FUND PARTICIPATION AGREEMENT
BETWEEN
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
LINCOLN VARIABLE INSURANCE PRODUCTS TRUST
THIS AGREEMENT, made and entered into this 1st day of May, 2003, by and
between LINCOLN VARIABLE INSURANCE PRODUCTS TRUST, an open-end management
investment company organized as a Delaware statutory trust (the "Trust"), and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, a New York insurance corporation
(the "Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 to this Agreement as in effect at the time this
Agreement is executed and such other separate accounts that may be added to
Schedule 1 from time to time in accordance with the provisions of Article XI of
this Agreement (each such account referred to as the "Account;" collectively,
the "Accounts").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Trust ("Participating Insurance Companies");
and
WHEREAS, the Trust filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Trust Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Trust Prospectus") on Form N-lA to register itself as an open-end
management investment company (File No. 811-08090) under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Trust shares (File No.
33-70742) under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund," which are set forth in Schedule 2,
and representing the interest in a particular managed portfolio of securities
and other assets; and
WHEREAS, the Company has filed or will file a registration statement with
the SEC to register under the 1933 Act (unless exempt therefrom) certain
variable annuity contracts and/or variable life insurance policies (such
policies and contracts shall be referred to herein collectively as the
"Contracts," each such registration statement for a class or classes of
contracts being referred to as the "Contracts Registration Statement" and the
prospectus for each such class or classes being referred to herein as the
"Contracts Prospectus," and the owners of the such contracts, as distinguished
from all Product owners, being referred to as "Contract owners"); and
WHEREAS, each Account, a validly existing separate account, duly authorized
by the Company on the date set forth on Schedule 1, sets aside and invests
assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
with the SEC as a unit investment trust under the 1940 Act before any Contracts
are issued by that Account; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Trust is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company and
the Trust agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those shares which the Company
orders on behalf of the Account, executing such orders on a daily basis in
accordance with Section 1.4 of this Agreement.
1.2. The Trust agrees to make shares available for purchase by the Company
on behalf of the Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Trust shall
use its best efforts to calculate AND DELIVER such net asset value by 7:00 p.m.,
New York time., on each such Business Day. Notwithstanding any other provision
in this Agreement to the contrary, the Board of Directors of the Trust (the
"Trust Board") may suspend or terminate the offering of shares, if such action
is required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Trust Board acting in good faith and in light of its
fiduciary duties under Federal and any applicable state laws, suspension or
termination is necessary and in the best interests of the shareholders (it being
understood that "shareholders"" for this purpose shall mean Product owners).
1.3. The Trust agrees to redeem, at the Company's request, any full or
fractional shares of the Trust held by the Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect same
day redemption wires unless unusual circumstances evolve which cause the Trust
to have to redeem securities) in accordance with Section 1.4 of this Agreement,
the applicable provisions of the 1940 Act and the then currently effective Trust
Prospectus. Notwithstanding the foregoing, the Trust may delay redemption of
Trust shares to the extent permitted by the 1940 Act, any rules, regulations or
orders thereunder, or the then currently effective Trust Prospectus.
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall be
the agent of the Trust for the limited purpose of receiving redemption
and purchase requests
from the Account (but not from the general account of the Company),
and receipt on any Business Day by the Company as such limited agent
of the Trust prior to the time prescribed in the current Trust
Prospectus (which as of the date of execution of this Agreement is 4
p.m., New York time) shall constitute receipt by the Trust on that
same Business Day, provided that the Trust receives notice of such
redemption or purchase request by 9:00 a.m., New York time on the next
following Business Day. For purposes of this Agreement, "Business Day"
shall mean any day on which the New York Stock exchange is open for
trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Trust to purchase those Trust shares for an
Account. Payment for Trust shares will be made by the Account or the
Company in Federal Funds transmitted to the Trust by wire to be
received by 11:00 a.m., New York time on the day the Trust is properly
notified of the purchase order for shares. The Trust will confirm
receipt of each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. New York time If Federal Funds
are not received on time, such funds will be invested, and shares
purchased thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the Company will be
made in Federal Trusts transmitted to the Company by wire on the same
day the Trust is notified of the redemption order of shares, except
that the Trust reserves the right to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 0000 Xxx. The Trust shall
not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be redeemed; the
Company alone shall be responsible for such action.
1.5. Issuance and transfer of Trust shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Trust shares will be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.6. The Trust shall furnish notice as soon as reasonably practicable to
the Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Trust. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends in cash. The Trust shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.7. The Trust shall use its best efforts to make the net asset value per
share available to the Company by 7:00 p.m., New York Time each Business Day,
and in any event, as soon as reasonably practicable after the net asset value
per share is calculated, and shall calculate such net asset value in accordance
with the then currently effective Trust Prospectus. The Trust will
notify Company when and if Trust is not able to communicate the net asset value
per share by 7:00 pm New York time.
1.8 If the Trust provides the Company with materially incorrect share net
asset value information through no fault of the Company, the Company on behalf
of the Separate Accounts, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct share net asset value. Any
material error in the calculation of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to the
Company. The Trust shall not be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company to the Trust. In the event of any material
error in the calculation or communication of net asset value, dividends or
capital gain information or any delay in the communication, the responsible
party or parties shall reimburse the Company for any losses or reasonable costs
incurred as a result of the error or delay, including but not limited to,
amounts needed to make Contract owners whole and reasonable administrative costs
necessary to correct the error.
1.9. The Company may withdraw the Account's investment in the Trust only:
(i) as necessary to facilitate Contract owner requests; (ii) upon a
determination by a majority of the Trust Board, or a majority of disinterested
Trust Board members, that an irreconcilable material conflict exists among the
interests of (x) any Product owners or (y) the interests of the Participating
Insurance Companies investing in the Trust; (iii) upon requisite vote of the
Contract owners having an interest in the Trust to substitute the shares of
another investment company for shares in accordance with the terms of the
Contracts; (iv) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application; or (v) at the
Company's sole discretion, pursuant to an order of the SEC under Section 26(b)
of the 0000 Xxx.
1.10. The parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive and that the Trust shares may be sold to other
insurance companies (subject to Section 1.12 hereof) and the cash value of the
Contracts may be invested in other investment companies.
1.11. The Company shall not, without prior notice to the Trust (unless
otherwise required by applicable law), take any action to operate the Accounts
as management investment companies under the 0000 Xxx.
1.12. The Trust agrees that Trust shares will be sold only to Participating
Insurance Companies and their separate accounts. The Trust will not sell Trust
shares to any insurance company or separate account unless an agreement
complying with Article VII of this Agreement is in effect to govern such sales.
No Trust shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be
issued in compliance in all material respects with all applicable Federal and
state laws and (c) that the Company will require of every person distributing
the Contracts that the Contracts be offered and sold in compliance in all
material respects with all applicable Federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
authorized each Account as a separate account under Section 27-1-5-1 of the
Indiana Insurance Code, and has registered or, prior to the issuance of any
Contracts, will register each Account (unless exempt therefrom) as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
separate account for its Contracts, and that it will maintain such registrations
for so long as any Contracts issued under them are outstanding.
2.2. The Trust represents and warrants that Trust shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Trust is and shall
remain registered under the 1940 Act for so long as the Trust shares are sold.
The Trust further represents and warrants that it is a corporation duly
organized and in good standing under the laws of Delaware.
2.3. The Trust represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Trust further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Trust represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Trust immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.6. The Trust represents that the Trust's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Delaware, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Trust, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Trust of
any investment restrictions imposed by state insurance law and applicable to the
Trust.
2.7. The Trust represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Trust will
immediately notify the Company
in the event the fidelity bond coverage should lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Trust shall provide the Company with as many copies of the current
Trust Prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Trust at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Trust Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Trust Prospectus in one document. See Article V for a detailed explanation of
the responsibility for the cost of printing and distributing Trust prospectuses.
3.2. The Trust Prospectus shall state that the Statement of Additional
Information for the Trust is available from the Trust and the Trust shall
provide such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Trust at its expense shall provide to the Company a
camera-ready copy of the Trust's shareholder reports and other
communications to shareholders (except proxy material), in each case
in a form suitable for printing, as determined by the Company. The
Trust shall be responsible for the costs of printing and distributing
these materials to Contract owners.
(b) The Trust at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contract owner names and addresses to the Trust for
this purpose.
3.4. The Company shall furnish to the Trust, prior to its use, each piece
of sales literature or other promotional material in which the Trust is named.
No such material shall be used, except with the prior written permission of the
Trust. The Trust agrees to respond to any request for approval on a prompt and
timely basis. Failure of the Trust to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Trust.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust other than the
information or representations contained in the Trust Registration Statement or
Trust Prospectus, as such Registration Statement and Prospectus may be amended
or supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust, except with the prior written permission of the Trust. The Trust agrees
to respond to any request for permission on a prompt and timely basis. If the
Trust does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Trust.
3.6. The Trust shall not give any information or make any representations
on behalf of the Company or concerning the Company, the Account or the Contracts
other than the information or representations contained in the Contracts
Registration Statement or Contracts Prospectus, as such Registration Statement
and Prospectus may be amended or supplemented from time to time, or in published
reports of the Account which are in the public domain or approved in writing by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved in writing by the Company, except with the prior
written permission of the Company. The Company agrees to respond to any request
for permission on a prompt and timely basis. If the Company fails to respond
within 10 days of a request by the Trust, then the Trust is relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Trust will provide to the Company at least one complete copy of
all Trust Registration Statements, Trust Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Trust or Trust shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Trust at least one complete copy of
all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, statements of additional information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports
and proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. VOTING
4.1 Subject to applicable law and the requirements of Article VII, the
Trust shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Trust shares attributable to Contract owners in accordance
with instructions or proxies received in timely fashion from such
Contract owners;
(b) vote Trust shares attributable to Contract owners for which no
instructions have been received in the same proportion as Trust shares
of such Series for which instructions have been received in timely
fashion; and
(c) vote Trust shares held by the Company on its own behalf or on
behalf of the Account that are not attributable to Contract owners in
the same proportion as Trust shares of such Series for which
instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Trust under this Agreement
(including expenses expressly assumed by the Trust pursuant to this Agreement)
shall be paid by the Trust to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Trust shares under Federal and any state securities law,
preparation and filing of the Trust Prospectus and Trust Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Trust shares, and any
expenses permitted to be paid or assumed by the Trust pursuant to a plan, if
any, under Rule 12b-1 under the 1940 Act.
The Trust is responsible for the cost of printing and distributing Trust
Prospectuses and SAIs to existing Contract owners. (If for this purpose the
Company decided to print the Trust Prospectuses and SAIs in a booklet or
separate booklets containing disclosure for the Contracts and for underlying
funds other than those of the Trust, then the Trust shall pay only its
proportionate share of the total cost to distribute the booklet to existing
Contract owners.)
The Company is responsible for the cost of printing and distributing Trust
prospectuses
and SAIs for new sales; and Account Prospectuses and SAIs for existing Contract
owners. The Company shall have the final decision on choice of printer for all
Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Trust undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and the Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Trust shall amend the Trust Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Trust shares are sold the continuous offering of Trust shares as
described in the then currently effective Trust Prospectus. The Trust shall
register and qualify Trust shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Trust undertakes to have a Trust Board of Directors,
a majority of whom are not interested persons of the Trust, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Trust of any applicable
state-mandated investment restrictions with which the Trust must
comply, the Company shall arrange with the Trust to amend Schedule 3,
pursuant to the requirements of Article XI.
(b) Should the Trust become aware of any restrictions which may be
appropriate for inclusion in Schedule 3, the Company shall be informed
immediately of the substance of those restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Trust
(the "Board")
any potential or existing conflicts between the interests of Product owners of
all separate accounts investing in the Trust, and to assist the Board in
carrying out its responsibilities under Section 6e-3(T) of the 1940 Act, by
providing all information reasonably necessary for the Board to consider any
issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the Company and
a reasonable opportunity for the Company to appear before it and
present its case, determines that the Company is responsible for said
conflict, and if the Company agrees with that determination, the
Company shall, at its sole cost and expense, take whatever steps are
necessary to remedy the material irreconcilable conflict. These steps
could include: (i) withdrawing the assets allocable to some or all of
the affected Accounts from the Trust and reinvesting such assets in a
different investment vehicle, or submitting the question of whether
such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contract owners, variable
life insurance policyowners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of
making such a change; and (ii) establishing a new registered mutual
fund or management separate account; or (iii) taking such other action
as is necessary to remedy or eliminate the material irreconcilable
conflict.
(b) If the Company disagrees with the Board's determination, the
Company shall file a written protest with the Board, reserving its
right to dispute the determination as between just the Company and the
Trust and to seek reimbursement from the Trust for the reasonable
costs and expenses of resolving the conflict . After reserving that
right the Company, although disagreeing with the Board that it (the
Company) was responsible for the conflict, shall take the necessary
steps, under protest, to remedy the conflict, substantially in
accordance with paragraph (a) just above, for the protection of
Contract owners.
(c) As between the Company and the Trust, if within 45 days after the
Board's determination the Company elects to press the dispute, it
shall so notify the Board in writing. The parties shall then attempt
to resolve the matter amicably through negotiation by individuals from
each party who are authorized to settle the matter. If the matter has
not been amicably resolved within 60 days from the date of the
Company's notice of its intent to press the dispute, then before
either party shall undertake to litigate the dispute it shall be
submitted to non-binding arbitration conducted expeditiously in
accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER, that if
one party has requested the other party to seek an amicable resolution
and the other party has failed to participate, the requesting party
may initiate arbitration before expiration of the 60-day period set
out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the CPR Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Fort Xxxxx, Indiana. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Board shall determine that the Trust or another was
responsible for the conflict, then the Board shall notify the Company
immediately of that determination. The Trust shall assure the Company
that it (the Trust) or that other Participating Insurance Company as
applicable, shall, at its sole cost and expense, take whatever steps
are necessary to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a waiver of
any right of action which the Company may have against other
Participating Insurance Companies for reimbursement of all or part of
the costs and expenses of resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall withdraw (without charge or penalty) the Account's investment in the
Trust, if the Trust so elects.
7.4. For purposes of this Article, a majority of the disinterested members
of the Board shall determine whether or not any proposed action adequately
remedies any irreconcilable conflict. However, in no event will the Trust be
required to establish a new funding medium for any variable contract, nor will
the Company be required to establish a new funding medium for any Contract, if
in either case an offer to do so has been declined by a vote of a majority of
affected Contract owners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each person who controls or is associated with the
Trust (other than another Participating Insurance Company) within the meaning of
such terms under the federal securities laws and any officer, trustee, director,
employee or agent of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid with the
prior written consent of the Company in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts
Registration Statement, Contracts Prospectus, sales literature or
other promotional material for the Contracts or the Contracts
themselves (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission
or such alleged statement or alleged omission was made in reliance
upon and in conformity with information furnished in writing to the
Company by the Trust (or a person authorized in writing to do so on
behalf of the Trust) for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company
(other than statements or representations contained in the Trust
Registration Statement, Trust Prospectus or sales literature or other
promotional material of the Trust not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution of
the Contracts or Trust shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Trust Registration Statement, Trust
Prospectus or sales literature or other promotional material of the
Trust or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in conformity
with information furnished to the Trust by or on behalf of the
Company; or
(d) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments under the
terms of this Agreement; or
(e) arise out of any material breach by the Company of this Agreement,
including but not limited to any failure to transmit a request for
redemption or purchase of Trust shares on a timely basis in accordance
with the procedures set forth in Article I; or
(f) arise as a result of the Company's providing the Trust with
inaccurate information, which causes the Trust to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and hold
harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Trust in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust
Registration Statement, Trust Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Trust, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Trust for use in the Trust Registration
Statement, Trust Prospectus (or any amendment or supplement thereto)
or sales literature for the Trust or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact made by the Trust (other than
statements or representations contained in the Trust Registration
Statement, Trust Prospectus or sales literature or other promotional
material of the Trust not supplied by the Distributor or the Trust or
persons under their control) or wrongful conduct of the Trust or
persons under its control with respect to the sale or distribution of
the Contracts or Trust shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contract's Registration Statement,
Contracts Prospectus or sales literature or other promotional material
for the Contracts (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon information
furnished in writing by the Trust to the Company (or a person
authorized in writing to do so on behalf of the Trust); or
(d) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Sections 2.4 and 6.1 in
Article VI of this Agreement; and (ii) to provide the Company with
accurate information sufficient for it to calculate its accumulation
and/or annuity unit values in timely fashion as required by law and by
the Contracts Prospectuses); or
(e) arise out of any material breach by the Trust of this Agreement.
This indemnification will be in addition to any liability which the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance written notice to
the other parties; or
(b) at the option of the Company if shares of the Trust are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause
shall be furnished by the Company. Termination shall be effective ten
days after the giving of notice by the Company; or
(c) at the option of the Trust upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission of
any state or any other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of the Account, the administration of the Contracts or the
purchase of Trust shares;
(d) at the option of the Company upon institution of formal
proceedings against the Trust, the investment advisor or any
sub-investment advisor, by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body; or
(e) upon requisite vote of the Contract owners having an interest in
the Trust (unless otherwise required by applicable law) and written
approval of the Company, to substitute the shares of another
investment company for the corresponding shares of the Trust in
accordance with the terms of the Contracts; or
(f) at the option of the Trust in the event any of the Contracts are
not registered, issued or sold in accordance with applicable Federal
and/or state law; or
(g) at the option of the Company or the Trust upon a determination by
a majority of the Trust Board, or a majority of disinterested Trust
Board members, that an irreconcilable material conflict exists among
the interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Trust; or
(h) at the option of the Company if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code, or under
any successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Trust may fail
to so qualify; or
(i) at the option of the Company if the Trust fails to meet the
diversification requirements specified in Section 817(h) of the Code
and any regulations thereunder; or
(j) at the option of the Trust if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the
Code, or if the Trust reasonably believes that the Contracts may fail
to so qualify; or
(k) at the option of the Trust if the Trust shall determine, in its
sole judgment exercised in good faith, that either (1) the Company
shall have suffered a material adverse change in its business or
financial condition; or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Trust; or
(l) at the option of the Company, if the Company shall determine, in
its sole judgment exercised in good faith, that: (1) the Trust shall
have suffered a material adverse change in its business or financial
condition; or (2) the Trust shall have been the subject of material
adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(m) automatically upon the assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the Accounts to
another insurance company pursuant to an assumption reinsurance
agreement) unless the non-assigning party consents thereto or unless
this Agreement is assigned to an affiliate of the Company or the
Trust, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no
termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the provisions of
Article VII or the provisions of Section 10.1(a) of this Agreement,
such prior written notice shall be given in advance of the effective
date of termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written
notice shall be given at least ninety (90) days before the effective
date of termination, or sooner if required by law or regulation.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Trust will, at the option of the
Company, continue to make available additional Trust shares for so
long after the termination of this Agreement as the Company desires,
pursuant to the terms and conditions of this Agreement as provided in
paragraph (b) below, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Company so
elects to make additional Trust shares available, the owners of the
Existing Contracts or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in
the Trust, redeem investments in the Trust and/or invest in the Trust
upon the making of additional purchase payments under the Existing
Contracts.
(b) If Trust shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1(a) and thereafter either the Trust or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances
but, if given by the Trust, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not apply to any
termination made pursuant to Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth
or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Trust. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and
must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Trust:
Lincoln Variable Insurance Products Trust
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Secretary
If to the Company:
Lincoln Life & Annuity Company of New York
c/o The Lincoln National Life Insurance Company.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Rise X. X. Xxxxxx
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all
necessary corporate or trust action, as applicable, by such party, and when so
executed and delivered this Agreement will be the valid and binding obligation
of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Fund Participation Agreement, as of its effective date, hereby
supersedes any and all prior agreements to purchase shares between Company and
the Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN VARIABLE INSURANCE PRODUCTS TRUST (Trust)
Signature: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
------------------------------------------
Title: Second Vice President
------------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK (Company)
Signature: /s/ Rise X. X. Xxxxxx
--------------------------------------
Name: Rise X. X. Xxxxxx
-----------------------------------------
Title: Second Vice President
------------------------------------------
SCHEDULE 1
Lincoln Variable Insurance Products Trust
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Trust
Lincoln Life & Annuity Variable Annuity Account L
Lincoln Life & Annuity Flexible Premium Variable Life Account M
Lincoln New York Account N for Variable Annuities
LLANY Account Q for Variable Annuities
LLANY Separate Account R for Flexible Premium Variable Life Insurance
LLANY Separate Account S for Flexible Premium Variable Life Insurance
SCHEDULE 2
FUNDS
Aggressive Growth Fund
Bond Fund
Capital Appreciation Fund
Equity-Income Fund
Global Asset Allocation Fund
Growth and Income Fund
International Fund
Managed Fund
Money Market Fund
Social Awareness Fund
Special Opportunities Fund
SCHEDULE 3
Lincoln Variable Insurance Products Trust
State-mandated Investment Restrictions
Applicable to the Trust
As of July 1, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if it is
invested in a minimum of three different countries at all times, and has
invested no more than 50 percent of total assets in any one second-tier
country and no more than 25 percent of total assets in any one third-tier
country. First-tier countries are: Germany, the United Kingdom, Japan, the
United States, France, Canada, and Australia. Second-tier countries are all
countries not in the first or third tier. Third-tier countries are
countries identified as "emerging" or "developing" by the International
Bank for Reconstruction and Development ("World Bank") or International
Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a minimum
of three countries. The name of the fund must accurately describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
