PARTICIPATION AGREEMENT
AMONG
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
BARON CAPITAL FUNDS TRUST
AND
BARON CAPITAL, INC.
THIS AGREEMENT, made and entered into this 28" day of August, 1998 by
and among Baron Capital Funds Trust (and all series thereof a business trust
organized under the laws of the State of Delaware (the "Fund"), and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, an New York insurance corporation
(the "Company"), on its own behalf and on behalf of each separate account of
the Company named in Schedule I to this Agreement as in effect at the time this
Agreement is executed and such other separate accounts that may be added to
Schedule I from time to time in accordance with the provisions of Article XI of
this Agreement (each such account referred to as the "Account"), and Baron
Capital, Inc. (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and has a class of stock (the "Fund Insurance Shares")
that has been established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively referred to as "Variable Insurance
Products," the owners of such products being referred to as "Product Owners")
to be offered by insurance companies which have entered into participation
agreements with the Fund ("Participating Insurance Companies"); and
WHEREAS, the Fund filed with the Securities and Exchange Commission
(the "SEC") and the SEC has declared effective a registration statement
(referred to herein as the "Fund Registration Statement" and the prospectus
contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred
to herein as the "Fund Prospectus") on Form N-IA to register itself as an
open-end management investment company (File No. 33-40839) under the
Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund
Insurance Shares (File No. 811-8505) under the Securities Act of 1933, as
amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC
to register under the 1933 Act (unless exempt therefrom) certain variable
annuity contracts described in Schedule 2 to this Agreement as in effect at
the time this Agreement is executed and such other variable annuity contracts
and variable life insurance policies which may be added to Schedule 2 from
time to time in accordance with Article XI of this Agreement (such policies
and contracts shall be referred to herein collectively as the "Contracts," each
such registration statement for a class or classes of contracts listed on
Schedule 2 being referred to as the "Contracts Registration Statement" and the
prospectus for each such class or classes being referred to herein as the
"Contracts Prospectus," and the owners of the such contracts, as distinguished
from all Product Owners, being refer-red to as "Contract Owners"); and
WHEREAS, each Account, a validly existing separate account, duly
authorized by resolution of the Board of Directors of the Company on the date
set forth on Schedule 1, sets aside and invests assets attributable to the
Contracts; and
WHEREAS, the Company has registered or will have registered each
Account with the SEC as a unit investment trust under the 1940 Act before any
Contracts are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an agreement
(the "Fund Distribution Agreement") pursuant to which the Distributor will
distribute the Fund Insurance Shares; and
WHEREAS, BAMCO, Inc. (the "Investment Manager") is registered as an
investment adviser under the 1940 Act and any applicable state securities laws
and serves as an investment manager to the Fund pursuant to an agreement; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund Insurance Shares on behalf of
each Account to fund ITS Contracts and the Distributor is authorized to sell
such Fund Insurance Shares to unit investrnent trusts such as the Accounts at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:
ARTICLE 1. SALE OF FUND SHARES
I.I. The Distributor agrees to sell to the Company those Fund
Insurance Shares, which the Company orders on behalf of each Account, executing
such orders on a daily basis in accordance with Section 1.4 of this Agreement.
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1.2. The Fund agrees to make Fund Insurance Shares available for
purchase by the Company on behalf of each Account at the then
applicable net asset value per share on Business Days as defined
in Section 1.4 of this Agreement, and the Fund shall use its best
efforts to calculate and deliver such net asset value by
6:00 p.m., E.S.T., on each such Business Day. Notwithstanding any
other provision in this Agreement to the contrary, the Board of
Directors of the Fund (the "Fund Board") may suspend or
terminate the offering of shares, if such action is required by
law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Fund Board acting in good faith and in
light of its fiduciary duties under Federal and any applicable
state laws, suspension or termination is necessary and in the best
interests of the shareholders (it being understood that
"shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full
or fractional Fund Insurance Shares held by each Account or the Company,
executing such requests at the net asset value on a daily basis (Company will
expect same day redemption wires unless unusual circumstances evolve which
cause the Fund to have to redeem securities) in accordance with Section 1.4
of this Agreement, the applicable provisions of the 1940 Act and the then
currently effective Fund Prospectus. Notwithstanding the foregoing, the Fund
may delay redemption of Fund Insurance Shares of any series to the extent
permitted by the 1940 Act, any rules, regulations or orders thereunder, or
the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company
shall be the agent of the Fund for the limited purpose of receiving
redemption and purchase requests from each Account (but not from
the general account of the Company), and receipt on any Business
Day by the Company as such limited agent of the Fund prior to the
time prescribed in the current Fund Prospectus (which as of the
date of execution of this Agreement is 4 p.m., E.S.T.) shall
constitute receipt by the Fund on that same Business Day,
provided that the Fund, or its designee, receives notice of such
redemption or purchase request by 11:00 a.m., E.S.T. on the next
following Business Day. For purposes of this Agreement, "Business
Day" shall mean any day on which the New York Stock exchange is
open for trading.
(b) The Company shall pay for the shares on the same day
that it places an order with the Fund to purchase those Fund
Insurance Shares for an Account. Payment for Fund Insurance
Shares will be made by each Account or the Company in Federal
Funds transmitted to the Fund by wire to be received by
11:00 a.m., E.S.T. on the day the Fund is properly notified of the
purchase order for shares. The Fund will confirm receipt of each
trade and these confirmations will be received by the Company via
Fax or Email by 1:00 p.m. E.S.T. If Federal Funds are not received
on time, such funds will be invested, and shares purchased thereby
will-be issued, as soon as practicable.
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(c) Payment for shares redeemed by each Account or the
Company will be made in Federal Funds transmitted to the Company
by wire on the same day the Fund is notified of the redemption
order of shares, except that the Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment
be delayed longer than the period permitted under Section 22(e)
of the 1940 Act. Neither the Fund nor the Distributor shall bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be redeemed;
the Company alone shall be responsible for such action.
1.5. Issuance and transfer of Fund Insurance Shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Account. Purchase and redemption orders for Fund Insurance Shares will be
recorded in an appropriate ledger for each Account or the appropriate
subaccount of each Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income dividends or capital gain distributions payable on
any shares. The Company, on its behalf and on behalf of each Account, hereby
elects to receive all such dividends and distributions as are payable on any
Fund Insurance Shares in the form of additional shares. The Company reserves
the right, on its behalf and on behalf of each Account, to revoke this election
and to receive all such dividends in cash. The Fund shall notify the Company of
the number of Fund Insurance Shares so issued as payment of such dividends and
distributions.
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 6 p.m., E.S.T. each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance
with the then currently effective Fund Prospectus. Neither the Fund, any
Series, the Distributor, nor the Investment Manager nor any of their affiliates
shall be liable for any information provided to the Company pursuant to this
Agreement which information is based on incorrect information supplied by the
Company to the Fund, the Distributor or the Investment Manager.
1.8. (a) The Company may withdraw each Account's investment in the
Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) upon a determination by a majority of the Fund
Board, or a majority of disinterested Fund Board members, that an
irreconcilable material conflict exists among the interests of
(x) any Product Owners or (y) the interests of the Participating
Insurance Companies investing in the Fund; (iii) upon requisite
vote of the Contractowners having an interest in the affected
Fund to substitute the shares of another investment company for
shares in accordance with the terms of the Contracts; (iv) as
required by state and/or federal laws or regulations or judicial
or other legal precedent of general application; or (v) at the
Company's sole discretion, pursuant to an order of the SEC under
Section 26(b) of the 1940 Act.
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(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
Insurance Shares may be sold to other insurance companies(subject
to Section 1.9 hereof) and the cash value of the Contracts may be
invested in other investment companies.
(e) The Company shall not, without prior notice to the
Distributor (unless otherwise required by applicable law), take
any action to operate each Account as a management investment
company under the 0000 Xxx.
1.9. The Fund and the Distributor agree that Fund Insurance Shares
will be sold only to Participating Insurance Companies and their separate
accounts. The Fund and the Distributor will not sell Fund Insurance Shares to
any insurance company or separate account unless an agreement complying with
Article VII of this Agreement is in effect to govern such sales. No Fund
Insurance Shares will be sold to the general public.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and wan-ants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a separate
account under Section 4240 of New York Insurance Law, and has registered or,
prior to the issuance of any Contracts, will register- each Account (unless
exempt therefrom) as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a separate account for its Contracts, and that it
will maintain such registrations for so long as any Contracts issued under them
are outstanding.
2.2. The Fund represents and warrants that Fund Insurance Shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund
Insurance Shares are sold. The Fund further represents and warrants that it is
a business trust duly organized and in good standing under the laws of the
State of Delaware.
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2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund further represents and warrants
that it will make every effort to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder. In the event of a
breach of this Section 3.6 by the Fund, it will a) immediately notify the
Company of the breach and b) to adequately diversify each series so as to
achieve compliance with the grace period offered by Regulation 1.817-5.
2.5. The Company represents that the Contracts are currently and at
the time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code.
The Company shall make every effort to maintain such treatment and shall notify
the Fund and the Distributor immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of California, if applicable, to the
extent required to perform this Agreement; and with any state-mandated
investrnent restrictions set forth on Schedule 3, as amended from time to time
by the Company in accordance with Section 6.6. The Fund, however, makes no
representation as to whether any aspect of its operations (including, but not
limited to, fees and expenses and investment policies) otherwise complies with
the insurance laws or regulations of any state. The Company alone shall be
responsible for informing the Fund of any investment restrictions imposed by
state insurance law and applicable to the Fund.
2.7. The Distributor represents and warrants that it is duly registered
as a broker-dealer under the 1934 Act, a member in good standing of the NASD,
and duly registered as a brokerdealer under applicable state securities laws;
its operations are in compliance with applicable law, and it will distribute
the Fund Insurance Shares according to applicable law.
2.8. The Distributor, on behalf of the Investrnent Manager, represents
and warrants that the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940 and is in compliance with applicable
federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
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ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Distributor shall provide the Company with as many copies of
the current Fund Prospectus as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund at its expense shall
provide to the Company a camera-ready copy, and electronic version, of the
current Fund Prospectus suitable for printing and other assistance as is
reasonably necessary in order for the Company to have a new Contracts
Prospectus printed together with the Fund Prospectus in one document. See
Article V for a detailed explanation of the responsibility for the cost of
printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Distributor (or, in the Fund's
discretion, the Fund Prospectus shall state that such Statement is available
from the Fund), and the Distributor (or the Fund) shall provide such Statement
free of charge to the Company and to any outstanding or prospective Contract
owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each
case in a form suitable for printing, as detennined by the
Company. The Fund shall be responsible for the costs of printing
and distributing these materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investrnent Manager is named to
the Fund or the Distributor prior to its use. No such material shall be used,
except with the prior written permission of the Fund or the Distributor. The
Fund and the Distributor agree to respond to any request for approval on a
prompt and timely basis. Failure of the Fund to respond within 10 days of the
request by the Company shall relieve the Company of the obligation to obtain
the prior written permission of the Fund or the Distributor.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
other than the information or representations contained in the Fund
Registration Statement or Fund Prospectus, as such Registration Statement and
Prospectus may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or by the Distributor, except with the prior
written permission of the Fund or the Distributor. The Fund agrees to respond
to any request for permission on a prompt and timely basis. If neither the
Fund nor the Distributor responds within 10 days of a request by the Company,
then the Company shall be relieved of the obligation to obtain the prior
written pension of the Fund.
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3.6. The Fund and the Distributor shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account or the Contracts other than the information or representations
contained in the Contracts Registration Statement or Contracts Prospectus, as
such Registration Statement and Prospectus may be amended or supplemented from
time to time, or in published reports of each Account which are in the public
domain or approved in writing by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved in
writing by the Company, except with the prior written permission of the
Company. The Company agrees to respond to any request for permission on a
prompt and timely basis. If the Company fails to respond within 10 days of a
request by the Fund or the Distributor, then the Fund and the Distributor are
relieved of the obligation to obtain the prior written permission of the
Company.
3.7. The Fund will provide to the Company at least one complete copy
of all Fund Registration Statements, Fund Prospectuses, Statements of
Additional Information, annual and semi-annual reports and other reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments or supplements
to any of the above, that relate to the Fund or Fund Insurance Shares, within
20 days after the filing of such document with the SEC or other regulatory
authorities.
3.8. The Company will provide to the Fund at least one complete copy
of all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, and statements of
additional information, reports, proxy statements, and solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments or supplements to any of the above, to the extent that the other
party reasonably needs such information for purposes of preparing a report or
other filing to be filed with or submitted to a regulatory agency. If a party
requests any such information before it has been filed, the other party will
provide the requested information if then available and in the version then
available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other
public media), sales literature (i.e., any written communication distributed
or made generally available to customers or the public, in print or
electronically, including brochures, circulars, research reports, market
letters, form letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications
8
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, Statements of Additional Information,
shareholder reports and proxy materials, and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the order referred to in Article
VII, the Fund shall: solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the order referred to in Article
VII, the Company shall:
(a) vote Fund Insurance Shares attributable to Contract
owners in accordance with instructions or proxies received in
timely fashion from such Contract owners;
(b) vote Fund Insurance Shares attributable to Contract
owners for which no instructions have been received in the same
proportion as Fund Insurance Shares of such series for which
instructions have been received in timely fashion; and
(c) vote Fund Insurance Shares held by the Company on its
own behalf or on behalf of each Account that are not attributable to
Contract owners in the same proportion as Fund Insurance Shares of such
series for which instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set f6rth
above.
ARTICLE V. Fees and EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund Insurance Shares under Federal and any state
securities law, preparation and filing of the Fund Prospectus and Fund
Registration Statement, the preparation of all statements and notices
required by any Federal or state securities law, all taxes on the issuance or
transfer of Fund Insurance Shares, and any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-I under the
1940 Act.
9
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAls to existing Contractowners. (If for this purpose the
Company may print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contract owners.)
The Company is responsible for the cost of printing and distributing
Fund prospectuses and SAls for new sales; and Account Prospectuses and SAls for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAls.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section
817(h) of the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and each Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund Insurance Shares are sold the continuous offering of Fund
Insurance Shares as described in the then currently effective Fund Prospectus.
The Fund shall register and qualify Fund Insurance Shares for sale to the extent
required by applicable securities laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, t he Fund undertakes to have a Fund Board of
Directors, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
6.6. (a) The Company shall amend Schedule 3 when appropriate in
order to inform the Fund of any applicable state-mandated
investment restrictions with which the Fund must comply.
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(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3,
the Company shall be informed immediately of the substance of those
restrictions.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and
Shared Funding Order") dated June 16, 1998 of the Securities and Exchange
Commission under Section 6c of the Act and, in particular, has reviewed the
conditions to the relief set forth in the related Notice. As set forth
therein, the Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist
the Board in carrying out its responsibilities under the conditions of the
Mixed and Shared Funding Order by providing all information reasonably
necessary for the Board to consider any issues raised, including information
as to a decision to disregard voting instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the
Company and a reasonable opportunity for the Company to appear
before it and present its case, determines that the Company is
responsible for said conflict, and if the Company agrees with that
determination, the Company shall, at its sole cost and expense,
take whatever steps are necessary to remedy the irreconcilable
material conflict. These steps could include: (a) withdrawing the
assets allocable to some or all of the affected Accounts from the
Fund and reinvesting such assets in a different investment vehicle,
or submitting the question of whether such segregation should be
implemented to a vote of all affected Contractowners and, as
appropriate, segregating the assets of any particular group (i.e.,
variable annuity Contractowners, variable life insurance
policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option
of making such a change; and (b) establishing a new registered
mutual fund or management separate account, or taking such other
action as is necessary to remedy or eliminate the irreconcilable
material conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with the
Board, reserving its right to dispute the determination as between
just the Company and the Fund. After reserving that right the
Company, although disagreeing with the Board that it (the Company)
was responsible for the conflict, shall take the necessary steps,
under protest, to remedy
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the conflict, substantially in accordance with paragraph (a) just
above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45
days after the Board's determination the Company elects to press
the dispute, it shall so notify the Board in writing. The parties
shall then attempt to resolve the matter amicably through
negotiation by individuals from each party who are authorized to
settle the matter.
If the matter has not been amicably resolved within 60 days from
the date of the Company's notice of its intent to press the
dispute, then before either party shall undertake to litigate the
dispute it shall be submitted to non-binding arbitration conducted
expeditiously in accordance with the CPR Rules for Non-Administered
Arbitration of Business Disputes, by a sole arbitrator; PROVIDED,
HOWEVER, that if one party has requested the other party to seek an
amicable resolution and the other party has failed to participate,
the requesting party may initiate arbitration before expiration of
the 60-day period set out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the CPR Panels of Neutrals. The
arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. See. 1-16. The place of arbitration shall Syracuse,
New York. The Arbitrator is not empowered to award damages in
excess of compensatory damages.
(d) If the Board shall determine that the Fund or another
insurer was responsible for the conflict, then the Board shall
notify the Company immediately of that determination. The Fund
shall assure the Company that it (the Fund) or that other insurer,
as applicable, shall, at its sole cost and expense, take whatever
steps are necessary to eliminate the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) each Accounts investment in
the Fund, if the Fund so elects.
7.4. Subject to the terms of Section 7.2 above, the Company shall
carry out the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict, but in no event will the Fund
be required to establish a new funding medium for any variable contract, nor
will the Company be required to establish a new funding medium for any
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Contract if in either case an offer to do so has been declined by a vote of a
majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold
harmless the Fund, the Distributor and each person who controls or is
associated with the Fund (other than another Participating Insurance Company)
or the Distributor within the meaning of such terms under the federal
securities laws and any officer, trustee, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint
or several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which they or any of
them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information furnished
in writing to the Company by the Fund or the Distributor (or a person
authorized in writing to do so on behalf of the Fund or the
Distributor) for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund Insurance Shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution of
the Contracts or Fund Insurance Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
13
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in
reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(d) arise as a result of any failure by the Company to
provide the services and furnish the materials or to make any payments
under the terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund Insurance Shares on a
timely basis in accordance with the procedures set forth in Article 1;
or
(f) arise as a result of the Company's providing the Fund
with inaccurate information, which causes the Fund to calculate its
Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless the Company and each person who controls or is
associated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund or the Distributor for use in the
Fund
14
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature for the Fund or otherwise for
use in connection with the sale of the Contracts or Fund Insurance
Shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the Distributor or
the Fund (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Distributor
or the Fund or persons under their control) or wrongful conduct of the
Distributor or persons under its control with respect to the sale or
distribution of the Contracts or Fund Insurance Shares; or
(c) a rise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract's Registration
Statement, Contracts Prospectus or sales literature or other
promotional material for the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in
reliance upon information furnished in writing by the Distributor or
the Fund to the Company (or a person authorized in writing to do so on
behalf of the Fund or the Distributor); or
(d) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the terms of this
Agreement (including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Article VI of this
Agreement; and (ii) to provide the Company with accurate information
sufficient for it to calculate its accumulation and/or annuity unit
values in timely fashion as required by law and by the Contracts
Prospectuses); or
(d) arise out of any material breach by the Distributor or
the Fund of this Agreement.
This indemnification will be in addition to any liability which the Distributor
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify
the indemnifying party in writing of the commencement thereof as soon as
practicable
15
thereafter, provided that the omission to so notify the indemnifying party
will not relieve it from any liability under this Article VIII, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result
of the failure to give such notice. The indemnifying party, upon the request
of the indemnified party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (1) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason of
such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VHI. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of New York,
without giving effect to the principles of conflicts of laws.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant, and the terms hereof shall be limited, interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
16
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts as
detennined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of
notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of each Account, the
administration of the Contracts or the purchase of Fund Insurance
Shares, or an expected or anticipated ruling, judgment or outcome
which would, in the Fund's reasonable judgment, materially impair
the Company's ability to perform the Company's obligations and
duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment
Manager or any Sub-Investment Manager, by the NASD, the SEC, or
any state securities or insurance commission or any other
regulatory body regarding the duties of the Fund or the
Distributor under this Agreement, or an expected or anticipated
ruling, judgment or outcome which would, in the Company's
reasonable judgment, materially impair the Fund's or the
Distributor's ability to perform Fund's or Distributor's
obligations and duties hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or Sub-investment
Manager by the NASD, the SEC, or any state securities or
insurance commission or any other regulatory body which would, in
the good faith opinion of the Company, result in material harm to
the Accounts, the Company, or Contractowners.
(f) upon requisite vote of the Contract owners having an
interest in the affected Series (unless otherwise required by
applicable law) and written approval of the Company, to substitute
the shares of another investment company for the corresponding
shares of the Fund in accordance with the terms of the Contracts;
or
(g) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
17
(h) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (i) any Product owners or
(ii) the interests of the Participating Insurance Companies
investing in the Fund; or
(i) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code, or under any successor or similar provision, or if the
Company reasonably believes, based on an opinion of its counsel,
that the Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails to meet
the diversification requirements specified in Section 817(h) of
the Code and any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(l) at the option of either the Fund or the Distributor if
the Fund or the Distributor, respectively, shall determine, in
their sole judgment exercised in good faith, that either (1) the
Company shall have suffered a material adverse change in its
business or financial condition; or (2) the Company shall have
been the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations
of either the Fund or the Distributor; or
(m) at the option of the Company, if the Company shall
detennine, in its sole judgment exercised in good faith, that
either: (1) the Fund and the Distributor, or either of them,
shall have suffered a material adverse change in their respective
businesses or financial condition; or (2) the Fund or the
Distributor, or both of them, shall have been the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Company;
or
(n) upon the assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Accounts
to another insurance company pursuant to an assumption
reinsurance agreement) unless the non-assigning party consents
thereto or unless this Agreement is assigned to an affiliate of
the Distributor.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties
to this Agreement of its intent to terminate which notice shall set forth the
basis for such termination. Furthermore:
18
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10. 1 (a) of
this Agreement, such prior written notice shall be given in advance
of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10. 1 (c) or 10. 1 (d) of this Agreement,
such prior written notice shall be given at least ninety (90) days
before the effective date of termination, or sooner if required by
law or regulation.
(c) in the event that any termination is based upon the
provisions of Section 10. 1 (e) of this Agreement, such prior
written notice shall be given at least sixty (60) days before the
date of any proposed vote to replace the Fund's shares
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10. 1 of this Agreement, the Fund and the
Distributor will, at the option of the Company, continue to make
available additional Fund Insurance Shares for so long after the
termination of this Agreement as the Company desires, pursuant to
the terms and conditions of this Agreement as provided in paragraph
(b) below, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Company so
elects to make additional Fund Insurance Shares available, the
owners of the Existing Contracts or the Company, whichever shall
have legal authority to do so, shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments
under the Existing Contracts.
(b) In the event of a termination of this Agreement
pursuant to Section 10. 1 of this Agreement, the Fund and the
Distributor shall promptly notify the Company whether the
Distributor and the Fund will continue to make Fund Insurance
Shares available after such termination. If Fund Insurance Shares
continue to be made available after such termination, the
provisions of this Agreement shall remain in effect except for
Section 10.1 (a) and thereafter either the Fund or the Company may
terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the
circumstances but, if given by the Fund, need not be for more than
six months.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII or any conditions or
undertakings incorporated by reference in Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth or
incorporated by reference therein.
19
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement from
time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance
policies to be issued by the Company through an Account investing in the
Fund. The provisions of this Agreement shall be equally applicable to each
such class of contracts or policies, unless the context otherwise requires.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth
below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Baron Capital Funds Trust
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attn: Xxxxx X. Xxxxxx
cc: Xxxxx X. Xxxxxxxxx, Esq.
If to the Company:
Lincoln Life & Annuity Company of New York
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx 0. Xxxxxxxx, Esq.
If to the Distributor:
Baron Capital, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx, 10 153
Attn: Xxxxx X. Xxxxxx
cc: Xxxxx X. Xxxxxxxxx, Esq.
20
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have
been duly authorized by all necessary corporate or trust action, as
applicable, by such party, and when so executed and delivered this Agreement
will be the valid and binding obligation of such party enforceable in
accordance with its terms.
21
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
Baron Capital Funds Trust
Date: Signature:
Name:
Title:
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Date: Signature:
Name:
Title:
Baron Capital, Inc.
Date: Signature:
Name:
Title:
22
SCHEDULE L
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of August 28, 1998
LINCOLN LIFE AND ANNUITY VARIABLE ANNUITY ACCOUNT L
LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT Q
23
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule I
As of August 28, 1998
LLANY GROUP VARIABLE ANNUITY - GVA (GROUP VARIABLE ANNUITY)
LLANY GROUP MULTI FUND (GROUP VARIABLE ANNUITY)
24
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of August 28, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. Borrowing limits for any variable contract separate account
portfolio are (1) 10% of net asset value when borrowing for any general
purpose; and (2) 25% of net asset value when borrowing as a temporary measure
to facilitate redemptions. Net asset value of a portfolio is the market value
of all investments or assets owned less outstanding liabilities of the
portfolio at the time that any new or additional borrowing is undertaken.
FOREIGN INVESTMENTS - DIVERSIFICATION.
1. A portfolio will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when foreign
investments comprise less than 80% of the portfolio's net asset value; to
three when less than 60% of that value; to two when less than 40%; and to one
when less than 20%.
2. Except as set forth in items 3 and 4 below, a Portfolio will have no
more than 20% of its net asset value invested in securities of issuers
located in any one county.
3. A Portfolio may have an additional 15% of its net asset value invested
in securities of issuers located in any one of the following countries:
Australia, Canada, France, Japan, the United Kingdom or Germany.
4. A Portfolio's investments in United States issuers are not subject to the
foreign country diversification guidelines.
25
