureds, 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 2 by
subtracting "Surrender Value" from "Total Accumulation
Value" on any chosen set of investment return assumptions.
The surrender charge under a Policy is proportional to the
face amount of the Policy. Expressed as a percentage of face
amount, it is higher for older than for younger issue ages.
For example, assuming issue ages 80 (the oldest possible
issue ages for a Policy), the first year surrender charge is
$37.40 per $1000 of face amount. At issue ages 65 it is
$25.10 per $1000 of face amount, at issue ages 55 it is
$13.68 per $1000 of face amount, and at issue ages 25 it is
$2.87 per $1000 of face amount. These calculations assume
both insureds are the same age. The surrender charge cannot
exceed Policy value but may equal Policy value, especially
during the first two Policy years. All surrender charges
decline to zero over the 15 years following issuance of the
Policy. See, for example, the illustrations in Appendix 2
for issue ages 55 and 65.
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 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. Lincoln Life 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 surrenders, full or partial, may result in tax
implications. SEE TAX MATTERS
25
<PAGE>
Based on its actuarial determination, Lincoln Life does not
anticipate that the Surrender Charge, together with the
portion of the premium load attributable to sales expense,
will cover all sales and administrative expenses which
Lincoln Life 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 the general account of Lincoln Life, which
supports insurance and annuity obligations.
TRANSACTION FEE FOR EXCESS TRANSFERS
Lincoln Life reserves 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.
DEATH BENEFITS
The Death Benefit Proceeds is the amount payable to the
Beneficiary upon the Second Death (the death of the second
of the two Insureds to die), 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 $250,000 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 on the Second Death and the Owner's
ability to make Premium Payments. In evaluating this
decision, the applicant should consider that the greater the
Net Amount at Risk, the greater the monthly deductions for
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 Second Death, less (in each case) any
indebtedness 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 younger
Insured reaches or would have reached Age 40 and decreases
in accordance with the table in Appendix I of this
Prospectus to 100% when the younger Insured reaches or would
have reached Age 95.
Death Benefit Option 1 provides Death Benefit Proceeds equal
to the Specified Amount (a minimum of $250,000). If Option 1
is selected, the Policy pays level Death Benefit Proceeds
until 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 Accumulation
Value as of the date of the Second Death. 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.
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<PAGE>
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. The ability of
the Owner to support the Policy 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 from the value of the Policy to pay the
Cost of Insurance.
Owners who prefer insurance coverage that generally does not
vary in amount and generally has lower Cost of Insurance
Charges should elect Option 1. Owners who prefer to have
favorable investment experience reflected in increased
insurance coverage should select Option 2. Under Option 1,
any Surrender Value at the time of the Second 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
amount of increase in Specified Amount currently permitted
is $1,000. If requested, a supplemental application and
evidence of insurability must also be submitted to Lincoln
Life.
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.
Lincoln Life may at its discretion decline any request for a
change between Death Benefit Options or increase in the
Specified Amount. Lincoln Life may at its discretion 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 I.
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<PAGE>
NOTICE OF DEATH OF INSUREDS
Due Proof of Death must be furnished to Lincoln Life at the
Administrative Office as soon as reasonably practicable
after the death of each 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 Lincoln
Life.
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 both Insureds. SEE
SETTLEMENT OPTIONS. The amount of the Death Benefit Proceeds
under Option 2 will be determined as of the date of the
Second Death. Payment of the Death Benefit Proceeds may be
delayed if the Policy is contested or if Separate Account
values cannot be determined.
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.
The Owner may elect a Settlement Option before the Second
Death; after the Second Death, if the Owner has not
irrevocably selected a Settlement Option, the Beneficiary
may elect one of the Settlement Options. 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, Lincoln
Life will pay any amount due the assignee in one lump sum.
Any remaining Death Benefit Proceeds will be paid as
elected.
A request to elect, change, or revoke a Settlement Option
must be received in proper written form by the
Administrative Office 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. Payments after the
first payment will be made 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.
Under the third Settlement Option, Lincoln Life makes
monthly payments for a stated number of years, at least
five but no more than thirty.
The fourth Settlement Option, provides that Lincoln Life
pays interest annually on the sum left with Lincoln Life
at a rate of at least 3% per year, and pays the amount
on deposit on the payee's death.
Any other Settlement Option offered by Lincoln Life at the
time of election may also be selected.
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POLICY LIQUIDITY
The Policy provides only limited liquidity. Subject to
certain limitations, however, the Owner 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
The Owner may at any time contract for Policy Loans up to an
aggregate amount not to exceed 90% of the Surrender Value at
the time a Policy Loan is made. It is a condition to
securing a Policy Loan that the Owner execute a loan
agreement and that the Policy be assigned to Lincoln Life
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 loan interest is payable to
Lincoln Life (for its account) once a year in arrears on
each Policy Anniversary, or earlier upon full surrender or
other payment of proceeds of a Policy.
The amount of a loan, plus any accrued but unpaid interest,
is added to the outstanding Policy Loan balance. Unless paid
in advance, any loan interest due will be transferred 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 pay interest to your Loan Account value, during the first
ten Policy Years, at an annual rate equal to the interest
rate you must pay on your loan, minus one percent. This is
the "loan spread", and we guarantee it will not exceed 2%
per year for Policy Years one through ten. For the eleventh
and subsequent Policy Years our current practice is to
credit interest at an annual rate equal to your loan rate.
We guarantee the loan spread in Policy Years eleven and
thereafter will never exceed 1%.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, transfers from each for loans and
loan interest will be made in proportion to the assets in
each Sub-Account at that time, unless Lincoln Life is
instructed otherwise in proper written form at the
Administrative Office. 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, whether or not repaid, affects the proceeds
payable upon the Second Death and the Accumulation Value.
The longer a Policy Loan is outstanding, the greater the
effect is likely to be. While 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 before the
Second Death by request to the Administrative Office in
proper written form or by telephone, if telephone
transactions
29
<PAGE>
have been authorized by the Owner. For each partial
surrender we charge a transaction fee of $25 or 2% of the
amount surrendered, whichever is less. 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 $250,000, the partial surrender will
not be permitted by Lincoln Life. 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.
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 Lincoln Life is instructed
otherwise in proper written form at the Administrative
Office. Lincoln Life may at its discretion decline any
request for a partial surrender.
SURRENDER OF THE POLICY
You may surrender the Policy at any time. On surrender of
the Policy, Lincoln Life will pay you, or assignee, the
Surrender Value next computed after receipt of the request
in proper written form at the Administrative Office. All
coverage under the Policy will automatically terminate if
the Owner makes a full surrender.
SURRENDER VALUE
The "Surrender Value" of a Policy is the amount the Owner
can receive in a lump sum by surrendering the Policy. The
Surrender Value is the Net Accumulation Value 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 2.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of loans or of the Surrender Value from any
Sub-Accounts will be made within 7 days. Payment or transfer
from the Fixed Account may be deferred up to six months at
Lincoln Life's option. If Lincoln Life exercises its right
to defer any payment from the Fixed Account, interest will
accrue and be paid as required by law from the date the
recipient would otherwise have been entitled to receive the
payment.
30
<PAGE>
ASSIGNMENT; CHANGE OF OWNERSHIP
While either Insured is living, the Owner may assign the
Owner's rights in the Policy, including the right to change
the beneficiary designation. The assignment must be in
proper written form, signed by the Owner and recorded at the
Administrative Office. No assignment will affect, or
prejudice Lincoln Life as to, any payment made or action
taken by Lincoln Life before it was recorded. Lincoln Life
is not responsible for any assignment not submitted for
recording, nor is Lincoln Life responsible for the
sufficiency or validity of any assignment. Any assignment is
subject to any indebtedness owed to Lincoln Life at the time
the assignment is recorded and any interest accrued on such
indebtedness after recordation of any assignment.
Once recorded, the assignment remains effective until
released by the assignee in proper written form. So long as
an effective assignment remains outstanding, the Owner will
not be permitted to take any action with respect to the
Policy without the consent of the assignee in proper written
form.
So long as either Insured is living, the Owner 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 Lincoln Life as to, any payment made or
action taken by Lincoln Life before it was recorded. Lincoln
Life may require that the Policy be submitted to it for
endorsement before making a change.
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, the Policy is subject to lapse and
automatic termination of all coverage under the Policy. 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 Lincoln Life has 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, Lincoln Life
will send a written notice to the Owner and any assignee of
record. The notice will state the amount of the Premium
Payment or 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 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
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. If the Second Death occurs during
the Grace Period, Death Benefit Proceeds will be paid, but
will be reduced, in addition to any other reductions, by any
unpaid Monthly Deductions. If the Second Death occurs after
the Policy has lapsed, no Death Benefit Proceeds will be
paid.
NO LAPSE PROVISION
(Note: the No Lapse provision may not be available in all
states).
The applicant may elect the No Lapse Provision at issue of
the Policy. If this provision is elected and if at each
Monthly Anniversary Day the sum of all Premium Payments
31
<PAGE>
less any policy loans (including any accrued loan interest)
and partial surrenders is at least equal to the sum of the
No Lapse Premiums (the cumulative premium required to have
been paid by each Monthly Anniversary Day, as indicated in
the Policy Specifications) due since the Date of Issue of
the Policy, the Policy will not lapse. 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 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 both insureds is furnished
to Lincoln Life and it agrees to accept the risk, (d)
Lincoln Life receives 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 Lincoln Life
approves the application for reinstatement, Surrender Charge
will be reinstated as of the Policy Year in which the Policy
lapsed.
If the Policy is reinstated, such reinstatement is effective
on the Monthly Anniversary Day following Lincoln Life
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.
COMMUNICATIONS WITH LINCOLN LIFE
PROPER WRITTEN FORM
When ever this Prospectus refers to a communication "in
proper written form," it means in writing, in form and
substance reasonably satisfactory to Lincoln Life, received
at the Administrative Office.
TELEPHONE TRANSACTION PRIVILEGES
Telephone transactions are permitted only if authorized in
proper written form by the applicant or Owner. To effect a
permitted telephone transaction, the Owner or his or her
authorized representative must call the Administrative
Office and provide, as identification, his or her policy
number, a requested portion of his or her Social Security
number, and such other information as Lincoln Life may
require to authenticate the authority of the caller. If
permitted and adequately authenticated, a customer service
representative will accept the telephone transaction
request. Lincoln Life disclaims all liability for losses
resulting from unauthorized or fraudulent telephone
transactions, but acknowledges that if it does not follow
these procedures, which it believes to be reasonable, it may
be liable for such losses.
32
<PAGE>
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only when both
Insureds are at least Age 18 but are less than Age 80.
DATE OF COVERAGE
The date of coverage will be the Date of Issue, provided
both Insureds are alive and prior to any change in the
health and insurability of the Insureds as represented in
the application.
RIGHT TO EXCHANGE THE POLICY
The Owner may exchange the policy for separate single life
policies on each of the Insureds under any of the following
circumstances; 1) a change in the Internal Revenue Code
(IRC) that would result in a less favorable tax treatment of
the Insurance provided under the policy, 2) the Insureds are
legally divorced while the policy is in force, or 3) the
Insureds' business is legally dissolved while the policy is
inforce.
Such a policy split is subject to all of the following
conditions; 1) both insureds are alive and the policy is
inforce at the time of the change in circumstances noted
above, 2) evidence of insurability satisfactory to Lincoln
Life is furnished, unless a) the exchange is applied for
within twelve months of the enactment of the change in the
IRC, or b) the exchange is applied for within 24 months of
the date of legal divorce with the split to become effective
after twenty-four months following the date of legal
divorce, 3) the amount of insurance of each new policy is
not larger than one half the Amount of Insurance then in
force under the policy, 4) the premium for each new policy
is determined according to Lincoln Life's rates then in
effect for that policy based on each Insured's then attained
age and sex, and 5) any other requirements as determined by
Lincoln Life are met.
The new policy will not take effect until the date all such
requirements are met.
INCONTESTABILITY
Lincoln Life will not contest payment of the Death Benefit
Proceeds based on the initial Specified Amount after the
Policy has been in force for two years from the Date of
Issue so long as both Insureds were alive during those two
years. For any increase in Specified Amount requiring
evidence of insurability, Lincoln Life will not contest
payment of the Death Benefit Proceeds based on such an
increase after it has been in force for two years from its
effective date so long as both Insureds were alive during
those two years.
MISSTATEMENT OF AGE OR GENDER
If the Age or gender of either of the Insureds 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 Second
Death;
33
<PAGE>
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 Second
Death.
SUICIDE
If the Second Death is by suicide, while sane or insane,
within two years from the Date of Issue, Lincoln Life will
upon the Second Death pay no more than the sum of the
premiums paid, less any indebtedness and the amount of any
partial surrenders. If the Second Death is by suicide, while
sane or insane, within two years from the date an
application is accepted for an increase in the Specified
Amount, Lincoln Life will upon the Second Death pay no more
than a refund of the monthly charges for the cost of such
additional benefit.
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.
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. Lincoln Life 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. Lincoln Life will
monitor premiums paid and will notify the Owner 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 the Owner
pursuant to Section 7702(f)(7) of the Code. The Owner 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
34
<PAGE>
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. Lincoln Life will monitor
compliance with these tests.
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.
Lincoln Life believes 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,
Lincoln Life reserves the right to steps required to remain
in compliance.
Lincoln Life 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. Lincoln Life also 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.
A total surrender or termination of the Policy by lapse may
have adverse tax consequences. If the amount received by the
Owner 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.
35
<PAGE>
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 discussion is
based on Lincoln Life's 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 Insureds grow older. Moreover,
on the death of the first of the Insureds to die, it tends
to increase significantly. The Owner should consult with his
or her 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 five 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
VICE PRESIDENT Second Vice President [1/90-4/96]), The
Lincoln National Life Insurance Co.
ROLAND C. BAKER President [1/95-present] The Lincoln
VICE PRESIDENT AND DIRECTOR National Life Insurance Co., President and
1801 S. Meyers Road Director, First Penn Pacific Life
Oakbrook Terrace, Ill. 60181 Insurance Company. Formerly: Chairman and
CFO [7/88-1/95], Baker, Ralish, Shipley
and Politzer, Inc.
JON A. BOSCIA President, Chief Executive Officer and
PRESIDENT AND DIRECTOR Director, Lincoln National Corporation
1500 Market Street [1/98-present], (Formerly: President,
Suite 3900 Chief Executive Officer and Director
Philadelphia, PA 19102 [10/96-1/98] and President and Chief
Operating Officer [5/94-10/96]), The
Lincoln National Life Insurance Company.
JOHN GOTTA Chief Executive Officer of Life Insurance,
CHIEF EXECUTIVE OFFICER OF LIFE Senior Vice President and Assistant
INSURANCE, SENIOR VICE PRESIDENT Secretary [12/99-present] The Lincoln
AND ASSISTANT SECRETARY National Life Insurance Company. Formerly:
350 Church Street Senior Vice President and Assistant
Hartford, Ct. 06103 Secretary [4/98-12/99]; Senior Vice
President [2/98-4/98]; Vice President and
General Manager [1/98-2/98] The Lincoln
National Life Insurance Co. Formerly:
Senior Vice President, Connecticut General
Life Insurance Company [3/96-12/97]; Vice
President, Connecticut (Massachusetts
Mutual) Mutual Life Insurance Company
[8/94-3/96].
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
---------------------------------- ------------------------------------------
<S> <C>
J. MICHAEL HEMP President [11/96-Present], Lincoln
SENIOR VICE PRESIDENT Financial Advisors Corp.; Senior Vice
350 Church Street President (formerly Vice President)
Hartford, Ct. 06103 [10/95-Present], Lincoln National Life
Insurance Co. Formerly: Regional Chief
Executive Officer [11/79-10/95], Lincoln
Dallas RMO.
STEPHEN H. LEWIS Interim Chief Executive Officer of
INTERIM CHIEF EXECUTIVE OFFICER Annuities and Senior Vice President,
AND SENIOR VICE PRESIDENT [12/99-present]. Formerly: Senior Vice
President, [5/94-12/99] The Lincoln
National Life Insurance Co.
H. THOMAS MCMEEKIN President and Director 5/94-present,
DIRECTOR Lincoln Investment Management, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103
GARY W. PARKER Vice President, Product Management,
VICE PRESIDENT [7/98-present] The Lincoln National Life
350 CHURCH STREET Insurance Co. Formerly: Senior Vice
HARTFORD, CT 06103 President, Life Products [10/97-6/98];
Vice President, Marketing Services
[9/89-10/97] Life of Virginia.
LAWRENCE T. ROWLAND Executive Vice President [10/96-present],
EXECUTIVE VICE PRESIDENT AND Formerly Senior Vice President
DIRECTOR [1/93-10/96]), The Lincoln National Life
One Reinsurance Place Insurance Co. Chairman, Chief Executive
1700 Magnavox Way Officer, President and Director
Fort Wayne, Ind. 46804 [10/96-present]. Formerly: Senior Vice
President [10/95-10/96]; Vice President
[10/91-10/95] Lincoln National Reassurance
Co.
KEITH J. RYAN Vice President, Controller and Chief
VICE PRESIDENT, CONTROLLER AND Accounting Officer [1/96-present] The
CHIEF ACCOUNTING OFFICER Lincoln National Life Insurance Co.
TODD R. STEPHENSON Senior Vice President, Chief Financial
SENIOR VICE PRESIDENT, Officer and Assistant Treasurer
CHIEF FINANCIAL OFFICER [3/99-present] Formerly: Senior Vice
AND ASSISTANT TREASURER President and Chief Operating Officer
[1/98-3/99] Lincoln Life & Annuity
Distributors, Inc.; Senior Vice President
and Chief Operating Officer [1/98-3/99]
Lincoln Financial Advisors Corp.; Senior
Vice President, Treasurer, Chief Financial
Officer and Director, American States
Insurance Co. [2/95-12/97], and Vice
President, Corporate Accounting, American
States Insurance Co. [5/92-2/95].
RICHARD C. VAUGHAN Executive Vice President and Chief
DIRECTOR Financial Officer [1/95-present] Formerly:
Centre Square Senior Vice President and Chief Financial
West Tower Officer [6/92-1/95]) Lincoln National
1500 Market Street Corp.
Suite 3900
Philadelphia, PA 19102
MICHAEL R. WALKER Senior Vice President [1/98-present]; Vice
SENIOR VICE PRESIDENT President [1/96-1/98] The Lincoln National
Life Insurance Co. Formerly: Vice
President [3/93-1/96], Employers Health
Insurance Co.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
---------------------------------- ------------------------------------------
<S> <C>
ROY V. WASHINGTON Vice President [7/96-present] formerly,
VICE PRESIDENT Associate Counsel [2/95-7/96] The Lincoln
National Life Insurance Co. Formerly:
Director of Compliance [8/94-2/95],
Lincoln Investment Management, Inc.
</TABLE>
DISTRIBUTION OF POLICIES
Lincoln Life intends to offer the Policy in all
jurisdictions where it is licensed to do business. Lincoln
Life, also 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"). The principal business address of Lincoln
Life is 1300 South Clinton Street, Fort Wayne, IN 46802.
The Policy may be sold by individuals, who in addition to
being appointed as life insurance agents for Lincoln Life,
are also registered representatives of Lincoln Life or other
broker-dealers. These representatives ordinarily 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 Lincoln
Life's resources, which include sales charges made under
this Policy.
CHANGES OF INVESTMENT POLICY
Lincoln Life may materially change the investment policy of
the Separate Account. Lincoln Life 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 Lincoln Life's
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 Lincoln Life on the
life of the Insureds. 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.
Lincoln Life 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
Lincoln Life from time to time offers other variable annuity
contracts and variable life insurance policies with benefits
which vary in accordance with the investment experience of a
separate account of Lincoln Life.
STATE REGULATION
Lincoln Life is 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 the operation of Lincoln Life for the preceding
year and its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic
examination to determine Lincoln Life's contract liabilities
and reserves so that the Insurance Department may certify
the items are correct. Lincoln Life's books and accounts are
subject to review by
38
<PAGE>
the Insurance Department at all times and a full examination
of its 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.
REPORTS TO OWNERS
Lincoln Life maintains 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.
Owners will also be sent annual reports containing financial
statements for the Separate Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Owners will receive 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
We are also 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 our financial strength or claims-paying
ability. The ratings are not intended to reflect the
investment experience or financial strength of the Variable
Account. We may advertise these ratings from time to time.
In addition, we may include in certain advertisements,
endorsements in the form of a list of organizations,
individuals or other parties which recommend Lincoln Life or
the Policies. Furthermore, we may occasionally include in
advertisements comparisons of currently taxable and tax
deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
We are a member of the Insurance Marketplace Standards
Association ("IMSA") and may include the IMSA logo and
information about IMSA membership in our advertisement.
Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services
for individually sold life insurance and annuities.
LEGAL PROCEEDINGS
Lincoln Life is involved in various pending or threatened
legal proceedings arising from the conduct of its business.
Most of 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 four lawsuits in which
Plaintiffs seek to represent national classes of
policyholders in connection with alleged fraud, breach of
contract and other claims relating to the sale of
interest-sensitive universal and participating whole life
insurance policies. As of the date of this prospectus, the
courts have not certified a class in any of the suits.
Plaintiffs seek unspecified damages and penalties for
themselves and on behalf of the putative class. Although the
relief sought in these cases is substantial, the cases are
in the preliminary stages of litigation, and it is
39
<PAGE>
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
Financial statements, actuarial and legal opinions 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.
40
<PAGE>
APPENDIX 1
CORRIDOR PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE OF THE YOUNGER
INSURED (NEAREST BIRTHDAY) CORRIDOR 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>
41
<PAGE>
APPENDIX 2
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 show 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, and that the
No-Lapse Provision is not selected.
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 current mortality and expense risk
charges are equivalent to an annual effective rate of 0.80%
of the daily net asset value of the Separate Account. The
mortality and expense risk charge is guaranteed never to
exceed an annual effective rate of 0.80% of the daily net
asset value of the Separate Account. 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
-1.62%, 4.38% and 10.38% on a current basis, -1.62%, 4.38%
and 10.38% on a guaranteed basis.
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 8.0% 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 per month for all
years. Current values reflect a current flat dollar monthly
administrative expense charge of $10.
Upon request, the Company will furnish a comparable
illustration based on the proposed insureds' ages, gender
classification, smoking classification, risk classification
and premium payment requested.
42
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,782 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED TOTAL ACCUMULATION VALUE SURRENDER VALUE
AT ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
END OF 5% DEATH BENEFIT PROCEEDS OF OF
POLICY INTEREST ANNUAL INVESTMENT RETURN OF GROSS GROSS GROSS GROSS SURRENDER
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% 0% 6% GROSS 12% 0% 6% GROSS 12% CHARGE
-- ------- --------- --------- --------- ------- ------- --------- ------- ------- --------- ------
1
2
3
4
5
6
7
8
</TABLE>
to be filed by amendment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9
10
11
12
13
14
15
20
25
30
</TABLE>
All 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. Guaranteed cost of insurance
rates assumed. Guaranteed 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 guaranteed
mortality and expense risk charges and
(2) assumed Fund total expenses of 0.82% per
year. See "Fund Expenses" at page 22 of this
Prospectus.
43
<PAGE>
MALE AGE 55/FEMALE AGE 55 NONSMOKER
STANDARD -- $13,782 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED TOTAL ACCUMULATION VALUE SURRENDER VALUE
AT ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
END OF 5% DEATH BENEFIT PROCEEDS OF OF
POLICY INTEREST ANNUAL INVESTMENT RETURN OF GROSS GROSS GROSS GROSS SURRENDER
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% 0% 6% GROSS 12% 0% 6% GROSS 12% CHARGE
-- ------- --------- --------- --------- ------- ------- --------- ------- ------- --------- ------
1
2
3
4
5
6
7
8
</TABLE>
to be filed by amendment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9
10
11
12
13
14
15
20
25
30
</TABLE>
All 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 current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.82% per year. See "Fund
Expenses" at page 6 of this Prospectus.
44
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,713 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED
AT TOTAL ACCUMULATION VALUE SURRENDER VALUE
END OF 5% DEATH BENEFIT PROCEEDS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST ANNUAL INVESTMENT RETURN OF GROSS GROSS SURRENDER
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% 0% GROSS 6% GROSS 12% 0% GROSS 6% GROSS 12% CHARGE
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- -------- ---------- ------
1
2
3
4
5
6
7
8
</TABLE>
to be filed by amendment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9
10
11
12
13
14
15
20
25
30
</TABLE>
All 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. Guaranteed cost of insurance
rates assumed. Guaranteed 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 guaranteed
mortality and expense risk charges and
(2) assumed Fund total expenses of 0.82% per
year. See "Fund Expenses" at page 6 of this
Prospectus.
45
<PAGE>
MALE AGE 65/FEMALE AGE 65 NONSMOKER
STANDARD -- $21,713 ANNUAL PREMIUM
FACE AMOUNT $1,000,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREMIUMS
ACCUMULATED
AT TOTAL ACCUMULATION VALUE SURRENDER VALUE
END OF 5% DEATH BENEFIT PROCEEDS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY INTEREST ANNUAL INVESTMENT RETURN OF GROSS GROSS SURRENDER
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% 0% GROSS 6% GROSS 12% 0% GROSS 6% GROSS 12% CHARGE
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- -------- ---------- ------
1
2
3
4
5
6
7
</TABLE>
to be filed by amendment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8
9
10
11
12
13
14
15
20
25
30
</TABLE>
All 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 current mortality
and expense risk charges and (2) assumed Fund
total expenses of 0.82% per year. See "Fund
Expenses" at page 6 of this Prospectus.
46
<PAGE>
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R
(TO BE FILED BY AMENDMENT)
R-1
<PAGE>
LINCOLN NATIONAL LIFE COMPANY FINANCIALS
(TO BE FILED BY AMENDMENT)
S-1
<PAGE>
PART II
FEES AND CHARGES REPRESENTATION
Lincoln Life represents that the fees and charges deducted
under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by 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 Post-Effective Amendment No. 4 to this Registration
Statement comprises the following papers and documents:
The facing sheet; A cross-reference sheet (reconciliation
and tie); Prospectus 3 consisting of 58 pages, The
undertaking to file reports; The fees and charges
representation; Statements regarding indemnification; The
signatures.
Other exhibits and 2 prospectuses currently in use are
incorporated by reference to previous filings of this
registration statement.
<PAGE>
<TABLE>
<S> <C> <C> <C>
1. The following exhibits correspond to those required by
paragraph A of the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of The Lincoln National Life
Insurance Company and related documents authorizing establishment
of the Account.(1)
(2) Not applicable.
(3) (a) Not applicable.
(b) Commission Schedule for Variable Life Policies.(5)
(4) Not applicable.
(5) (a) Form of Policy and Application.(1)
(b) Riders.(1)
(c) Form of Contract LN 655, Form of Application B10409
(6) (a) Articles of Incorporation of The Lincoln National Life
Insurance Company.(7)
(b) Bylaws of The Lincoln National Life Insurance Company.(7)
(7) Not applicable.
(8) Fund Participation Agreements.
Forms of Agreements between The Lincoln National Life Insurance
Company and:
(a) AIM Variable Insurance Funds, Inc.*(8)
(b) Baron Capital Funds Trust.*
(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.*(9)
(i) Lincoln National Funds.*(8)
(j) MFS-Registered Trademark- Variable Insurance Trust.(5)
(k) Neuberger Berman Advisers Management Trust.*(9)
(l) Templeton Variable Products Series Fund.*(8)
(m) OCC Accumulation Trust.(6)
(9) Services Agreement between The Lincoln National Life Insurance
Co. and Delaware Management Co.(2)
(10) See Exhibit 1(5).
2. See Exhibit 1(5).
3. Opinion and Consent of Counsel.*
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Actuary.*
7. Consent of Independent Auditors.*
8. Not applicable.
</TABLE>
- --------------------------
(1) Incorporated by reference to Registrant's registration statement on
Form S-6 (File No. 333-43107) filed on December 23, 1997
(2) Incorporated by reference to Registration Statement on Form S-6 (File
No. 33-40745) filed on November 21, 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 26, 1996.
(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 Registration Statement on Form S-6 (File No.
333-42479) filed on May 12, 1998.
(7) Incorporated by reference to Registration Statement on Form N-4 (File No.
33-27783) filed on December 5, 1996.
(8) Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-42507) filed on February 26, 1999.
(9) Incorporated by reference to Post-Effective Amendment No. 3 on on Form N-4
(File No. 333-50817) filed on April 23, 1990.
* to be filed by Amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Lincoln Life Flexible Premium Variable Life Separate Account R (File
No. 333-43107), has caused this Post-Effective Amendment No. 4 to be signed on
its behalf by the undersigned duly authorized, in the City of Hartford and State
of Connecticut on the 10th day of February, 2000.
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE
LIFE SEPARATE ACCOUNT R (Registrant)
By: /s/ JOHN H. GOTTA
-----------------------------------
John H. Gotta
CHIEF EXECUTIVE OFFICER OF LIFE
INSURANCE
SENIOR VICE PRESIDENT, ASSISTANT
SECRETARY, AND
DIRECTOR OF THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY
By: THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
(DEPOSITOR)
By: /s/ JOHN H. GOTTA
-----------------------------------
John H. Gotta
CHIEF EXECUTIVE OFFICER OF LIFE
INSURANCE,
SENIOR VICE PRESIDENT, ASSISTANT
SECRETARY, AND
DIRECTOR
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 to this Registration Statement (File
No. 333-43107) has been signed below on February 10, 2000 by the following
persons, as officers and directors of the Depositor, in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JON A. BOSCIA* President and Director (Principal Executive
-------------------------------------- Officer)
Jon A. Boscia
/s/ JOHN H. GOTTA Chief Executive Officer of Life Insurance, Senior
-------------------------------------- Vice President, Assistant Secretary, and Director
John H. Gotta
/s/ STEPHEN H. LEWIS* Interim Chief Executive Officer of Annuities,
-------------------------------------- Senior Vice President and Director
Stephen H. Lewis
/s/ LAWRENCE T. ROWLAND*
-------------------------------------- Executive Vice President and Director
Lawrence T. Rowland
/s/ TODD R. STEPHENSON* Senior Vice President, Chief Financial Officer and
-------------------------------------- Assistant Treasurer (Principal Financial Officer)
Todd R. Stephenson
/s/ KEITH J. RYAN* Vice President, Controller, and Chief Accounting
-------------------------------------- Officer (Principal Accounting Officer)
Keith J. Ryan
/s/ H. THOMAS MCMEEKIN*
-------------------------------------- Director
H. Thomas McMeekin
/s/ RICHARD C. VAUGHAN*
-------------------------------------- Director
Richard C. Vaughan
</TABLE>
*By: /s/ JOHN H. GOTTA
----------------------------------
John H. Gotta, pursuant to a Power
of Attorney filed with this
Post-Effective Amendment No. 4 to
the Registrantion Statement.
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance 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
Form S-6, Form N-8B-2 and/or Form N-6, or any successors to these Forms, and
amendments thereto, filed with the Securities and Exchange Commission under the
Securities Act of 1933, on behalf of the Company in its own name or in the name
of one of its Separate Accounts, hereby ratifying and confirming our signatures
as they may be signed by any of our attorneys-in-fact to any such Registration
Statement or amendment to said Registration Statement. The execution of this
document by each of the undersigned hereby revokes any and all Powers of
Attorney previously executed by said individual for this specific purpose.
WITNESS our hands and common seal on this 28th day of January, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JON A. BOSCIA
-------------------------------------- President and Director
Jon A. Boscia
/s/ JOHN H. GOTTA Chief Executive Officer of Life Insurance, Senior
-------------------------------------- Vice President, Assistant Secretary, and Director
John H. Gotta
/s/ STEPHEN H. LEWIS* Interim Chief Executive Officer of Annuities,
-------------------------------------- Senior Vice President and Director
Stephen H. Lewis
/s/ TODD R. STEPHENSON* Senior Vice President, Chief Financial Officer and
-------------------------------------- Assistant Treasurer
Todd R. Stephenson
/s/ H. THOMAS MCMEEKIN
-------------------------------------- Director
H. Thomas McMeekin
/s/ RICHARD C. VAUGHAN
-------------------------------------- Director
Richard C. Vaughan
</TABLE>
<TABLE>
<S> <C> <C>
* For Stephen H. Lewis and Todd R. Stephenson
STATE OF )
INDIANA
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
28th day of January, 2000
/s/ Janet L. Lindenberg
-------------------------------
Janet L. Lindenberg
Notary Public
Commission Expires: 7-10-2001
</TABLE>
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance 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
Form S-6, Form N-8B-2 and/or Form N-6, or any successors to these Forms, and
amendments thereto, filed with the Securities and Exchange Commission under the
Securities Act of 1933, on behalf of the Company in its own name or in the name
of one of its Separate Accounts, hereby ratifying and confirming our signatures
as they may be signed by any of our attorneys-in-fact to any such Registration
Statement or amendment to said Registration Statement. The execution of this
document by each of the undersigned hereby revokes any and all Powers of
Attorney previously executed by said individual for this specific purpose.
WITNESS our hands and common seal on this 28th day of January, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LAWRENCE T. ROWLAND*
-------------------------------------- Executive Vice President and Director
Lawrence T. Rowland
/s/ KEITH J. RYAN* Vice President, Controller and Chief Accounting
-------------------------------------- Officer
Keith J. Ryan
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
*For: Lawrence T. Rowland and Keith J. Ryan
STATE OF )
INDIANA
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
31st day of January, 2000
/s/ Janet L. Lindenberg
-------------------------------
Notary Public
Commission Expires: 7-10-2001
</TABLE>
<PAGE>
Policy Number SPECIMEN
Insured JOHN DOE
JANE DOE
Initial Specified Amount $500,000 Date of Issue MAY 1, 2000
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 death
of the second Insured to die. 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 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.
Registrar
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ON THE LIVES OF TWO INSUREDS
Non-Participating Variable life insurance payable
upon death of the second Insured to die.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy.
Flexible premiums payable to when the younger Insured reaches or would have
reached Age 100 or the death of the second Insured to die, whichever is earlier.
Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages as
shown in the Policy Specifications.
LN655
<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.................................................18
General Provisions............................................................20
Followed by Optional Methods of Settlement and Any Riders
*Page 4 is intentionally "blank."
LN655 2
<PAGE>
POLICY SPECIFICATIONS
Policy Number SPECIMEN
Insured JOHN DOE
Issue Age 35 Premium Class STANDARD
Insured JANE DOE
Issue Age 32 Premium Class STANDARD
Initial Specified Amount $500,000 Date of Issue MAY 1, 2000
Minimum Specified Amount $250,000 Monthly Anniversary Day 01
LN655 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 $10,000.00
Planned Premium $10,000.00
Additional premium payments may vary by frequency or
amount.
PAYMENT MODE: ANNUALLY
NO-LAPSE PREMIUM: A payment of at least $52.61 is due on
the Date of Issue and each Monthly Anniversary
Day thereafter to guarantee the policy will not
lapse. All or a portion of the remaining monthly
premiums can be paid in advance at any time. If
such cumulative premium payments are paid, it
will prevent the policy from lapsing. (SEE
PREMIUM AND REINSTATEMENT PROVISIONS, NO-LAPSE
PROVISION.)
NOTE: Unless the No-Lapse Provision is in effect, the
policy will terminate before the younger Insured
reaches or would have reached 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%.
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.)
GUARANTEED MINIMUM LOAN INTEREST RATES: The interest rate credited on the Loan
Account may vary, but will not be less than the interest rate charged on the
Loan Account, less 2% per year during Policy years 1 through 10 and less 1% per
year thereafter. (As of the Date of Issue, the annual rate at which interest is
credited on the Loan Account Value will be equal to the interest rate charged on
the Loan Account, less 1%, on and before the 10th Policy Anniversary, and the
interest rate charged on the Loan Account, less 0%, thereafter.)
LN655 3
<PAGE>
POLICY SPECIFICATIONS
Policy Number SPECIMEN
Insured JOHN DOE
Issue Age 35 Premium Class STANDARD
Insured JANE DOE
Issue Age 32 Premium Class STANDARD
Initial Specified Amount $500,000 Date of Issue MAY 1, 2000
Minimum Specified Amount $250,000 Monthly Anniversary Day 01
OWNER
The Insureds
BENEFICIARY
Margaret Doe, Daughter, if surviving both Insureds
LN655 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 or 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.
<TABLE>
<CAPTION>
SURRENDER CHARGE AS OF
POLICY YEAR BEGINNING OF POLICY YEAR
----------- ------------------------
<S> <C>
1 $2,020.00
2 $2,020.00
3 $1,965.00
4 $1,885.00
5 $1,805.00
6 $1,725.00
7 $1,635.00
8 $1,450.00
9 $1,270.00
10 $1,090.00
11 $905.00
12 $725.00
13 $545.00
14 $365.00
15 180.00
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.
LN655 5
<PAGE>
SCHEDULE 2: EXPENSE CHARGES AND FEES
PREMIUM LOAD. Lincoln Life will deduct a Premium Load of 8% from each premium
payment during the first 15 policy years and 5% thereafter.
MONTHLY ADMINISTRATIVE FEE. A Monthly Deduction is made on each Monthly
Anniversary Day from the Net Accumulation Value. (SEE POLICY VALUES PROVISIONS,
MONTHLY DEDUCTION.) It includes an administrative fee charge, Cost of Insurance
charges and any charges for supplemental riders or optional benefits.
The monthly administrative fee as of the Date of Issue of the policy consists
of:
(a) a fee of $10.00 per month; and
(b) a monthly charge of per $1,000 of initial Specified Amount for the first
120 months from the Date of Issue, and
(c) a monthly charge per $1,000 for any increase in Specified Amount for the
first 120 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 older Insured's Age at the Date of Issue or date of any
increase in Specified Amount.
<TABLE>
<CAPTION>
EXPENSE CHARGE EXPENSE CHARGE EXPENSE CHARGE
AGE PER $1,000 AGE PER $1,000 AGE PER $1,000
- ------------------ ------------------ ------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
0-40 0.0600 51 0.1080 62 0.1400
41 0.0640 52 0.1160 63 0.1400
42 0.0680 53 0.1240 64 0.1400
43 0.0720 54 0.1320 65 0.1450
44 0.0760 55 0.1400 66 0.1450
- ------------------ ------------------ ------------------ ---------------- ----------------- ----------------
45 0.0800 56 0.1400 67 0.1450
46 0.0840 57 0.1400 68 0.1450
47 0.0880 58 0.1400 69 0.1450
48 0.0920 59 0.1400 70+ 0.1500
49 0.0960 60 0.1400
50 0.1000 61 0.1400
- ------------------ ------------------ ------------------ ---------------- ----------------- ----------------
</TABLE>
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 made
daily at an equivalent annual rate of 0.80% of a Variable Sub-Account's Value.
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.
LN655 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 Cost of Insurance Rate is the monthly rate charged under the
policy. The Cost of Insurance Rate varies based on the sex,
issue age (nearest birthday), duration and premium class of each
Insured. It is determined under an actuarial formula, on file
with the insurance supervisory official of the jurisdiction in
which the policy is delivered, that reflects one-alive and
both-alive probabilities. The rates set forth in the table below
reflect the amount of the Flat Extra or the Risk Factor
(substandard risk classification rates), if any, shown in the
POLICY SPECIFICATIONS, and are based on the 1980 CSO Tables. The
monthly Cost of Insurance Rate charged under the policy shall
not exceed the applicable rate set forth in the table below for
each respective duration (number of years from the Date of
Issue).
<TABLE>
<CAPTION>
MONTHLY MONTHLY MONTHLY
DURATION RATE DURATION RATE DURATION RATE
- ------------------- ----------------- ----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
1 0.00006 2 0.00019 3 0.00034
4 0.00051 5 0.00072 6 0.00097
7 0.00125 8 0.00160 9 0.00199
10 0.00245 11 0.00379 12 0.00559
13 0.00695 14 0.00830 15 0.00951
16 0.01098 17 0.01295 18 0.01432
19 0.01573 20 0.01708 21 0.01852
22 0.01996 23 0.02232 24 0.02508
25 0.02870 26 0.03301 27 0.03830
28 0.04462 29 0.05212 30 0.06119
31 0.07169 32 0.08551 33 0.10171
34 0.12045 35 0.14291 36 0.16945
37 0.20182 38 0.24149 39 0.29087
40 0.35747 41 0.56891 42 0.77627
43 0.99394 44 1.32533 45 1.74827
46 2.19436 47 2.72027 48 3.28096
49 3.91144 50 4.63804 51 5.46308
52 6.38173 53 7.43672 54 8.40643
55 9.48003 56 9.85217 57 10.16255
58 10.43189 59 10.68160 60 10.91958
61 11.74364 62 12.61485 63 13.53432
64 13.63748 65 13.72362 66 13.79463
67 13.80948 68 13.81689 69 13.81850
</TABLE>
LN655 7
<PAGE>
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE
The amount of the Death Benefit Proceeds must satisfy certain requirements under
the Internal Revenue 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 Internal Revenue Code to maintain the policy as life insurance
under each of the Death Benefit Options (SEE INSURANCE COVERAGE PROVISIONS,
DEATH BENEFIT OPTIONS) is equal to the product of the Accumulation Value and the
applicable Corridor Percentage set forth below.
<TABLE>
<CAPTION>
ATTAINED AGE OF ATTAINED AGE OF THE
THE YOUNGER INSURED CORRIDOR YOUNGER INSURED CORRIDOR
(NEAREST BIRTHDAY) PERCENTAGE (NEAREST BIRTHDAY) 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>
LN655 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 subject person 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 on the POLICY SPECIFICATIONS.
DEATH BENEFIT PROCEEDS. The amount payable to the Beneficiary upon the Second
Death (defined below) in accordance with the Death Benefit Option elected. 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 transfers 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, POLICY LAPSE AND 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.
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.
LN655 9
<PAGE>
DEFINITIONS (CONTINUED)
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 on the Date of Issue and each
Monthly Anniversary Day on a cumulative basis to prevent the policy from
lapsing, if the No-Lapse Provision is elected. (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.
SECOND DEATH. The death of the second of the two Insureds to die.
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.
VARIABLE ACCOUNT. The Lincoln Life Flexible Premium Variable Life Account R,
which consists 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.
LN655 10
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS
PREMIUMS. The first premium must be paid to commence coverage under this policy
(See INSURANCE 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 younger Insured reaches or would
have reached 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 POLICY LAPSE AND 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 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 younger
Insured reaches or would have reached 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
Accumulation Value and the Specified Amount, Lincoln Life may reject the
additional premium payment unless evidence of insurability is furnished to
Lincoln Life and it agrees to accept the risk for both Insureds or any surviving
Insured. 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 premium
payment received by Lincoln Life shall be applied as premium and not to repay
any outstanding loans, 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. The Net Premium
Payment associated with the initial premium payment and any Net Premium Payments
received during 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.
NO-LAPSE PROVISION. If the No-Lapse Provision has been selected, the Owner is
required to pay, on the Date of Issue and on or before each Monthly Anniversary
Day, the monthly No-Lapse Premium as 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 even if the Net Accumulation Value is
insufficient to meet the Monthly Deductions or the amount of indebtedness
exceeds the Accumulation Value, less Surrender Charges.
A period of 61 days will be granted for the No-Lapse Provision 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 amount required shall be the difference between (a) the sum of
the No-Lapse Premiums due since the Date of Issue, and (b) the sum of all
premiums paid less indebtedness and partial surrenders.
The No-Lapse Provision will terminate 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.
LN655 11
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
POLICY LAPSE AND 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
Accumulation Value less Surrender Charges, 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 Surrender Charges, 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 if both Insureds are living provided (a) the policy has not been
surrendered, (b) there is an application for reinstatement In Writing, (c)
evidence of insurability is furnished to Lincoln Life and it agrees to accept
the risk as to both Insureds, (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 Insureds will be
the Owner.
RIGHTS OF OWNER. So long as one of the Insureds is alive and except as provided
below, 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.
The Owner may exercise any rights and privileges under the policy without the
consent of any designated Beneficiary if the Owner has reserved the right to
change the Beneficiary. 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 than an Insured and
dies before the Second Death, all of the rights and privileges of the Owner
under the policy shall vest 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.
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OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS (CONTINUED)
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 affect 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 Second Death 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 held in the separate account ("Variable Account") which is designated in the
DEFINITIONS 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.
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.
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VARIABLE ACCOUNT PROVISIONS (CONTINUED)
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 Group 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. Lincoln Life, after due consideration of
appropriate factors, may add additional Funds and Fund Groups at any time or may
eliminate or substitute Funds or Fund Groups 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 Group'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, 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, (f) monthly deductions, and (g) all expenses
and fees as specified under SCHEDULE 2.
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.)
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POLICY VALUES PROVISIONS (CONTINUED)
INTEREST RATE CREDITED ON LOAN ACCOUNT. The interest rate credited on the Loan
Account may vary, but will not be less than the interest rate charged on the
loan account less 2% per year during Policy years 1 through 10 and less 1% per
year thereafter. (SEE the POLICY SPECIFICATIONS for the rate in effect as of the
Date of Issue.)
Such loan interest amount will be transferred into the Fixed and/or Variable
Sub-Accounts in proportion to the then current Net Accumulation Value, unless
the Owner and Lincoln Life agree otherwise.
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 earned 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 (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 accumulation unit value may increase or decrease from Valuation Period to
Valuation Period.
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.
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POLICY VALUES PROVISIONS (CONTINUED)
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. 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 1980 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.
Transfers from the Fixed Sub-Account are subject to the POLICY SPECIFICATIONS,
LIMITS ON TRANSFERS. Transfers to the Fixed Sub-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
$100 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 effect; (d) Transfers among the Variable
Sub-Accounts or from a Variable
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TRANSFER PRIVILEGE PROVISION (CONTINUED)
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 than $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 at least one Insured is still living when the younger Insured becomes
or would have become 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 younger Insured becomes or would have
become age 100. No further Monthly Deductions will be made and 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, including the transaction fee, is (a) not less than $525;
(b) 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 $25 transaction fee (as indicated in Schedule 1:
Surrender Charges) shall be withdrawn from the Fixed and/or Variable
Sub-Accounts in proportion to the balances invested in such Sub-Accounts.
Any surrender results in a withdrawal of funds from all of the Fixed and/or
Variable Sub-Accounts. 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.
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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 the then current Accumulation Value less the
Surrender Charge 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.
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 either 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 then current Net Accumulation Value.
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 charge, 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 subject to the conditions in PREMIUM AND REINSTATEMENT PROVISIONS,
POLICY LAPSE AND 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 has been accepted by the Owner (1)
while both Insureds are alive and (2) prior to any change in health and
insurability as represented in the application.
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INSURANCE COVERAGE PROVISIONS (CONTINUED)
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 both of the
Insureds are alive on such day.
(SEE PREMIUM AND REINSTATEMENT 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 second of the Insureds to die; and
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 both Insureds die while the policy is in force,
Lincoln Life shall pay Death Benefit Proceeds equal to the greater of (i) the
amount determined under the Death Benefit Option in effect at the time of the
Second 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 Second 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 as of the Valuation Day
immediately after the Second Death, less loan interest accrued but not
yet charged.
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, subject to (a) the consent of Lincoln Life, b)
all such changes must be requested In Writing on a form satisfactory to Lincoln
Life and filed at the Administrator Mailing Address, and (c) 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.
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INSURANCE COVERAGE PROVISIONS (CONTINUED)
2. If an increase in the Specified Amount is requested:
(a) a supplemental application must be submitted and evidence of
insurability of both Insureds 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 both Insureds are 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 date 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.
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 each 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 Second Death.
The amount payable upon receipt of due proof of the Second 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 at the
Administrator Mailing Address upon the Second Death subject to the receipt of
Due Proof of Death for both Insureds. If the Second 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.
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GENERAL PROVISIONS (CONTINUED)
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 either of the Insureds is
misstated, Lincoln Life will adjust all benefits to the amounts that would have
been purchased for the correct ages and sexes according to the basis specified
in the "Table of Guaranteed Maximum Life Insurance Rates.
SUICIDE. If the second of the Insureds to die commits suicide, while sane or
insane, 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 second of the
Insureds to die commits suicide, while sane or insane, 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 both Insureds
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 both Insureds.
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.
LN655 21
<PAGE>
GENERAL PROVISIONS (CONTINUED)
CHANGE OF PLAN. This policy may be exchanged for another policy only if the
Company consents to the exchange and all requirements for the exchange, as
determined by the Company, are met.
However, The Owner may exchange the policy for separate single life policies on
each of the Insureds under any of the following circumstances: 1) a change in
the Internal Revenue Code (IRC) that would result in a less favorable tax
treatment of the Insurance provided under the policy, 2) the Insureds are
legally divorced while the policy is inforce, or 3) the Insureds' business is
legally dissolved while the policy is inforce.
Such a policy split is subject to all of the following conditions: 1) both
Insureds are alive and the policy is inforce at the time of the change in
circumstances noted above, 2) evidence of insurability satisfactory to Lincoln
Life is furnished, unless a) the exchange is applied for within twelve months of
the enactment of the change in the IRC, or b) the exchange is applied for within
24 months of the date of legal divorce with the split to become effective after
24 months following the date of legal divorce, 3) the amount of insurance of
each new policy is not larger than one half of the Amount of Insurance then in
force under the policy unless agreed to by the Company, and 4) any other
requirements as determined by Lincoln Life are met.
The new policy will not take effect until the date all such requirements are
met. The premium for each new policy is determined according to Lincoln Life's
rates then in effect for that policy based on each Insured's then attained age
and sex.
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.
LN655 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 an Insured is alive, the request, including the designation of the payee,
may be made by the Owner. At the time the Death Benefit Proceeds become 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 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
LR650 Page 1
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
<TABLE>
<CAPTION>
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - MALE
- ----------------------------------------------------------- ---------------------------------------------------------
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
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age Life Annuity Age Life Annuity
10 $2.87 $2.87 $2.87 $2.87 $2.87 35 $3.44 $3.44 $3.44 $3.43 $3.41
11 2.89 2.89 2.89 2.88 2.88 36 3.48 3.48 3.48 3.46 3.45
12 2.90 2.90 2.90 2.90 2.90 37 3.52 3.52 3.52 3.50 3.48
13 2.92 2.92 2.91 2.91 2.91 38 3.57 3.56 3.56 3.54 3.52
14 2.93 2.93 2.93 2.93 2.92 39 3.61 3.61 3.60 3.58 3.56
15 2.95 2.95 2.95 2.94 2.94 40 3.66 3.65 3.65 3.63 3.60
16 2.96 2.96 2.96 2.96 2.96 41 3.71 3.70 3.69 3.67 3.64
17 2.98 2.98 2.98 2.98 2.97 42 3.76 3.75 3.74 3.72 3.68
18 3.00 3.00 3.00 2.99 2.99 43 3.81 3.81 3.79 3.77 3.73
19 3.02 3.02 3.01 3.01 3.01 44 3.87 3.86 3.85 3.82 3.77
20 3.04 3.04 3.03 3.03 3.03 45 3.93 3.92 3.90 3.87 3.82
21 3.06 3.05 3.05 3.05 3.05 46 3.99 3.98 3.96 3.92 3.87
22 3.08 3.08 3.07 3.07 3.07 47 4.05 4.05 4.02 3.98 3.92
23 3.10 3.10 3.09 3.09 3.09 48 4.12 4.11 4.09 4.04 3.97
24 3.12 3.12 3.12 3.11 3.11 49 4.19 4.18 4.15 4.10 4.03
25 3.14 3.14 3.14 3.14 3.13 50 4.27 4.26 4.22 4.17 4.08
26 3.17 3.17 3.16 3.16 3.15 51 4.34 4.33 4.30 4.23 4.14
27 3.19 3.19 3.19 3.19 3.18 52 4.43 4.41 4.37 4.30 4.20
28 3.22 3.22 3.22 3.21 3.20 53 4.51 4.50 4.45 4.37 4.26
29 3.25 3.25 3.24 3.24 3.23 54 4.60 4.59 4.54 4.45 4.32
30 3.28 3.28 3.27 3.27 3.26 55 4.70 4.68 4.62 4.53 4.39
31 3.31 3.31 3.30 3.30 3.29 56 4.80 4.78 4.72 4.61 4.45
32 3.34 3.34 3.33 3.33 3.32 57 4.91 4.89 4.82 4.69 4.51
33 3.37 3.37 3.37 3.36 3.35 58 5.03 5.00 4.92 4.78 4.58
34 3.41 3.41 3.40 3.39 3.38 59 5.15 5.12 5.03 4.87 4.65
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
<TABLE>
<CAPTION>
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - MALE
---------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
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 4.96
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 10.55 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>
LR650 Page 2
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
<TABLE>
<CAPTION>
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - FEMALE
- ----------------------------------------------------------- ---------------------------------------------------------
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
- ----------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age Life Annuity Age Life Annuity
10 $2.80 $2.80 $2.80 $2.80 $2.80 35 $3.26 $3.26 $3.26 $3.25 $3.24
11 2.81 2.81 2.81 2.81 2.81 36 3.29 3.29 3.29 3.28 3.27
12 2.82 2.82 2.82 2.82 2.82 37 3.32 3.32 3.32 3.31 3.30
13 2.83 2.83 2.83 2.83 2.83 38 3.35 3.35 3.35 3.34 3.33
14 2.85 2.85 2.85 2.84 2.84 39 3.39 3.39 3.38 3.38 3.37
15 2.86 2.86 2.86 2.86 2.86 40 3.42 3.42 3.42 3.41 3.40
16 2.87 2.87 2.87 2.87 2.87 41 3.46 3.46 3.46 3.45 3.43
17 2.89 2.89 2.89 2.88 2.88 42 3.50 3.50 3.50 3.49 3.47
18 2.90 2.90 2.90 2.90 2.90 43 3.54 3.54 3.54 3.53 3.51
19 2.92 2.92 2.92 2.91 2.91 44 3.59 3.59 3.58 3.57 3.55
20 2.93 2.93 2.93 2.93 2.93 45 3.64 3.63 3.63 3.61 3.59
21 2.95 2.95 2.95 2.95 2.94 46 3.68 3.68 3.67 3.66 3.63
22 2.96 2.96 2.96 2.96 2.96 47 3.73 3.73 3.72 3.71 3.68
23 2.98 2.98 2.98 2.98 2.98 48 3.79 3.79 3.77 3.76 3.72
24 3.00 3.00 3.00 3.00 2.99 49 3.84 3.84 3.83 3.81 3.77
25 3.02 3.02 3.02 3.02 3.01 50 3.90 3.90 3.89 3.86 3.82
26 3.04 3.04 3.04 3.03 3.03 51 3.97 3.96 3.95 3.92 3.88
27 3.06 3.06 3.06 3.06 3.05 52 4.03 4.03 4.01 3.98 3.93
28 3.08 3.08 3.08 3.08 3.07 53 4.10 4.10 4.08 4.04 3.99
29 3.10 3.10 3.10 3.10 3.09 54 4.18 4.17 4.15 4.11 4.04
30 3.13 3.13 3.12 3.12 3.12 55 4.25 4.25 4.22 4.18 4.11
31 3.15 3.15 3.15 3.14 3.14 56 4.34 4.33 4.30 4.25 4.17
32 3.18 3.18 3.17 3.17 3.16 57 4.42 4.41 4.38 4.32 4.23
33 3.20 3.20 3.20 3.20 3.19 58 4.52 4.51 4.47 4.40 4.30
34 3.23 3.23 3.23 3.22 3.22 59 4.61 4.60 4.56 4.48 4.37
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - FEMALE
- ---------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
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 5.08 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 6.98 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 9.08 8.70 7.69 6.49 5.45
80 9.54 9.07 7.89 6.55 5.47
81 10.03 9.47 8.08 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>
<TABLE>
<CAPTION>
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
- ----------------------------------------------------------- ---------------------------------------------------------
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
- ----------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<TABLE>
<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>
LR650 Page 3
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ON
THE LIVES OF TWO INSUREDS Non-Participating Variable life
insurance payable upon death of the second Insured to die.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy.
Flexible premiums payable to when the younger Insured reaches
or would have reached Age 100 or the death of the second Insured to
die, whichever is earlier. Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages
as shown in the Policy Specifications.
LN655
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY VUL/SVUL ADDENDUM TO
APPLICATION
THIS VUL/SVUL ADDENDUM IS SUBMITTED AS A
SUPPLEMENT TO A LIFE INSURANCE APPLICATION
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
NAME OF PROPOSED INSURED(A):
- ------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST
NAME OF PROPOSED INSURED(B):
- ------------------------------------------------------------------------------
FIRST MIDDLE INITIAL LAST
NAME OF OWNER(S):
-----------------------------------------------------------------------------------------
PROVIDE FULL LEGAL NAME
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1. BROKER/ Print Name of Broker/Dealer:
DEALER
INFORMATION ------------------------------------------------------------
Address:
------------------------------------------------------------------------------
Telephone: Field Office Code:
------------------------------- ----------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2. INVESTMENT Overall Investment Objective for Sub-Account Selections: (SELECT ONE OBJECTIVE ONLY)
OBJECTIVE Aggressive Growth Growth Growth & Income Income
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. TELEPHONE I(We) acknowledge that neither the Company nor any person
authorized by the Company will be responsible for TRANSFER any claim, loss,
liability or expense in connection with a telephone transfer if the Company
or such other AUTHORIZA- person acted on telephone transfer instructions in
good faith in reliance on this authorization.
Check here if you DO NOT wish to authorize telephone transfer instructions.
Check here if you DO NOT wish to authorize your registered representative/agent to make telephone transfers.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4. NO LAPSE
PROVISION The No Lapse Provision will only be effective if
elected here and if the No Lapse Premium
requirement is met. (This provision may not be
available in all states for all products.)
YES NO
- ------------------------------------------------------------------------------------------------------------------------------------
5. AUTOMATIC Quarterly Semi-Annual Annual
REBALANCING
YES NOTE: THIS SERVICE IS NOT AVAILABLE IF DOLLAR COST AVERAGING IS SELECTED.
(IF BOX IS NOT CHECKED, AUTOMATIC REBALANCING WILL NOT BE PROVIDED AT POLICY ISSUE.)
- ------------------------------------------------------------------------------------------------------------------------------------
6. DOLLAR COST SELECT ONE TRANSFER OPTION (SEE THE PROSPECTUS FOR THE MINIMUM PER TRANSFER):
AVERAGING $_____________ monthly $_____________ quarterly
(FOLLOW Each amount transferred is to be applied to the Fund(s) listed on the following page in the percentages
INSTRUCTIONS IN noted (USE WHOLE PERCENTAGES ONLY. TOTAL MUST EQUAL 100%).
SECTION 7 BEFORE
COMPLETING THIS
SECTION) I(We) understand that these transfers will continue until the Fund is exhausted or I(we) terminate the
program, whichever occurs earlier. I(We) also understand that I(we) may add to such Fund at any time to
continue this program or may change the periodic amounts.
YES NOTE: IF DOLLAR COST AVERAGING IS SELECTED, ALLOCATIONS MUST BE MADE FROM
THE MONEY MARKET FUND.
(IF BOX IS NOT CHECKED, DOLLAR COST AVERAGING WILL NOT BE PROVIDED AT POLICY ISSUE.)
- ------------------------------------------------------------------------------------------------------------------------------------
7. INITIAL FIXED ACCOUNT ________% Transfer(s) from the Fixed Account may only be made during the 30-day period
PREMIUM following each Policy Anniversary and is (are) subject to a maximum annual limit of 20% of the Fixed Account
PAYMENT Value as of that Policy Anniversary. (SEE POLICY SPECIFICATION PAGE)
ALLOCATION
- ------------------------------------------------------------------------------------------------------------------------------------
B10409
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
7. (CONT'D) VARIABLE ACCOUNT - INITIAL DOLLAR
INITIAL PREMIUM SUB-ACCOUNTS (FUNDS) PREMIUM COST
PAYMENT (REFER TO THE PROSPECTUS FOR FUND AVAILABILITY) ALLOCATION % AVERAGING %
ALLOCATION
- ---------------------------- --------------------------------------------------- --------------------- -------------------
<S> <C> <C> <C>
--------------------------------------------------- --------------------- -------------------
(Allocation to any one AIM VARIABLE INSURANCE FUNDS, INC.
% line must be 1% --------------------------------------------------- --------------------- -------------------
or more. Use whole AIM V.I. Growth Fund
percentages only. --------------------------------------------------- --------------------- -------------------
Grand Total of all AIM V.I. International Equity Fund
allocations made in --------------------------------------------------- --------------------- -------------------
this section of the AIM V.I. Value Fund
application must equal --------------------------------------------------- --------------------- -------------------
100%)
--------------------------------------------------- --------------------- -------------------
AMERICAN VARIABLE INSURANCE SERIES
--------------------------------------------------- --------------------- -------------------
Global Small Capitalization Fund - Class 2
--------------------------------------------------- --------------------- -------------------
Growth Fund - Class 2
--------------------------------------------------- --------------------- -------------------
Growth-Income Fund - Class 2
--------------------------------------------------- --------------------- -------------------
--------------------------------------------------- --------------------- -------------------
BARON CAPITAL FUNDS TRUST
--------------------------------------------------- --------------------- -------------------
IF DOLLAR COST Baron Capital Asset Fund - Insurance Shares
AVERAGING --------------------------------------------------- --------------------- -------------------
is elected, an allocation
must be made to the --------------------------------------------------- --------------------- -------------------
Money Market Fund and BT INSURANCE FUNDS TRUST
the % allocated must --------------------------------------------------- --------------------- -------------------
result in an initial amount EAFE(R) Equity Index Fund
of at least $1,000 in such --------------------------------------------------- --------------------- -------------------
account. Please complete Equity 500 Index Fund
Section 6. --------------------------------------------------- --------------------- -------------------
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
--------------------------------------------------- --------------------- -------------------
Growth Portfolio - Service Class
--------------------------------------------------- --------------------- -------------------
High Income Portfolio - Service Class
--------------------------------------------------- --------------------- -------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
--------------------------------------------------- --------------------- -------------------
Contrafund Portfolio - Service Class
--------------------------------------------------- --------------------- -------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
--------------------------------------------------- --------------------- -------------------
Growth Opportunities Portfolio - Service Class
--------------------------------------------------- --------------------- -------------------
--------------------------------------------------- --------------------- -------------------
JANUS ASPEN SERIES
--------------------------------------------------- --------------------- -------------------
Balanced Portfolio
--------------------------------------------------- --------------------- -------------------
Worldwide Growth Portfolio
--------------------------------------------------- --------------------- -------------------
Global Technology Portfolio
--------------------------------------------------- --------------------- -------------------
--------------------------------------------------- --------------------- -------------------
LINCOLN NATIONAL
--------------------------------------------------- --------------------- -------------------
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(R)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
--------------------------------------------------- --------------------- -------------------
International Fund - Class 2
--------------------------------------------------- --------------------- -------------------
Stock Fund - Class 2
--------------------------------------------------- --------------------- -------------------
--------------------------------------------------- --------------------- -------------------
OTHER:
--------------------------------------------------- --------------------- -------------------
--------------------------------------------------- --------------------- -------------------
NOTE: ALL PAYMENTS AND VALUES PROVIDED BY THE LIFE INSURANCE POLICY WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. THE DEATH BENEFIT PROCEEDS AND THE CASH
VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE EXPERIENCE OF THE VARIABLE ACCOUNT. ALSO, THE DEATH BENEFIT
PROCEEDS MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
B10409
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
CERTIFICATIONS AND SIGNATURES
I(We) have read the above questions and answers and declare that they are complete and true to the best of my (our) knowledge and
belief. I(We) agree, a) that this VUL/SVUL Addendum to Application and Life Insurance Application (Part I pages 1, 2, 3, 4 and 5,
and Part IIA, or Part II, if required) shall form a part of any policy/contract issued, and b) that no Agent/Representative of the
Company shall have the authority to waive a complete answer to any question in this Addendum to Application, make or alter any
contract, or waive any of the Company's other rights or requirements. I(We) further agree that no insurance shall take effect unless
and until the policy/contract has been delivered to and accepted by me(us) and the initial premium paid during the lifetime of the
Proposed Insured(s), and provided the Proposed Insured(s) remain in the state of health and insurability represented in Parts I and
II, or Part IIA if required, of this Application.
I(We) acknowledge receipt of the current prospectus(es).
_____________________
DATED AT (CITY AND STATE) ON (MONTH, DAY AND YEAR)
_____________________
SIGNATURE OF PROPOSED INSURED (A)
_____________________
SIGNATURE OF PROPOSED INSURED (B)
_____________________
SIGNATURE OF APPLICANT/OWNER/TRUSTEE/SUB-TRUSTEE IF OTHER THAN PROPOSED INSURED
_____________________
SIGNATURE OF APPLICANT/OWNER/TRUSTEE/SUB-TRUSTEE IF OTHER THAN PROPOSED INSURED
_____________________
SIGNATURE OF LICENSED AGENT/REPRESENTATIVE/BROKER (AS WITNESS)
_____________________
SIGNATURE OF WITNESS (IF OTHER THAN AGENT/REPRESENTATIVE)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B10409
