<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
1933 ACT REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
(EXACT NAME OF REGISTRANT)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
120 Madison Street, Suite 1700, Syracuse, NY 13202
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(888) 223-1860
<TABLE>
<S> <C>
Robert O. Sheppard, Esquire COPY TO:
Lincoln Life & Annuity Company of New York Jeremy Sachs, Esquire
120 Madison Street, Suite 1700 350 Church Street
Syracuse NY 13202 Hartford, CT 06103
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
Approximate date of proposed public offering: As soon as possible
after the effective date of the Registration Statement.
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 first Form 24F-2 for the Registrant for the fiscal year
ending December 31, 2000 is not yet due.
<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 LLANY, the Separate Account and the General
Account
6(a) LLANY, the Separate Account and the General
Account
6(b) *
9 Legal Proceedings
10(a)-(c) Right-to-Examine Period; Surrenders of the
Policy; Accumulation Value; Reports to Owners
10(d) Right to Exchange the Policy; Policy Loans;
Surrenders of the Policy; 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 Benefit;
Policy Values; Settlement Options
11 The Funds
12 The Funds
13 Charges and Fees
14 The Policy
15 Premium Payments; Transfers
16 LLANY, the Separate Account and the General
Account
17 Surrender of the Policy
18 LLANY, the Separate Account and the General
Account
19 Reports to Owners
20 *
21 Policy Loans
22 *
23 LLANY, the Separate Account and the General
Account
24 Incontestability; Suicide; Misstatement of Age or
Gender
25 LLANY, the Separate Account and the General
Account
26 Fund Participation Agreements
27 LLANY, 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 LLANY
29 LLANY, 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 Surrender of the Policy
47 LLANY, the Separate Account and the General
Account; Surrender of the Policy, Transfers
48 *
49 *
50 LLANY, 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>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HOME OFFICE LOCATION:
120 MADISON STREET
SUITE 1700
SYRACUSE, NY 13202
(888) 223-1860
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 Lincoln Life & Annuity Company of New York ("LLANY"
"we", "our" or "us"). The Policy provides death benefits when the second of the
two named Insureds dies (a "Second Death Policy").
The Policy features include 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 Policy described in this Prospectus is available only in New York.
The mutual funds ("Funds") available through LLANY'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
AMERICAN VARIABLE INSURANCE SERIES
Global Small Capitalization Fund -- Class 2
Growth Fund -- Class 2
Growth-Income Fund -- Class 2
BARON CAPITAL FUNDS TRUST
Baron Capital Asset Fund -- Insurance Shares
DELAWARE GROUP PREMIUM FUND, INC.
High Yield Series formerly Delchester Series -- Standard Class
Devon Series -- Standard Class
Emerging Markets Series -- Standard Class
REIT Series -- Standard Class
Small Cap Value Series -- Standard Class
Trend Series -- Standard Class
DEUTSCHE ASSET MANAGEMENT VIT FUNDS FORMERLY BT INSURANCE FUNDS TRUST
EAFE-Registered Trademark- Equity Index Fund
Equity 500 Index Fund
Small Cap Index Fund
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
FRANKLIN TEMPLETON VARIABLE PRODUCTS INSURANCE TRUST
Templeton International Securities Fund -- Class 2 formerly Templeton
International Fund
Templeton Growth Securities Fund -- Class 2 formerly Templeton Stock Fund
JANUS ASPEN SERIES
Global Technology Portfolio
Janus Aspen Series Balanced Portfolio
Janus Aspen Series Worldwide Growth Portfolio
LINCOLN NATIONAL (LN)
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
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.
PROSPECTUS DATED: MAY 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
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<S> <C>
HIGHLIGHTS............................ 3
Initial Choices To Be Made.......... 3
Level or Varying Death Benefit...... 3
Amount of Premium Payment........... 4
Selection of Funding Vehicles....... 4
Charges and Fees.................... 5
Fund Expenses....................... 6
Changes in Specified Amount......... 6
LLANY, THE SEPARATE ACCOUNT AND THE
GENERAL ACCOUNT...................... 6
BUYING VARIABLE LIFE INSURANCE........ 7
Replacements........................ 9
APPLICATION........................... 9
OWNERSHIP............................. 9
BENEFICIARY........................... 10
INSUREDS.............................. 10
THE POLICY............................ 10
Policy Specifications............... 10
PREMIUM FEATURES...................... 11
Planned Premiums; Additional
Premiums........................... 11
Limits on Right to Make Payments
of Additional and Planned
Premiums......................... 11
Premium Load; Net Premium
Payment.......................... 11
RIGHT-TO-EXAMINE PERIOD............... 11
TRANSFERS AND ALLOCATION AMONG
ACCOUNTS............................. 12
Allocation of Net Premium
Payments........................... 12
Transfers........................... 12
Optional Sub-Account Allocation
Programs........................... 13
Dollar Cost Averaging............. 13
Automatic Rebalancing............. 13
POLICY VALUES......................... 13
Accumulation Value.................. 14
Separate Account Value.............. 14
Accumulation Unit Value........... 14
Accumulation Units................ 14
Fixed Account and Loan Account
Value.............................. 15
Net Accumulation Value.............. 15
FUNDS................................. 15
Substitution of Securities.......... 20
Voting Rights....................... 20
Fund Participation Agreements....... 21
CHARGES AND FEES...................... 21
Premium Load; Net Premium Payment... 21
Deductions Made Monthly............. 21
Monthly Deduction................. 21
Cost of Insurance Charge.......... 22
Mortality and Expense Risk Charge... 22
Surrender Charges................... 22
Transaction Fee for Excess
Transfers.......................... 23
DEATH BENEFITS........................ 23
Death Benefit Options............... 23
Changes in Death Benefit Options and
Specified Amount................... 24
Federal Income Tax Definition of
Life Insurance..................... 24
</TABLE>
<TABLE>
NOTICE OF DEATH OF INSUREDS........... 25
<CAPTION>
CONTENTS PAGE
- -------- --------
<S> <C>
PAYMENT OF DEATH BENEFIT PROCEEDS..... 25
Settlement Options.................. 25
POLICY LIQUIDITY...................... 26
Policy Loans........................ 26
Partial Surrender................... 26
Surrender of the Policy............. 27
Surrender Value................... 27
Deferral of Payment and Transfers... 27
ASSIGNMENT; CHANGE OF OWNERSHIP....... 27
LAPSE AND REINSTATEMENT............... 28
Lapse of a Policy................... 28
Reinstatement of a Lapsed Policy.... 28
COMMUNICATIONS WITH LLANY............. 29
Proper Written Form................. 29
OTHER POLICY PROVISIONS............... 29
Issuance............................ 29
Date of Coverage.................... 29
Right to Exchange the Policy........ 29
Maturity of the Policy.............. 29
Incontestability.................... 30
Misstatement of Age or Gender....... 30
Suicide............................. 30
Riders.............................. 30
Nonparticipating Policies........... 30
TAX ISSUES............................ 30
Taxation of Life Insurance Contracts
in General......................... 30
Policies Which Are MECS............. 32
Policies Which Are Not MECS......... 32
Last Survivor Contract.............. 33
Other Considerations................ 33
Tax Status of LLANY................. 34
FAIR VALUE OF THE POLICY.............. 34
DIRECTORS AND OFFICERS OF LLANY....... 35
DISTRIBUTION OF POLICIES.............. 36
CHANGES OF INVESTMENT POLICY.......... 37
OTHER CONTRACTS ISSUED BY LLANY....... 37
STATE REGULATION...................... 37
REPORTS TO OWNERS..................... 37
ADVERTISING........................... 37
LEGAL PROCEEDINGS..................... 38
EXPERTS............................... 38
REGISTRATION STATEMENT................ 38
Appendix 1............................ 39
Illustration of Accumulation Values,
Surrender Values, and Death Benefit
Proceeds........................... 39
Appendix 2............................ 44
Corridor Percentages................ 44
Financial Statements..................
Separate Account R.................. R-1
Lincoln Life & Annuity Company
of New York........................ S-1
</TABLE>
2
<PAGE>
HIGHLIGHTS
This section is an overview of key Policy features. 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. LLANY reserves the right to return your premium
payments if they result in your Policy failing to meet Code
requirements.
If you are already entitled to favorable tax treatment, you
should satisfy yourself that this Policy meets your other
financial goals before you buy it.
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 LLANY 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. LLANY calculates 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 is 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 "DEATH BENEFITS" 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
certain limits. (See "PREMIUM FEATURES.")
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 "CHARGES AND
FEES") 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. (See "LAPSE AND REINSTATEMENT.")
When you first receive your Policy you will have 10 days to
look it over. 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 "RIGHT-TO-EXAMINE PERIOD.")
SELECTION OF FUNDING VEHICLES
VARIABLE ACCOUNT
This Prospectus focuses on the Separate Account investment
information that makes up the "variable" part of the Policy.
If you put money into the 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 carefully read 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. You may also place your Net Premium Payment or
part of it into the Fixed Account. A Sub-Account is not
guaranteed and will increase or decrease in value according
to the particular Fund's investment performance. (See
"FUNDS.")
Each portfolio described below under Funds is an investment
vehicle for one or more insurance company separate accounts.
A given portfolio may have a similar investment objective
and principal investment strategy to those for another
mutual fund managed by
4
<PAGE>
the same investment advisor or subadvisor. However, because
of timing of investments and other variables we cannot
guarantee there will be any correlation between the two
investments. Even though the management strategy and
objectives of the fund are similar, the investment results
may vary.
FIXED ACCOUNT
You may also use LLANY's Fixed Account to fund your Policy.
Net Premium Payments made into the Fixed Account:
- become part of LLANY'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 LLANY's discretion.
For additional information, see the "GENERAL ACCOUNT."
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 under "CHARGES AND FEES" 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 "TRANSFERS.")
SURRENDER IN FULL. You may surrender the Policy in full. If
you do so during the first 15 policy years we retain a
certain amount as a Surrender Charge, and deduct it from the
amount due you. Also, if you surrender in full during the
first 15 years of any increase in Specified Amount, we
retain a certain amount as a Surrender Charge for
surrendering the increase, in addition to any existing
surrender charge for the original Policy. PARTIAL SURRENDER.
Each time you request a partial surrender of your Policy we
charge you an administrative fee of $25, but not more than
2% of the amount withdrawn. (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 rate charged. (See "POLICY LIQUIDITY.")
LLANY may derive a profit from its charges and may use these
profits to finance distribution of the Policies.
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 a class of 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>
</TABLE>
[TO COME]
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 26.
LLANY, THE SEPARATE ACCOUNT AND
THE GENERAL ACCOUNT
Lincoln Life & Annuity Company of New York is a life
insurance company chartered under New York law on June 6,
1996. Wholly-owned by The Lincoln National Life Insurance
Company ("Lincoln Life") and in turn by Lincoln National
Corporation ("LNC"), a publicly held Indiana insurance
holding company incorporated in 1968, it is licensed to sell
life insurance and annuity contracts in New York. Its
principal office is at 120 Madison Street, Suite 1700,
Syracuse, NY 13202. LLANY, Lincoln Life, LNC and their
affiliates comprise the "Lincoln Financial Group" which
provides a variety of wealth accumulation and protection
products and services.
LLANY Separate Account R for Flexible Premium Variable Life
Insurance ("Account R") is a "separate account" established
pursuant to a resolution of the Board of Directors of LLANY.
Under New York law, the assets of Account R attributable to
the Policies, though LLANY's property, are not chargeable
with liabilities of any other business of LLANY and are
available first to satisfy LLANY's obligations under the
Policies. Account R's income,
6
<PAGE>
gains, and losses are credited to or charged against
Account R without regard to other income, gains, or losses
of LLANY. Account R's values and investment performance are
not guaranteed. Account R is registered with the Securities
and Exchange Commission (the "Commission") as a "unit
investment trust" under the 1940 Act and meets the 1940
Act's definition of "separate account". Such registration
does not involve supervision by the Commission of
Account R's or LLANY's management, investment practices, or
policies. LLANY has other registered separate accounts which
fund its 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 mutual funds or
the Fixed Account available as funding vehicles under the
Policies. On each Valuation Day, 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 are listed with their investment objectives, which
they may or may not achieve. (See "FUNDS.") 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 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 LLANY'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
7
<PAGE>
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.
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.
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 "TAX ISSUES"), an Owner
can borrow Policy values tax-free, without surrender charges
and at very low net interest cost. Policy loans can be a
source of retirement income. Variable annuity withdrawals
are generally taxable to the extent of accumulated income,
may be subject to surrender charges, and will result in
penalty tax if made before age 59 1/2.
Depending on the death benefit option chosen, accumulated
Policy values may also be part of the eventual death benefit
payable. If a Policy is heavily funded and investment
performance is very favorable, the death benefit may
increase even further because of tax law requirements that
the death benefit be a certain multiple of Policy value,
depending on the Insured's ages. (See "DEATH BENEFITS.") The
death benefit is income-tax free and may, with proper estate
planning, be estate-tax free. A tax advisor should be
consulted.
There are costs and expenses of variable life insurance
ownership which are directly related to Policy values (i.e.
asset based costs) as is true with investment in mutual
funds or variable annuities. A significant additional cost
of variable life insurance is the "cost of insurance" charge
which is imposed on the "amount at risk" (the death benefit
less Policy value) and increases as the insured grows older.
This charge varies by age, underwriting classification,
smoking status and in most states by gender. The effect of
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its increase can be seen in illustrations in this Prospectus
(see Appendix 1) or in personalized illustrations available
upon request. Surrender Charges, which decrease over time,
are another significant additional cost if the Policy is not
retained.
REPLACEMENTS
Before purchasing the Policy to replace, or to be funded
with proceeds borrowed or withdrawn from, an existing life
insurance policy, an applicant should consider a number of
matters. Will any commission will be paid to an agent or any
other person with respect to the replacement? Are coverages
and comparable values are 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 LLANY.
A complete application identifies the prospective Insureds
and provides sufficient information about them to permit
LLANY to begin underwriting the risks under the Policy. We
require medical history and examination of each of the
Insureds. LLANY may decline to provide insurance on the
lives of the Insureds or, if it agrees to 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."). 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.
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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 LLANY.
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 Benefit under the Policy.
Multiple Beneficiaries will be paid in equal shares, unless
otherwise specified to LLANY.
Except when LLANY 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 LLANY
and submitted to LLANY. 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 LLANY as to, any payment made or action taken by
LLANY before it was recorded.
If any Beneficiary dies before the Second Death, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to LLANY. 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 this
Prospectus. The Date of Issue is the date on which LLANY
begins life insurance coverage under a Policy. A Policy Year
is each twelve month period, beginning with the Date of
Issue, during which the Policy is in effect. The Policy
Anniversary is the day of the year the Policy was issued.
On issuance, 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 LLANY. 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, LLANY will issue a
replacement on request. LLANY 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.
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PREMIUM FEATURES
The Policy permits flexible premium payments, meaning that
the Owner may select the frequency and the amount of Premium
Payments. After the Initial Premium Payment is paid there is
no minimum premium required. 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.
PLANNED PREMIUMS; ADDITIONAL PREMIUMS
"Planned Premiums" are the amount of premium (as shown in
the Policy Specifications) the applicant chooses to pay
LLANY on a scheduled basis. This is the amount for which
LLANY sends 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
LLANY. Planned Premiums 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 LLANY's
right to limit the amount or frequency of Additional
Premiums.
LLANY 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 LLANY 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.
LLANY 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 LLANY. 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 LLANY for cancellation as
follows. If the Owner mails or delivers the Policy to the
Administrative Office on or before 10 days after delivery of
the Policy (60 days for Policies issued in replacement of
other insurance) and notice of surrender rights to the
Owner, (Right-to-Examine Period) LLANY will refund to the
Owner all Premium Payments.
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Any Premium Payments received by LLANY 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.
TRANSFERS AND ALLOCATION AMONG ACCOUNTS
ALLOCATION OF NET PREMIUM PAYMENTS
The allocation of Net Premium Payments among the Fixed
Account and the 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. LLANY, 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 the
lesser of (a) 25% of the Fixed Account Value (as of the
preceding anniversary of the Date of Issue) or (b) $250,000
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.
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 requests in any Policy
Year. LLANY 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 LLANY to accept
telephone transactions. Contact our Administrative Office
for authorization forms and information on permitted
telephone transactions. 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.
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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.
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. LLANY 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
LLANY 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 current charge for Automatic
Rebalancing, but LLANY 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
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particular Policy depends, may require additional premium
payments beyond those expected to maintain the level of
coverage or to avoid lapse of the Policy. We strongly
suggest you review periodic statements to see if additional
premium payments must be made 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 a Net Premium Payment 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
unrestricted. Accumulation Units are valued on every
Valuation Day.
The Accumulation Value of a Policy is determined by:
(1) multiplying the total number of Accumulation Units
credited to the Policy for each Sub-Account by its
appropriate current 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.
ACCUMULATION UNIT VALUE
All or a part of a Net Premium Payment allocated to a
Sub-Account is converted into Accumulation Units by dividing
the amount allocated to the Sub-Account by the value of the
Accumulation Unit for the Sub-Account calculated at the end
of the Valuation Period in which it is received at the
Administrative Office. The 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.
ACCUMULATION UNITS
An Accumulation Unit is a unit of measure used in the
calculation of the value of each Sub-Account. The
Accumulation Unit value will be as determined for the
Valuation Period during which a Premium Payment or request
for transfer is received by LLANY. The 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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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 LLANY that LLANY determines result from
the operations of the Separate Account; and
3.The result of (2) is divided by the number of
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
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 Accumulation Units credited to a Policy will
not be changed by any subsequent change in the value of an
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 LLANY's General Account through payment
of premiums or through transfers from the Separate Account.
LLANY 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, collectively referred to as the "Trusts". Each
such trust or corporation is registered as an open-end
management investment company under the 1940 Act. All of the
Funds except for the Delaware Group REIT Series and the
Delaware Group Emerging Market Series are diversified under
the 1940 Act.
Listed below are the Trusts, their investment advisers and
distributors, and the Funds within each that are available
under the Policies:
AIM VARIABLE INSURANCE FUNDS, INC., managed by A I M
Advisors, Inc., and distributed by A I M Distributors Inc.,
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
AMERICAN VARIABLE INSURANCE SERIES, managed by Capital
Research and Management Company and distributed by American
Funds Distributors, Inc., 333 South Hope Street, Los
Angeles, CA 90071
AVIS Global Small Capitalization Fund -- Class 2
AVIS Growth Fund -- Class 2
AVIS Growth-Income Fund -- Class 2
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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
DELAWARE GROUP PREMIUM FUND, 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 -- Standard Class
Devon Series -- Standard Class
Emerging Markets Series -- Standard Class
REIT Series -- Standard Class
Small Cap Value Series -- Standard Class
Trend Series -- Standard Class
DEUTSCHE ASSET MANAGEMENT VIT FUNDS FORMERLY 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
FIDELITY VARIABLE INSURANCE PRODUCTS FUND, 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 Growth -- Service Class
Fidelity VIP High Income -- Service Class
Fidelity VIP II Contrafund Portfolio -- Service Class
Fidelity VIP III Growth Opportunities Portfolio --
Service Class
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST,
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 Securities Fund -- Class 2
Templeton Growth Securities Fund -- Class 2
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 Global Technology 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.)
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LN Global Asset Allocation Fund, Inc. (Sub-advised by Putnam
Investment Management, Inc.)
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc. (Sub-advised by Vantage
Investment Advisors Inc.)
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST, managed
by Massachusetts Financial Services Company and distributed
by MFS Fund Distributors, Inc., 500 Boylston Street, Boston,
MA 02116
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST, managed and
distributed by NB Management Incorporated, 605 Third Avenue,
2nd Floor, New York, NY 10158-0006
NB AMT Mid-Cap Growth Portfolio
NB AMT Partners Portfolio
The investment advisory fees charged the Funds by their
advisers are listed under "FUND EXPENSES" in 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: Seeks growth of capital primarily by
investing in seasoned and better capitalized companies
considered to have strong earnings momentum. Focus is on
companies that have experienced above-average growth in
earnings and have excellent prospects for future growth.
AIM V.I. INTERNATIONAL EQUITY FUND: 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.
AIM V.I. VALUE FUND: 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.
AVIS GLOBAL SMALL CAPITALIZATION FUND: Seeks to make your
investment grow over time by investing primarily in stocks
of smaller companies located around the world that typically
have market capitalization of $50 million to $1.2 billion.
The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should
have a long-term perspective and be able to tolerate
potentially wide price fluctuations.
AVIS GROWTH FUND: Seeks to make your investment grow over
time by investing primarily in common stocks of companies
that appear to offer superior opportunities for growth of
capital. The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should
have a long-term perspective and be able to tolerate
potentially wide price fluctuations.
AVIS GROWTH-INCOME FUND: Seeks to make your investment grow
and provide you with income over time by investing primarily
in common stocks or other securities which demonstrate the
potential for appreciation and/or dividends. The fund is
designed for investors seeking both capital appreciation and
income.
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BARON CAPITAL ASSET FUND-INSURANCE SHARES: Seeks to purchase
stocks judged by the advisor to have the potential of
increasing their value at least 50% over two subsequent
years, although that goal may not be achieved.
DELAWARE GROUP HIGH YIELD SERIES: Seeks total return and as
a secondary objective, high current income. The Series
invests in rated and unrated corporate bonds, (including
high-risk, high yield bonds commonly known as junk bonds),
foreign 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: Seeks growth and income by
investing primarily in income-producing stocks that the
manager believes have the potential for above-average
dividend increases over time. This fund blends traditional
growth and value investment styles.
DELAWARE GROUP EMERGING MARKETS SERIES: Seeks long-term
growth by investing primarily in stocks of companies located
or operating in emerging or developing countries.
DELAWARE GROUP REIT SERIES: Seeks to achieve maximum
long-term total return by investing primarily in the
securities of real estate investment trusts and real estate
operating companies.
DELAWARE GROUP SMALL CAP VALUE SERIES: Seeks growth by
investing primarily in stocks of small cap companies whose
market values appear low relative to underlying value or
future earnings and growth potential.
DELAWARE GROUP TREND SERIES: Seeks long-term growth by
investing primarily in stocks of small companies and
convertible securities of emerging and other growth-oriented
companies.
DEUTSCHE VIT EAFE-REGISTERED TRADEMARK- FUND: 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 of the United
States.
DEUTSCHE VIT EQUITY 500 FUND: Seeks to replicate as closely
as possible the performance of the Standard & Poor's 500
Composite Price Index, before the deduction of Fund
expenses.
DEUTSCHE VIT SMALL CAP INDEX FUND: Seeks to replicate as
closely as possible (before the deduction of expenses) the
total return of the Russell 2000 Small Stock Index (the
"Russell 2000"), an index consisting of approximately 2,000
small capitalization common stocks.
FIDELITY VIP GROWTH PORTFOLIO: Seeks long-term capital
appreciation. The portfolio normally purchases common
stocks.
FIDELITY VIP HIGH INCOME PORTFOLIO: Seeks high current
income by investing at least 65% of total assets in
income-producing debt securities, with an emphasis on lower
quality securities.
FIDELITY VIP II CONTRAFUND PORTFOLIO -- SERVICE CLASS: 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: Seeks capital growth by investing primarily in common
stocks.
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JANUS ASPEN SERIES BALANCED PORTFOLIO: 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 GLOBAL TECHNOLOGY: Seeks capital
appreciation by normally investing at least 65% of the
Fund's total assets in securities of domestic and foreign
issuers that its portfolio manager believes will benefit
significantly from advancements or improvements in
technology. These businesses may include companies in the
semiconductor, computer systems, networking,
telecommunications and software industries.
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO: 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. The Portfolio has
the flexibility to invest on a worldwide basis in companies
and other organization of any size, regardless of country of
organization or place of principal business. Worldwide
Growth Portfolio normally invests at least 65% of its total
assets in securities of issuers from at least five different
countries including the U.S. The Portfolio may at times
invest in fewer than five countries or even a single
country.
LINCOLN NATIONAL BOND FUND: 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: 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: Seeks to achieve
reasonable income by investing primarily in income-producing
equity securities. The fund invests mostly in high income
stocks with some high-yielding bonds (including junk bonds).
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND: Seeks
long-term total return consistent with preservation of
capital. The fund allocates its assets among several
categories of equity and fixed-income securities, both of
U.S. and foreign insurers.
LINCOLN NATIONAL MONEY MARKET FUND: Seeks maximum current
income consistent with the preservation of capital. The fund
invests in short term obligations issued by U.S.
corporations, the U.S. government, and federally-chartered
banks and U.S. branches of foreign banks.
LINCOLN NATIONAL SOCIAL AWARENESS FUND: 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: Seeks to provide long-term
growth of capital.
MFS TOTAL RETURN SERIES: 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: Seeks capital growth and current
income (income above that available from a portfolio
invested entirely in equity securities).
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NB AMT MID-CAP GROWTH PORTFOLIO: 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-capitalization companies.
NB AMT PARTNERS PORTFOLIO: Seeks growth of capital and
invests mainly in common stocks of mid-to-large
capitalization companies, using the value-oriented
investment approach.
TEMPLETON INTERNATIONAL SECURITIES FUND -- CLASS 2: 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 GROWTH SECURITIES FUND -- CLASS 2: Seeks long-term
capital growth. Invests primarily in equity securities
issued by companies, large and small, in various nations
throughout the world, including the United States and
emerging markets.
Several of the Funds may invest in non-investment grade,
high-yield, high-risk debt securities (commonly referred to
as "junk bonds"), as detailed in the individual Fund
Prospectuses.
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, with prior
approval of the New York Insurance Department. The right to
select among Funds will be limited by the terms and
conditions imposed by LLANY (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
LLANY, 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, LLANY 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
LLANY 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.
LLANY 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.
To determine how many votes each Policyowner is entitled to
direct with respect to a Fund, first LLANY will calculate
the dollar amount of your account value attributable to that
Fund. Second we will divide that amount by $100.00. The
result is the number of votes you may direct.
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.
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FUND PARTICIPATION AGREEMENTS
LLANY has entered into agreements with the various Trusts
and their advisers or distributors under which LLANY makes
the Funds available under the Policies and performs certain
administrative services. In some cases, the advisers or
distributors may compensate LLANY at annual rates of between
.10% and .25% of assets in a particular Fund attributable to
the Policies.
CHARGES AND FEES
LLANY 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.
The nature and amount of these charges are as follows:
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."
DEDUCTIONS MADE MONTHLY
We make various expense deductions monthly. The Monthly
Deduction, including the Cost of Insurance Charge and
charges for supplemental riders or benefits, if any, is made
from the Net Accumulation Value.
The Monthly Deductions are deducted proportionately from the
value of each underlying investment subject to the charge.
In the case of Sub-Accounts, Accumulation Units are canceled
and the value of the canceled 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 starting on the Date
of Issue. The Monthly Anniversary Day under the Policy is
the same day of each month as the Date of Issue, provided
that if there is no such date in a given month, it is 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.")
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 LLANY 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.
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<PAGE>
COST OF INSURANCE CHARGE
The "Cost of Insurance" charge is the portion of the Monthly
Deduction designed to compensate LLANY for the anticipated
cost of paying Death Benefits in excess of the Accumulation
Value, not including riders, supplemental benefits or
monthly expense charges.
The Cost of Insurance charge depends on the Age (the age of
the subject person at his/ her nearest birthday),
underwriting category and gender (in accordance with state
law) of both Insureds and the current "Net Amount at Risk"
(Death Benefit minus the Accumulation Value). The rate on
which the Monthly Deduction for the Cost of Insurance is
based will generally increase as the 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 Insurance Rate as
determined by LLANY. 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
LLANY deducts a daily mortality and expense risk charge as a
percentage of the assets of the Separate Account. The
mortality risk assumed is that insureds may 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 0.80%, 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 1 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 1
for issue ages 55 and 65.
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<PAGE>
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. LLANY 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)
Based on its actuarial determination, LLANY 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 LLANY
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 LLANY, which supports insurance and
annuity obligations.
TRANSACTION FEE FOR EXCESS TRANSFERS
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 in any Policy Year. A
single transfer request 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 2 of this
Prospectus to 100% when the younger Insured reaches or would
have reached Age 95.
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<PAGE>
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.
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 LLANY.
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 LLANY.
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.
LLANY may at its discretion decline any request for a change
between Death Benefit Options or increase in the Specified
Amount. LLANY 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 LLANY,
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.
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<PAGE>
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 is equal to the product of the
Accumulation Value and the applicable Corridor Percentage. A
table of Corridor Percentages is in Appendix 2.
NOTICE OF DEATH OF INSUREDS
Due Proof of Death must be furnished to LLANY 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 LLANY.
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. 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 to which the Beneficiary may receive
the Death Benefit Proceeds or 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, LLANY 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, LLANY makes monthly
payments for a stated number of years, at least five but
no more than thirty.
The fourth Settlement Option, provides that LLANY pays
interest annually on the sum left with LLANY at a rate
of at least 3% per year, and pays the amount on deposit
on the payee's death.
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<PAGE>
Any other Settlement Option offered by LLANY at the time of
election may also be selected.
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 LLANY 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
the Sub-Accounts. Interest on Policy Loans accrues at an
annual rate of 8%, and loan interest is payable to LLANY
(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 (including for this purpose the
Fixed Account), transfers from each for loans and loan
interest will be made in proportion to the assets in each
such Sub-Account at that time, unless LLANY 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. (See "LAPSE AND
REINSTATEMENT.")
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 you have authorized
telephone transactions. For each partial surrender we charge
a transaction fee of $25 or
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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 LLANY. 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 LLANY is instructed otherwise in
proper written form at the Administrative Office. LLANY 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, LLANY will pay you or your 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 1.
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
LLANY's option. If LLANY 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.
ASSIGNMENT; CHANGE OF OWNERSHIP
While either Insured is living, you may assign your rights
in the Policy, including the right to change the beneficiary
designation. The assignment must be in proper written form,
signed by you and recorded at the Administrative Office. No
assignment will affect, or prejudice LLANY as to, any
payment made or action taken by LLANY before it was
recorded. LLANY is not responsible for any assignment not
submitted for recording, nor is LLANY responsible for the
sufficiency or validity of any assignment. Any
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<PAGE>
assignment is subject to any indebtedness owed to LLANY 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, you 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, you may name a new
Owner by recording a change in ownership in proper written
form at the Administrative Office. On recordation, the
change will be effective as of the date of execution of the
document of transfer or, if there is no such date, the date
of recordation. No such change of ownership will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded. LLANY may require that the
Policy be submitted to it for endorsement before making a
change.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY
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 LLANY 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, LLANY will
send a written notice to the Owner and any assignee of
record. The notice will state the amount of the Premium
Payment or payment of indebtedness on Policy Loans necessary
such that the Net Accumulation Value is at least equal to
two times the Monthly Deduction Amount. If the minimum
required amount set forth in the notice is not paid to LLANY
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.
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 LLANY and it agrees to accept the
risk, (d) LLANY 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 the reinstated
Policy shall be the Monthly Anniversary Day after the date
on which LLANY approves the application for reinstatement.
Surrender Charges 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 LLANY approval. The
Accumulation Value at reinstatement will be the Net Premium
Payment then made less all Monthly Deductions due.
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<PAGE>
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 LLANY
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 LLANY, received at the
Administrative Office.
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 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 twenty-four 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, 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 policies will not take effect until the date all
such requirements are met. There will be no surrender charge
under the existing policy when it is split into two new
policies. However, the two new policies will incur new
premium loads, surrender and other charges from the
effective date.
MATURITY OF THE POLICY
If either Insured is still living on the Monthly Anniversary
following the younger Insured's 100th birth date, at that
point the Policy will terminate and the Owner will receive
the Surrender Value.
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<PAGE>
INCONTESTABILITY
LLANY 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, LLANY 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;
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, LLANY 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, LLANY will
upon the Second Death pay no more than a refund of the
monthly charges for the cost of such additional benefit.
RIDERS
Riders may be offered and we may charge for them.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of LLANY.
TAX ISSUES
INTRODUCTION. The Federal income tax treatment of the policy
is complex and sometimes uncertain. The Federal income tax
rules may vary with your particular circumstances. This
discussion does not include all the Federal income tax
rules that may affect you and your policy, and is not
intended as tax advice. This discussion also does not
address other Federal tax consequences, or state or local
tax consequences, associated with the policy. As a result,
you should always consult a tax adviser about the
application of tax rules to your individual situation.
TAXATION OF LIFE INSURANCE CONTRACTS IN GENERAL
TAX STATUS OF THE POLICY. Section 7702 of the Code
establishes a statutory definition of life insurance for
Federal tax purposes. We believe that the policy will meet
the statutory definition of life insurance, which places
limitations on the amount of premium payments that may be
made and the contract values that can accumulate relative to
the death benefit. As a result, the death benefit payable
under the policy will generally be excludable from the
beneficiary's gross income, and interest and other income
credited
30
<PAGE>
under the policy will not be taxable unless certain
withdrawals are made (or are deemed to be made) from the
policy prior to the insured's death, as discussed below.
This tax treatment will only apply, however, if (1) the
investments of the Separate Account are "adequately
diversified" in accordance with Treasury Department
regulations, and (2) we, rather than the you, are considered
the owner of the assets of the Separate Account for Federal
income tax purposes.
INVESTMENTS IN THE SEPARATE ACCOUNT MUST BE DIVERSIFIED. For
a policy to be treated as a life insurance contract for
Federal income tax purposes, the investments of the Separate
Account must be "adequately diversified." IRS regulations
define standards for determining whether the investments of
the Separate Account are adequately diversified. If the
Separate Account fails to comply with these diversification
standards, you could be required to pay tax currently on the
excess of the contract value over the contract premium
payments. Although we do not control the investments of the
subaccounts, we expect that the subaccounts will comply with
the IRS regulations so that the Separate Account will be
considered "adequately diversified."
RESTRICTION ON INVESTMENT OPTIONS. Federal income tax law
limits your right to choose particular investments for the
policy. Because the IRS has not issued guidance specifying
those limits, the limits are uncertain and your right to
allocate contract values among the subaccounts may exceed
those limits. If so, you would be treated as the owner of
the assets of the Separate Account and thus subject to
current taxation on the income and gains from those assets.
We do not know what limits may be set by the IRS in any
guidance that it may issue and whether any such limits will
apply to existing policies. We reserve the right to modify
the policy without your consent to try to prevent the tax
law from considering you as the owner of the assets of the
Separate Account.
NO GUARANTEES REGARDING TAX TREATMENT. We make no guarantee
regarding the tax treatment of any policy or of any
transaction involving a policy. However, the remainder of
this discussion assumes that your policy will be treated as
a life insurance contract for Federal income tax purposes
and that the tax law will not impose tax on any increase in
your contract value until there is a distribution from your
policy.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In
general, the amount of the death benefit payable from a
policy because of the death of the insured is excludable
from gross income. Certain transfers of the policy for
valuable consideration, however, may result in a portion of
the death benefit being taxable.
If the death benefit is not received in a lump sum and is,
instead, applied under one of the settlement options,
payments generally will be prorated between amounts
attributable to the death benefit which will be excludable
from the beneficiary's income and amounts attributable to
interest (accruing after the insured's death) which will be
includible in the beneficiary's income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing
provisions of the Code, except as described below, any
increase in your contract value is generally not taxable to
you unless amounts are received (or are deemed to be
received) from the policy prior to the insured's death. If
there is a total withdrawal from the policy, the surrender
value will be includible in the your income to the extent
the amount received exceeds the "investment in the
contract." (If there is any debt at the time of a total
withdrawal, such debt will be treated as an amount received
by the owner.) The "investment in the contract" generally is
the aggregate amount of premium payments and other
consideration paid for the policy, less the aggregate amount
received under the policy previously to the extent such
amounts received were excludable from gross income. Whether
partial withdrawals (or other amounts deemed to be
distributed) from the policy constitute income to you
depends, in part, upon whether the policy is considered a
"modified endowment contract" (a "MEC") for Federal income
tax purposes.
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<PAGE>
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. A policy will be
classified as a MEC if premiums are paid more rapidly than
allowed by a "7-pay test" under the tax law or if the policy
is received in exchange for another policy that is a MEC. In
general, this policy will constitute a MEC unless (1) it was
received in exchange for another life insurance contract
which was not a MEC, and (2) no premium payments (other than
the exchanged contract) are paid into the policy during the
first seven contract years. In addition, even if the policy
initially is not a MEC, it may in certain circumstances
become a MEC. These circumstances would include a later
increase in benefits, any other material change of the
policy (within the meaning of the tax law), and a withdrawal
or reduction in the death benefit during the first seven
contract years.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES
UNDER MECS. If the policy is a MEC, withdrawals from the
policy will be treated first as withdrawals of income and
then as a recovery of premium payments. Thus, withdrawals
will be includible in income to the extent the contract
value exceeds the investment in the policy. The Code treats
any amount received as a loan under a policy, and any
assignment or pledge (or agreement to assign or pledge) any
portion of your contract value, as a withdrawal of such
amount or portion. Your investment in the policy is
increased by the amount includible in income with respect to
such assignment, pledge, or loan.
PENALTY TAXES PAYABLE ON WITHDRAWALS. A 10% penalty tax may
be imposed on any withdrawal (or any deemed distribution)
from your MEC which you must include in your gross income.
The 10% penalty tax does not apply if one of several
exceptions exists. These exceptions include withdrawals or
surrenders that: you receive on or after you reach age
59 1/2, you receive because you became disabled (as defined
in the tax law), or you receive as a series of substantially
equal periodic payments for your life (or life expectancy).
SPECIAL RULES IF YOU OWN MORE THAN ONE MEC. In certain
circumstances, you must combine some or all of the life
insurance contracts which are MECs that you own in order to
determine the amount of withdrawal (including a deemed
withdrawal) that you must include in income. For example, if
you purchase two or more MECs from the same life insurance
company (or its affiliates) during any calendar year, the
Code treats all such policies as one contract. Treating two
or more policies as one contract could affect the amount of
a withdrawal (or a deemed withdrawal) that you must include
in income and the amount that might be subject to the 10%
penalty tax described above.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS. If the policy is not a MEC
(described below), the amount of any withdrawal from the
policy will generally be treated first as a non-taxable
recovery of premium payments and then as income from the
policy. Thus, a withdrawal from a policy that is not a MEC
will not be includible in income except to the extent it
exceeds the investment in the policy immediately before the
withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST
15 POLICY YEARS. Section 7702 places limitations on the
amount of premium payments that may be made and the contract
values that can accumulate relative to the death benefit.
Where cash distributions are required under Section 7702 in
connection with a reduction in benefits during the first 15
years after the policy is issued (or if withdrawals are made
in anticipation of a reduction in benefits, within the
meaning of the tax law, during this period), some or all of
such amounts may be includible in income. A reduction in
benefits may occur when the face amount is decreased,
withdrawals are made, and in certain other instances.
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<PAGE>
TAX TREATMENT OF LOANS. If your policy is not a MEC, a loan
you receive under the policy is generally treated as your
indebtedness. As a result, no part of any loan under such a
policy constitutes income to you so long as the policy
remains in force. Nevertheless, in those situations where
the interest rate credited to the loan account equals the
interest rate charged to you for the loan, it is possible
that some or all of the loan proceeds may be includible in
your income. If a policy lapses (or if all contract value is
withdrawn) when a loan is outstanding, the amount of the
loan outstanding will be treated as withdrawal proceeds for
purposes of determining whether any amounts are includible
in the your income.
LAST SURVIVOR CONTRACT
Although we believe that the policy, when issued as a last
survivor contract, complies with Section 7702 of the Code,
the manner in which Section 7702 should be applied to last
survivor contracts is not directly addressed by Section
7702. In the absence of final regulations or other guidance
issued under Section 7702 regarding this form of contract,
there is necessarily some uncertainty whether a last
survivor contract will meet the Section 7702 definition of a
life insurance contract. As a result, we may need to return
a portion of your premium (with earnings) and impose higher
cost of insurance charges in the future.
Due to the coverage of more than one insured under the
policy, there are special considerations in applying the
7-pay test. For example, a reduction in the death benefit at
any time, such as may occur upon a partial surrender, may
cause the policy to be a MEC. Also and more generally, the
manner of applying the 7-pay test is somewhat uncertain in
the case of policies covering more than one insured.
OTHER CONSIDERATIONS
INSURED LIVES PAST AGE 100. If the insured survives beyond
the end of the mortality table used to measure charges under
the policy, which ends at age 100, we believe the policy
will continue to qualify as life insurance for Federal tax
purposes. However, there is some uncertainty regarding this
treatment, and it is possible that you would be viewed as
constructively receiving the cash value in the year the
insured attains age 100.
COMPLIANCE WITH THE TAX LAW. We believe that the maximum
amount of premium payments we have determined for the
policies will comply with the Federal tax definition of life
insurance. We will monitor the amount of premium payments,
and, if the premium payments during a contract year exceed
those permitted by the tax law, we will refund the excess
premiums within 60 days of the end of the policy year and
will pay interest and other earnings (which will be
includible in income subject to tax) as required by law on
the amount refunded. We also reserve the right to increase
the death benefit (which may result in larger charges under
a policy) or to take any other action deemed necessary to
maintain compliance of the policy with the Federal tax
definition of life insurance.
DISALLOWANCE OF INTEREST DEDUCTIONS. If an entity (such as a
corporation or a trust, not an individual) purchases a
policy or is the beneficiary of a policy issued after June
8, 1997, a portion of the interest on indebtedness unrelated
to the policy may not be deductible by the entity. However,
this rule does not apply to a policy owned by an entity
engaged in a trade or business which covers the life of an
individual who is a 20-percent owner of the entity, or an
officer, director, or employee of the trade or business, at
the time first covered by the policy. This rule also does
not apply to a policy owned by an entity engaged in a trade
or business which covers the joint lives of the 20% owner of
the entity and the owner's spouse at the time first covered
by the policy.
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<PAGE>
FEDERAL INCOME TAX WITHHOLDING. We will withhold and remit
to the IRS a part of the taxable portion of each
distribution made under a policy unless you notify us in
writing at or before the time of the distribution that tax
is not to be withheld. Regardless of whether you request
that no taxes be withheld or whether the Company withholds a
sufficient amount of taxes, you will be responsible for the
payment of any taxes and early distribution penalties that
may be due on the amounts received. You may also be required
to pay penalties under the estimated tax rules, if your
withholding and estimated tax payments are insufficient to
satisfy your total tax liability.
CHANGES IN THE POLICY OR CHANGES IN THE LAW. Changing the
owner, exchanging the contract, and other changes under the
policy may have tax consequences (in addition to those
discussed herein) depending on the circumstances of such
change. The above discussion is based on the Code, IRS
regulations, and interpretations existing on the date of
this Prospectus. However, Congress, the IRS, and the courts
may modify these authorities, sometimes retroactively.
TAX STATUS OF LLANY
Under existing Federal income tax laws, LLANY does not pay
tax on investment income and realized capital gains of the
Separate Account. LLANY does not expect that it will incur
any Federal income tax liability on the income and gains
earned by the Separate Account. We, therefore, do not impose
a charge for Federal income taxes. If Federal income tax law
changes and we must pay tax on some or all of the income and
gains earned by the Separate Account, we may impose a charge
against the Separate Account to pay the taxes.
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 LLANY'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.
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<PAGE>
DIRECTORS AND OFFICERS OF LLANY
The following persons are Directors and Officers of LLANY.
Except as indicated below, the address of each is 120
Madison Street, Suite 1700, Syracuse, New York 13202 and
each has been employed by LLANY or its affiliates for more
than five years.
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
-------------------------------- ------------------------------------------
<S> <C>
ROLAND C. BAKER President and Director [1/95-present],
DIRECTOR First Penn- Pacific Life Insurance Co.
1801 S. Meyers Rd. Formerly: Chairman and CEO [7/88-1/95],
Oakbrook Terrace, IL 60181 Baker, Rakish, Shipley & Politzer, Inc.
J. PATRICK BARRETT Chairman and Chief Executive Officer,
DIRECTOR CARPAT Investments [9/87-present];
One Telergy Parkway President, Chief Operating Officer and
East Syracuse, NY 13057 Director, Telergy, Inc. [4/98-present];
Chief Executive Officer and Director,
Syracuse Executive Air Service, Inc.
[3/89-present]; Director, Bennington Iron
Works, Inc. [6/89-present]; Director,
Coyne Industrial Enterprises Corp.
[1998-present].
DAVID N. BECKER Vice President and Chief Actuarial
SECOND VICE PRESIDENT AND Officer, The Lincoln National Life
APPOINTED ACTUARY Insurance Co.
1300 South Clinton St.
Fort Wayne, IN 46802
THOMAS D. BELL, JR. President and Chief Executive Officer
DIRECTOR Young & Rubicam [1/00-present]. Formerly:
285 Madison Avenue President and Chief Executive Officer
New York, NY 10017 [4/95-9/98], Burson- Marstellar; Vice
Chairman [4/94-5/95], Gulfstream Aerospace
Corp.
JON A. BOSCIA President, Chief Executive Officer and
DIRECTOR Director, Lincoln National Corp.
Centre Square, West Tower [1/98-present]. Formerly: President and
Suite 3900 Chief Executive Officer [10/96-1/98],
Philadelphia, PA 19102 President and Chief Operating Officer
[5/94-10/96] The Lincoln National Life
Insurance Co.
JOANNE B. COLLINS President, Treasurer and Director, Lincoln
PRESIDENT, TREASURER AND Life & Annuity Company of New York
DIRECTOR [8/99-present]; Second Vice President
Lincoln National Corporation
[4/96-present]. Formerly: Second Vice
President [9/84-3/96] Lincoln National
Corporation-Reinsurance.
JOHN H. GOTTA Director, Second Vice President and
DIRECTOR, SECOND VICE PRESIDENT Assistant Secretary [12/99-present],
AND ASSISTANT SECRETARY Lincoln Life & Annuity Company of New
350 Church Street York; Chief Executive Officer of Life
Hartford, CT 06103 Insurance, Senior Vice President and
Assistant Secretary [12/99-present] The
Lincoln National Life Insurance Company.
Formerly: Senior Vice President and
Assistant 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; 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>
35
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S) WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
-------------------------------- ------------------------------------------
<S> <C>
BARBARA S. KOWALCZYK Senior Vice President, Corporation
DIRECTOR Planning [5/94-present] Lincoln National
Centre Square West Tower Corporation.
1500 Market Street Suite 3900
Philadelphia, PA 19102
MARGUERITE L. LACHMAN Principal [11/99-present], Lend Lease Real
DIRECTOR Estate Investments. Formerly: Managing
437 Madison Avenue, 18th Floor Director [4/87-11/99], Schroeder Real
New York, NY 10022 Estate Associates.
LOUIS G. MARCOCCIA Senior Vice President for Business,
DIRECTOR Finance and Administrative Services,
Syracuse University Syracuse University [1975-present].
Syracuse, NY 13244 Formerly: Auditor [1969-1975] Price
Waterhouse.
TROY D. PANNING Second Vice President and Chief Financial
SECOND VICE PRESIDENT AND Officer
CHIEF FINANCIAL OFFICER [11/96-present], Lincoln Life & Annuity
Company of New York. Formerly: Accountant
[9/90-11/96] Ernst & Young LLP
JOHN M. PIETRUSKI Chairman of the Board, Texas Biotechnology
DIRECTOR Corp.
One Penn Plaza
Suite 3408
New York, NY 10119
LAWRENCE T. ROWLAND Chairman, Chief Executive Officer,
DIRECTOR President and Director [10/96-present]
1700 Magnavox Way Lincoln National Reassurance Co. Formerly:
One Reinsurance Place Senior Vice President [10/95-10/96]; Vice
Ft. Wayne, IN 46802 President [10/91-10/95] Lincoln National
Life Reinsurance Co.
RICHARD C. VAUGHAN Executive Vice President and Chief
DIRECTOR Financial Officer [1/95-present].
Centre Square West Tower Formerly: Senior Vice President and Chief
1500 Market Street Suite 3900 Financial Officer [6/92-1/95] Lincoln
Philadelphia, PA 19102 National Corp.
</TABLE>
DISTRIBUTION OF POLICIES
LLANY intends to offer the Policy in New York. Lincoln
Financial Advisors Corporation ("LFA"), 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 LFA is 350 Church Street,
Hartford, CT 06103.
The Policy will be sold by individuals, who in addition to
being appointed as life insurance agents for LLANY, are also
registered representatives of LFA or other broker-dealers.
These representatives ordinarily receive commission and
service fees up to 98% of the first year premium, plus up to
10% of all other premiums paid. In lieu of premium-based
commission, LLANY 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
36
<PAGE>
for bonuses and non-cash compensation if certain production
levels are reached. All compensation is paid from LLANY's
resources, which include sales charges made under this
Policy.
CHANGES OF INVESTMENT POLICY
LLANY may materially change the investment policy of the
Separate Account. LLANY 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 LLANY'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 LLANY on the life of the
Insureds. The Owner has the later of 60 days from the date
of the investment policy change or 60 days from being
informed of such change to make this conversion. LLANY 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 LLANY
LLANY 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 LLANY.
STATE REGULATION
LLANY is subject to the laws of New York governing insurance
companies and to regulation by the New York Insurance
Department. An annual statement in a prescribed form is
filed with the New York Insurance Department each year
covering the operation of LLANY 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 LLANY's contract liabilities and
reserves so that the Insurance Department may certify the
items are correct. LLANY's books and accounts are subject to
review by the Insurance Department at all times and a full
examination of its operations is conducted periodically by
the New York 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
LLANY 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
LLANY is 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 the financial strength or
claims-paying ability of LLANY. The
37
<PAGE>
ratings are not intended to reflect the investment
experience or financial strength of the Separate Account.
LLANY may advertise these ratings from time to time. In
addition, LLANY may include in certain advertisements,
endorsements in the form of a list of organizations,
individuals or other parties which recommend LLANY or the
Policies. Furthermore, LLANY 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 advertisements.
Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services
for individually sold life insurance and annuities.
LEGAL PROCEEDINGS
At this time, LLANY is not involved in any material
litigation. From time to time, legal proceedings arise which
generally are routine and in the ordinary course of
business.
EXPERTS
The statutory-basis financial statements of LLANY appearing
in this prospectus and registration statement have been
audited by Ernst & Young, LLP, independent auditors, as set
forth in their report which appears elsewhere in this
document and in the registration statement. The financial
statements audited by Ernst & Young, LLP, have been included
in this document in reliance on their report given on their
authority as experts in accounting and auditing.
Actuarial matters included in this prospectus have been
examined by Vaughn W. Robbins, FSA as stated in the Opinion
filed as an Exhibit to the Registration Statement.
Legal matters in connection with the Policies described
herein are being passed upon by Robert O. Sheppard, Esq., as
stated in the Opinion filed as an Exhibit to the
Registration Statement.
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, LLANY, 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.
38
<PAGE>
APPENDIX 1
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES, AND
DEATH BENEFIT PROCEEDS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefit
Proceeds under a Policy would vary over time if the
hypothetical gross investment rates of return were a uniform
annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%,
6%, or 12% over a period of years, but fluctuates above or
below those averages for individual years, the Accumulation
Values, Surrender Values and Death Benefit Proceeds may be
different. The illustrations also assume there are no Policy
Loans or Partial Surrenders, no additional Premium Payments
are made other than shown, no Accumulation Values are
allocated to the Fixed Account, and there are no changes in
the Specified Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit Proceeds as of each Policy
Anniversary reflect the fact that charges are made and
expenses applied which lower investment return on the assets
held in the Sub-Accounts. Daily charges are made against the
assets of the Sub-Accounts for assuming mortality and
expense risks. The 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 LLANY 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 LLANY deducts a
premium load of 8.0% from each Premium Payment.
The Surrender Values shown in the illustrations reflect the
fact that LLANY 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 LLANY
deducts a monthly administrative charge at the beginning of
each Policy Month. The monthly administrative expense charge
is a flat charge per month for all years current values
reflect a current flat dollar monthly administrative expense
charge of $10.
Upon request, LLANY will furnish a comparable illustration
based on the proposed insureds' ages, gender classification,
smoking classification, risk classification and premium
payment requested.
39
<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>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- --------------------- ----------- --------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
to be
9 filed by
10 amendment
11
12
13
14
15
20
25
30
<CAPTION>
END OF SURRENDER VALUE
POLICY ANNUAL INVESTMENT RETURN OF SURRENDER
YEAR GROSS 0% GROSS 6% GROSS 12% CHARGE
- --------------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
to be
9 filed by
10 amendment
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.
40
<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>
PREMIUMS
ACCUMULATED SURRENDER VALUE
END OF AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ------- --------- --------- --------- ------- ------- --------- ------- -------
1
2
3
4
5
6
7
8
to be
9 filed by
10 amendment
11
12
13
14
15
20
25
30
<CAPTION>
<S> <C> <C>
END OF
POLICY SURRENDER
YEAR GROSS 12% CHARGE
-- --------- ------
1
2
3
4
5
6
7
8
to be
9 filed by
10 amendment
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.
41
<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>
PREMIUMS
ACCUMULATED SURRENDER VALUE
AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
END OF 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
POLICY YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- --------
1
2
3
4
5
6
7
to be
8 filed by
9 amendment
10
11
12
13
14
15
20
25
30
<CAPTION>
<S> <C> <C>
END OF SURRENDER
POLICY YEAR GROSS 12% CHARGE
-- ---------- ------
1
2
3
4
5
6
7
to be
8 filed by
9 amendment
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.
42
<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>
PREMIUMS
ACCUMULATED SURRENDER VALUE
AT DEATH BENEFIT PROCEEDS TOTAL ACCUMULATION VALUE ANNUAL INVESTMENT
END OF 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF RETURN OF
POLICY YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6%
-- ---------- ---------- ---------- ---------- ------- -------- ---------- ------- --------
1
2
3
4
5
6
7
to be
8 filed by
9 amendment
10
11
12
13
14
15
20
25
30
<CAPTION>
<S> <C> <C>
END OF SURRENDER
POLICY YEAR GROSS 12% CHARGE
-- ---------- ------
1
2
3
4
5
6
7
to be
8 filed by
9 amendment
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.
43
<PAGE>
APPENDIX 2
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>
44
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
FLEXIBLE PREMIUM VARIABLE ACCOUNT R
(TO BE FILED BY AMENDMENT)
R-1
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK FINANCIALS
(TO BE FILED BY AMENDMENT)
S-1
<PAGE>
PART II
FEES AND CHARGES REPRESENTATION
Lincoln Life & Annuity Company of New York 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 & Annuity Company of New York.
UNDERTAKING
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 Lincoln Life & Annuity
Company of New York (LLANY) provides that LLANY 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 LLANY, 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, LLANY. Certain additional conditions apply to indemnification in
criminal proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LLANY in connection with suits
by, or in the right of, LLANY.
Please refer to Article VII of the By-Laws of LLANY (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, New York law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus consisting of 44 pages;
The undertaking to file reports;
The fees and charges representation;
Statements regarding indemnification;
The signatures.
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 Lincoln Life & Annuity
Company of New York and related documents authorizing establishment
of the Account.(2)
(2) Not applicable.
<PAGE>
(3) (a) Principal Underwriting Agreement between Lincoln Financial
Advisors Corporation and Lincoln Life & Annuity Company of New
York.(3)
(b) Form of Selling Group Agreement.*
(c) Commission Schedule for Variable Life Policies.*
(4) Not applicable.
(5) (a) Form of Policy and Application.(2)
(b) Riders.(2)
(c) Form of Contract LN655NY, form of application B10409NY
(6) (a) Articles of Incorporation of Lincoln Life & Annuity Company of
New York.(1)
(b) Bylaws of Lincoln Life & Annuity Company of New York.(1)
(7) Not applicable.
(8) Fund Participation Agreements.
Agreements between Lincoln Life & Annuity Company of New York and:
(a) AIM Variable Insurance Funds, Inc.(3)
(b) Baron Capital Funds Trust.(5)
(c) BT Insurance Funds Trust.(3)
(d) Delaware Group Premium Fund, Inc.(4)
(e) Fidelity Variable Insurance Products Fund.(3)
(f) Fidelity Variable Insurance Products Fund II.(3)
(g) Janus Aspen Series.(5)
(h) Lincoln National Money Market Fund, Inc.(3)
(i) MFS-Registered Trademark- Variable Insurance Trust.(3)
(j) Neuberger & Berman Advisors Management Trust.(5)
(k) Templeton Variable Products Series Fund.(3)
(l) OCC Accumulation Trust.(3)
(9) (a) Not applicable.
(b) *
(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.
* To be filed by amendment
(1) Incorporated by reference to Registration Statement on Form N-4 (File
No. 333-38007 filed on October 16, 1997.
(2) Incorporated by reference to Registration Statement on Form N-8B-2 (File
No. 811-08651) filed on February 11, 1998.
(3) 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.
(4) Incorporated by reference to Registration Statement on Form N-4 (File
No. 33-25990) filed on April 22, 1998.
(5) Incorporated by reference to Post-Effective Amendment No. 3 on Form N-4
(File No. 333-50817) filed on April 23, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
LLANY Separate Account R for Flexible Premium Variable Life Insurance, has duly
caused this Initial Registration Statement on Form S-6 to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Syracuse and
the State of New York, on the 31st day of March, 2000.
<TABLE>
<S> <C> <C>
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE
(Registrant)
By: /s/ TROY D. PANNING
------------------------------------------
Troy D. Panning
SECOND VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL
ACCOUNTING OFFICER) LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Depositor)
By: /s/ TROY D. PANNING
------------------------------------------
Troy D. Panning
SECOND VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Initial Registration Statement has been signed below on March 31, 2000 by the
following persons, as officers and directors of the Depositor, in the capacities
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ JOANNE B. COLLINS President, Treasurer and
------------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
Second Vice President and
/s/ TROY D. PANNING Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/s/ JON A. BOSCIA*
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN*
------------------------------------------- Director
Richard C. Vaughan
/S/ THOMAS D. BELL, JR.*
------------------------------------------- Director
Thomas D. Bell, Jr.
/s/ JOHN H. GOTTA*
------------------------------------------- Director
John H. Gotta
/s/ BARBARA STEURY KOWALCZYK*
------------------------------------------- Director
Barbara Steury Kowalczyk
/s/ MARGUERITE LEANNE LACHMAN*
------------------------------------------- Director
Marguerite Leanne Lachman
/s/ JOHN M. PIETRUSKI*
------------------------------------------- Director
John M. Pietruski
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ J. PATRICK BARRETT*
------------------------------------------- Director
J. Patrick Barrett
/s/ LOUIS G. MARCOCCIA*
------------------------------------------- Director
Louis G. Marcoccia
</TABLE>
*by /s/ Troy D. Panning
--------------------------------------
Troy D. Panning, pursuant to a Power
of Attorney filed with this Initial
Registration Statement.
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Lincoln Life & Annuity
Company of New York, hereby severally constitute and appoint, Joanna B. Collins,
Robert O. Sheppard and Troy D. Panning, 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 7th day of February, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ JOANNE B. COLLINS* President, Treasurer and
------------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
Second Vice President and
/s/ TROY D. PANNING* Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/s/ JON A. BOSCIA*
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN*
------------------------------------------- Director
Richard C. Vaughan
/S/ THOMAS D. BELL, JR.*
------------------------------------------- Director
Thomas D. Bell, Jr.
------------------------------------------- Director
Roland C. Baker
/s/ JOHN H. GOTTA*
------------------------------------------- Director
John H. Gotta
/s/ BARBARA STEURY KOWALCZYK*
------------------------------------------- Director
Barbara Steury Kowalczyk
/s/ MARGUERITE LEANNE LACHMAN*
------------------------------------------- Director
Marguerite Leanne Lachman
/s/ JOHN M. PIETRUSKI*
------------------------------------------- Director
John M. Pietruski
/s/ LAWRENCE T. ROWLAND*
------------------------------------------- Director
Lawrence T. Rowland
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ J. PATRICK BARRETT*
------------------------------------------- Director
J. Patrick Barrett
/s/ LOUIS G. MARCOCCIA*
------------------------------------------- Director
Louis G. Marcoccia
</TABLE>
<PAGE>
Policy Number SPECIMEN
Insured JOHN DOE
JANE DOE
Initial Specified Amount $500,000 Date of Issue MAY 1, 2000
LINCOLN NEW YORK & ANNUITY COMPANY OF NEW YORK
A Stock Company Home Office Location: 120 Madison Street, Suite 1700
Syracuse, New York 13202
Administrator Mailing Address: The Lincoln National Life
Insurance Company
350 Church Street
Hartford, CT 06103-1106
Lincoln Life & Annuity Company of New York ("Lincoln New York") 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 New York further agrees to pay
the surrender value to the Owner on the Maturity Date provided the Insured is
then alive.
RIGHT TO EXAMINE THE POLICY. The policy may be returned to the insurance agent
through whom it was purchased or to Lincoln New York 10 days after receipt of
the policy (60 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
New York 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 DURATION OF
COVERAGE IS VARIABLE AND MAY INCREASE OR DECREASE BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT.
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 New York as of the Date of Issue.
Registrar [GRAPHIC]
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 before the Maturity Date.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy or on the Maturity Date.
Flexible premiums payable to the Maturity Date or to 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 NY
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE*
<S> <C>
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
</TABLE>
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
NOTE: The policy will terminate before the Maturity Date if the
actual premiums paid and investment experience are
insufficient to continue coverage to such a date. The
Maturity Date is the next Monthly Anniversary after the
younger Insured becomes or would have become age 100.
Crediting of additional interest is not guaranteed and,
subject to the guaranteed minimum rate, Lincoln New York
has the right to change the amount of interest credited
and the amount of Cost of Insurance or other expense
charges deducted which may require more premium to be paid
than was illustrated, or the Accumulation Values may be
less than those illustrated.
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 the lesser of: (a) 25% of the Fixed Account Value as of that Policy
Anniversary, or (b) $250,000. (SEE TRANSFER PRIVILEGE PROVISION.)
GUARANTEED MINIMUM INTEREST RATES: The interest rate used to credit interest on
the Fixed Account Value may vary but will never be less than .010746% compounded
daily (4% compounded yearly).
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 NY 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
LN655 NY 4
<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 New York.
<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 NY 5
<PAGE>
SCHEDULE 2: EXPENSE CHARGES AND FEES
PREMIUM LOAD. Lincoln New York 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 New York
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 New York 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 NY 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 THE ATTAINED AGE OF
YOUNGER INSURED CORRIDOR THE YOUNGER CORRIDOR
(NEAREST BIRTHDAY) PERCENTAGE INSURED (NEAREST PERCENTAGE
BIRTHDAY)
----------------------- -------------- ------------------------- -------------
<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 New York.
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 New York and are held in Lincoln New York'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 New York, this term means a
written form satisfactory to Lincoln New York and received by it at the
Administrator Mailing Address. With respect to any notice by Lincoln New York 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 New York'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 New York's general account.
MONTHLY ANNIVERSARY DAY. The Day of the month, as shown in the POLICY
SPECIFICATIONS, when Lincoln New York 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 NY 9
<PAGE>
DEFINITIONS (CONTINUED)
MORTALITY AND EXPENSE RISK (M&E) RATE. A daily rate assessed by Lincoln New York
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.
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 LLANY 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 New York, the
investment performance of which is kept separate from that of the general assets
of Lincoln New York. Variable Account assets are not chargeable with the general
liabilities of Lincoln New York.
VARIABLE ACCUMULATION UNIT. A unit of measure used to calculate the value of a
Variable Sub-Account.
LN655 NY 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 New York and subject to the requirements under
ADDITIONAL PREMIUMS, at any time before the Maturity Date. There is no minimum
premium requirement. However, 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 New York. All subsequent
premium payments are payable at the Administrator Mailing Address.
PLANNED PREMIUM. If the Owner chooses to make periodic premium payments, Lincoln
New York 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 New York.
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 Maturity
Date. Lincoln New York 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 New York may reject the additional premium payment unless
evidence of insurability is furnished to Lincoln New York 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 New York may reject all or such excess
portion of the additional premium. Any additional premium payment received by
Lincoln New York shall be applied as premium and not to repay any outstanding
loans, unless Lincoln New York 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 New York is otherwise instructed In Writing.
MATURITY DATE. The Maturity Date is described in the POLICY SPECIFICATIONS.
Payment of the Planned Premiums in accordance with the payment mode specified,
may not continue the policy in force until the Maturity Date even if the amount
is paid as scheduled. The Maturity Date is not guaranteed based upon the level
of Planned Premiums. The period for which the policy will continue will depend
on:
1. The amount, timing, and frequency of premium payment;
2. Changes in the Specified Amount and Death Benefit options;
3. Interest credites and insurance costs;
4. Changes in deductions for riders, if any; and
5. Partial withdrawals and loans
LN655 NY 11
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
POLICY LAPSE AND GRACE PERIOD. 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 New York 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 New York 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 at any time prior to the Maturity Date 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 New York 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 New York
approves the application for reinstatement. The Net Premium Payment and any loan
repayment upon reinstatement will be allocated as set forth under ALLOCATION OF
NET PREMIUM PAYMENTS and LOAN PROVISIONS, LOAN ACCOUNT and LOAN REPAYMENT. Upon
reinstatement, the surrender charges assessed at the time of lapse will be
credited to the Accumulation Value (in proportion to the then current allocation
of Net Premium Payments), and 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 New York,
(b) agree with Lincoln New York 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 New York, 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.
LN655 NY 12
<PAGE>
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 New York, and any payment made or any action taken or
allowed by Lincoln New York before such time in reliance on the recorded
ownership of the policy shall be without prejudice to Lincoln New York.
Unless otherwise directed by the Owner, with the consent of any assignee
recorded with Lincoln New York, 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 New York receives it. Lincoln New York 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 New York, and any payment made or any action taken or allowed by Lincoln
New York before such time in reliance on its records as to the identity of the
Beneficiary shall be without prejudice to Lincoln New York.
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 New York's Board of Directors as a "separate account" under the
insurance law of the State of New York, Lincoln New York'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 New York 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 New York. The Variable Account assets are owned and controlled
exclusively by Lincoln New York, and Lincoln New York 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 New York 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 New York may elect to operate the Variable Account as a management
company instead of a unit investment trust under the 1940 Act or, if
registration under the 1940 Act is no longer required, to deregister the
Variable Account. In the event of such a change, Lincoln New York shall endorse
the policy to reflect the change and may take any other necessary or appropriate
action required to effect the change.
LN655 NY 13
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VARIABLE ACCOUNT PROVISIONS (CONTINUED)
Any changes in the investment policies of the Variable Account shall first be
approved by the New York 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 New York, 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 New York 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 New York 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 New
York 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 New York shall obtain any necessary regulatory or other
approvals. Lincoln New York 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 New York 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 New York from
time to time. Such rate will be established on a prospective basis and, once
credited, such interest will be nonforfeitable.
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.)
LN655 NY 14
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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 New York 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. A Variable Accumulation Unit is a
unit of measure used in the calculation of the value of each Variable
Sub-Account. 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. All or part of a Net Premium Payment allocated
or transferred to a Variable Sub-Account is converted into Variable Accumulation
Units. The number of units will be calculated by dividing each amount allocated,
transferred, distributed or redeemed by the Accumulation Unit Value of the
appropriate Variable Sub-Account at the end of the Valuation Period in which it
is received. The Accumulation Unit Value for each Variable Sub-Account was
initially established at $10.00. It may thereafter increase or decrese from on
Valuation Period to the next. The Variable Accumulation Unit Value for a
Variable Sub-Account for the later Valuation Period 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 end of the preceding Valuation Period by the net asset
value per share of the Fund at the end of the current 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 New York that Lincoln New York determines
result from the operations of the Variable Account; and
3. The difference between the values obtained under steps (1) and (2) is
divided by the number of Variable Accumulation Units for that Variable
Sub-Account outstanding at the beginning of the current 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.
LN655 NY 15
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
COST OF INSURANCE RATES. The Cost of Insurance Rates are determined from time to
time by Lincoln New York based on its expectations of future mortality, Fixed
Account investment earnings, persistency, and expenses, 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. A portion of such Cost of Insurance rates may represent a recovery
of expenses associated with the administration of the policy; such recovery may
be greater in the early policy years. Any change in Cost of Insurance Rates will
apply to all individuals of the same class as the Insureds. The Cost of
Insurance Rates shall not exceed the amounts described in SCHEDULE 3.
MONTHLY DEDUCTION. Each month, on the Monthly Anniversary Day, Lincoln New York
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. 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. 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 New York 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 New
York's maximum amount limit then in effect; (d) Transfers among the Variable
Sub-Accounts or from a Variable
LN655 NY 16
<PAGE>
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.
If the investment strategy of a Variable Sub-Account were changed, the Owner may
transfer the amount in that Variable Sub-Account to the Fixed Account without a
transfer charge, even if the 12 free transfers have already been used. Moreover,
no transfer charge will be imposed when the Owner, in accordance with INSURANCE
COVERAGE PROVISIONS, RIGHT TO CONVERT and GENERAL PROVISIONS, CHANGE OF PLAN,
exchanges the policy for an equivalent fixed account policy, even if the 12 free
transfers have already been used.
NONFORFEITURE AND SURRENDER VALUE PROVISIONS
SURRENDER. Surrender of the policy is effective on the business day of receipt
by Lincoln New York of the policy and a request for surrender In Writing,
provided that at the time of such receipt the policy is in force and it is prior
to the Maturity Date.
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 New York in a lump sum or as
provided under the OPTIONAL METHODS OF SETTLEMENT rider. Any deferment of
payments by Lincoln New York will be subject to GENERAL PROVISIONS, DEFERMENT OF
PAYMENTS.
VALUE AT MATURITY DATE. At the Maturity Date Lincoln New York will pay the
Surrender Value to the Owner if the Insured is then alive.
PARTIAL SURRENDER. A partial surrender may be made from the Policy on any
Valuation Day prior to the Maturity Date 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 New York; 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.
LN655 NY 17
<PAGE>
LOAN PROVISIONS
POLICY LOANS. If the policy has Surrender Value, Lincoln New York 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 New York is made. The
loan may be for any amount up to 100% of the then current Surrender Value;
however, Lincoln New York 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 New York's receipt of such
request, except as Lincoln New York may be permitted to defer the payment of
amounts as specified under GENERAL PROVISIONS, DEFERMENT OF PAYMENTS.
The minimum loan amount is $500. Lincoln New York reserves the right to modify
this amount in the future. Lincoln New York 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 New York 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 New York 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 New York.
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
New York 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. The Owner should consult a
tax advisor prior to taking a loan.
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.
LN655 NY 18
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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 New York, 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;
3. The policy matures as at its Maturity Date; and
4. Failure to pay the amount of premium necessary to avoid termination before
the end of any applicable Grace Period.
No action by Lincoln New York 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 New York 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 New York 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 New York,
b) all such changes must be requested In Writing on a form satisfactory to
Lincoln New York 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 New York, are met.
In such event, Lincoln New York 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 New York 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.
LN655 NY 19
<PAGE>
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 New York must be
furnished; and
(b) any other requirements as determined by Lincoln New York must be met.
If Lincoln New York 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 New York 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 New York 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.
RIGHT TO CONVERT. The Owner may convert this policy to a substantially
comparable flexible premium adjustable life insurance policy without evidence of
insurability for an amount of insurance not exceeding the death benefit of the
variable life insurance policy on the date of conversion.
PAID-UP INSURANCE OPTION. At any time, the Owner may transfer all of the
Variable Account Value to the Fixed Account and then surrender the policy for
reduced guaranteed nonparticipating paid-up insurance. No monthly adminsitrative
fees would apply to such paid-up insurance. The amount of paid-up insurance will
be that which the surrender value will purchase when applied as a net single
premium at the Insured's then attained age using the guaranteed interest and
mortality basis set forth under the "Basis of Computations" provision of the
policy. The paid-up insurance will not include any supplementary or additional
benefits provided by rider under the original policy.
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 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 New York 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 New York as
soon as reasonably practicable after the death of each Insured. Such notice
shall be given to Lincoln New York In Writing by or on behalf of the Owner.
LN655 20
<PAGE>
GENERAL PROVISIONS (CONTINUED)
PAYMENT OF PROCEEDS. Proceeds, as used in this policy, means the amount payable
(a) on the Maturity Date, or (b) upon the surrender of this policy, or (c) 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 New York will pay the Death Benefit Proceeds for the Death
Benefit Option in effect immediately prior to the GRACE PERIOD reduced by any
overdue monthly deductions.
If the policy is surrendered prior to the Maturity Date, the proceeds will be
the Surrender Value described in NONFORFEITURE AND SURRENDER VALUE PROVISIONS.
On the Maturity Date, the proceeds will be the Surrender Value.
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 New York 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 New York'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 New York 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 New York; 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 New York 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 either Insured commits suicide within 2 years from the Date of
Issue, the surviving Insured may convert this policy to a single life flexible
variable life insurance policy. If the second of the Insureds to die commits
suicide within 2 years from the Date of Issue, the Death Benefit Proceeds will
be limited to a refund of premiums paid, less (a) any indebtedness against the
policy and (b) the amount of any partial surrenders. If the second of the
Insureds to die commits suicide within 2 years from the date of any increase in
the Specified Amount, the Death Benefit Proceeds with respect to such increase
will be limited to a refund of the monthly charges for the cost of such
additional insurance and the amount of insurance will be limited to the amount
of Death Benefit Proceeds applicable before such increase was made provided that
the increase became effective at least 2 years from the Date of Issue of the
policy.
INCONTESTABILITY. Except for nonpayment of Monthly Deductions, this policy will
be incontestable after it has been in force during the lifetime of either
Insured for 2 years from its Date of Issue. This means that Lincoln New York
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 either 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.
LN655 NY 21
<PAGE>
GENERAL PROVISIONS (CONTINUED)
ANNUAL REPORT. Lincoln New York 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, (d) outstanding policy loans, and (e) any other
information required by the Superintendent of Insurance.
PROJECTION OF BENEFITS AND VALUES. Lincoln New York will provide a projection of
illustrative future Death Benefit Proceeds and values to the Owner at any time
upon written request and payment of a service fee, if any.
CHANGE OF PLAN. This policy may be exchanged for another policy only if 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
New York 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 New York 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 New
York'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 New York 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 New York. Further, Lincoln New York 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 NY 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.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
[GRAPHIC[
LR650 LL NY Page 1
<PAGE>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000
APPLIED - MALE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain Settlement age of Number of instalments certain
payee nearest payee nearest
birthday 60 120 180 240 birthday 60 120 180 240
- -----------------------------------------------------------------------------------------------------
Age Life Annuity Age Life Annuity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $2.87 $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
- -----------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
- ------------------------------------------------------
Age Life Annuity
<C> <C> <C> <C> <C> <C>
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)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000
APPLIED - FEMALE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain Settlement age of Number of instalments certain
payee nearest payee nearest
birthday 60 120 180 240 birthday 60 120 180 240
- -------------------------------------------------------------------------------------------------------------------
Age Life Annuity Age Life Annuity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $2.80 $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
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
- ------------------------------------------------------
Age Life Annuity
<C> <C> <C> <C> <C> <C>
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>
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Number of years Amount of each instalment Number of years
during which during which
instalments will be instalments will be
paid Annual Monthly paid
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
5 $211.99 $17.91 12
6 179.22 15.14 13
7 155.83 13.16 14
8 138.31 11.68 15
9 124.69 10.53 16
10 113.82 9.61 17
11 104.93 8.86 18
- ---------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------
Amount of each instalment Number of years Amount of each instalment
during which
instalments will be
Annual Monthly paid Annual Monthly
- ---------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$97.54 $8.24 19 $67.78 $5.73
91.29 7.71 20 65.26 5.51
85.95 7.26 25 55.76 4.71
81.33 6.87 30 49.53 4.18
77.29 6.53
73.74 6.23
70.59 5.96
- ---------------------------------------------------------------------------------------
</TABLE>
LR650 Page 3
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
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 before the
Maturity Date.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy or on the Maturity Date.
Flexible premiums payable to the Maturity Date or to
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 NY
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK VUL/SVUL ADDENDUM TO APPLICATION
THIS VUL/SVUL ADDENDUM IS SUBMITTED AS A SUPPLEMENT TO A LIFE INSURANCE
APPLICATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<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
------------------------------------------------------------------------------------------
PROVIDE FULL LEGAL NAME
SOC. SEC. #: __ __ __ - __ __ - __ __ __ __ OR TAX I.D. __ __ - __ __ __ __ __ __ __
- ------------------------------------------------------------------------------------------------------------
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
TRANSFER will be responsible for any claim, loss, liability or expense in connection with a
AUTHORIZA- telephone transfer if the Company or such other person acted on telephone transfer
TION 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 INSTRUCTIONS Each amount transferred is to be applied to the Fund(s) listed on the following page in
IN SECTION 7 BEFORE the percentages noted (USE WHOLE PERCENTAGES ONLY. TOTAL MUST EQUAL 100%).
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
/ / YES add to such Fund at any time to continue this program or may change the periodic
amounts.
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
PREMIUM the 30-day period following each Policy Anniversary and is (are) subject to a
PAYMENT maximum annual limit of 20% of the Fixed Account Value as of that Policy Anniversary.
ALLOCATION (SEE POLICY SPECIFICATION PAGE)
- ----------------------------------------------------------------------------------------------------------
B10409 NY (Page 1)
<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-Registered Trademark- 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-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
---------------------------------------------------------------------------------------------
International Fund - Class 2
---------------------------------------------------------------------------------------------
Stock Fund - Class 2
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
OTHER:
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
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
- --------------------------------------------------------------------------------
B10409 NY (Page 2)
<PAGE>
MAY BE VARIABLE OR FIXED UNDER SPECIFIED CONDITIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
B10409 NY (Page 3)
