FORM OF
PARTICIPATION AGREEMENT
AMONG
THE LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
LIBERTY ADVISORY SERVICES CORPORATION
AND
LIBERTY VARIABLE INVESTMENT TRUST
AND
LIBERTY FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, made and entered into this 1st day of February, 2000 by
and among Liberty Variable Investment Trust, a Massachusetts Business Trust
organized under the laws of Massachusetts (the "Fund") on behalf of the Series
named in Schedule 1 that may be amended from time to time in accordance with the
provisions of Article XI of this Agreement, 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"), Liberty Advisory Services Corporation
(the "Investment Manager"), and Liberty Funds Distributor, Inc., each a
Massachusetts corporation (the "Distributor").
WHEREAS, the Fund 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 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-lA to register itself as an open-end
management investment company (File No. 811-7556) under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Fund shares (File No.
33-59216) 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 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 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 (unless exempt therefrom) 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 AFund Distribution Agreement") pursuant to which the Distributor will
distribute Fund shares; and
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisors Act of 1940 and any applicable state securities
laws and serves as an investment manager to the Fund pursuant to an agreement,
and may delegate its responsibilities to selected Sub-Investment Managers; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to unit investment 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 I. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Fund 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.
1.2. The Fund agrees to make 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., New York time, on each such Business Day. Notwithstanding any other
provision in this Agreement to the contrary, the Trustees of the Fund may
suspend or
2
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 Trustees 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 shares of the Fund held by each Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect
redemption wires on the same day as notification of redemption 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 shares of any Fund 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 Fund shall
treat receipt on any Business Day by the Company of redemption
and purchase requests from each Account prior to the time
prescribed in the current Fund Prospectus (which as of the
date of execution of this Agreement is the close of the New
York Stock Exhange) as receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such
redemption or purchase request by 10:00 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, which in addition to being a life insurance
company is a broker/dealer and member of the NASD, shall pay
for the shares on the same day that it places an order with
the Fund to purchase those Fund shares for an Account. Payment
for Fund shares will be made by each Account or the Company in
Federal Funds transmitted to the Fund by wire to be received
by 2:00 p.m., New York time 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 Company via Fax or Email by 2:00 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 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 as 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.
3
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or each Account. Purchase
and redemption orders for Fund 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 shares in
the form of additional shares of that Fund. 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
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., 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 Fund Prospectus. Neither the Fund, 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
Trustees, or a majority of disinterested Trustees, 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.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the
Fund 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.
(c) 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 1940 Act.
4
1.9. The Fund and the Distributor agree that Fund shares will be sold
only to Participating Insurance Companies and their separate accounts. The Fund
and the Distributor will not sell Fund shares to any insurance company or
separate account unless an agreement substantially complying with Article VII of
this Agreement is in effect to govern such sales. No Fund 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, unless exempt therefrom, (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 4240 of the 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 shares of any Series 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 shares
are sold. The Fund further represents and warrants that it is a Massachusetts
Business Trust duly organized and in good standing under the laws of
Massachusetts.
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 2.4 by the Fund, it will: (a) immediately notify the
Company of such breach; and (b) take the steps necessary to adequately diversify
each portfolio so as to achieve such compliance within the period allowed by
regulation.
2.5. The Company represents and warrants 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
5
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 (except for the Newport Tiger Fund, Variable Series)
represents and warrants 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 New York ("NY"), 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 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 broker-dealer under applicable state securities laws;
its operations are in compliance with applicable law, and it will distribute the
Fund shares according to applicable law.
2.8. The Investment Manager represents and warrants that it 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.
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 Prospectus of any Series named in Schedule 1 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, and the Distributor
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 with
respect to the Series named in Schedule 1
6
and other communications to shareholders (except proxy
material), in each case in a form suitable for printing, as
determined by the Company. The Fund shall be responsible for
the costs of printing and distributing these materials to
Contract owners, subject to the limitation in Article V.
(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 a third party proxy house for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Distributor prior to its use. No such material shall be used, except with the
prior written permission of the Distributor. The Distributor agrees to respond
to any request for approval on a prompt and timely basis. Failure of the
Distributor 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 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 Distributor, except with the prior written permission of the Distributor.
The Distributor agrees to respond to any request for permission on a prompt and
timely basis. If the Distributor 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 Distributor.
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,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to any Series of the Fund named
in Schedule 1, within 20 days after the filing of such document with the SEC or
other regulatory authorities.
7
3.8. The Company will provide to the Fund at least one complete copy of
all Contracts Registration Statements, Contract 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 and their investment in the Fund, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
3.9. 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 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 shares attributable to Contract owners in
accordance with instructions or proxies received in timely
fashion from such Contract owners;
(b) vote Fund shares attributable to Contract owners for which
no instructions have been received in the same proportion as
Fund shares for which instructions have been received in
timely fashion; and
(c) vote Fund 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 shares 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.
8
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 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 of the Fund by any
Federal or state securities law, all taxes on the issuance or transfer of Fund
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs 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.)
During the calendar year 2000, the Fund will not pay more than $15,000
of the cost of printing and distributing Fund Prospectuses, Statements of
Additional Information and annual and semi-annual reports to existing Contract
owners.
The Company is responsible for the cost of printing and distributing
Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
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 shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
9
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 Fund undertakes to have its Trustees, a majority of
whom shall not be 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.
(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 VlI. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and
Shared Funding Order") dated July 1, 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 Trustees any potential or existing conflicts
between the interests of Product Owners of all separate accounts investing in
the Fund, and to assist the Trustees in carrying out their responsibilities
under the conditions of the Mixed and Shared Funding Order by providing all
information reasonably necessary for the Trustees 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 Trustees, or a majority of disinterested
Trustees, determines that a material irreconcilable conflict exists, the
Trustees shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the Trustees, after notice to the Company
and a reasonable opportunity for the Company to appear before
it and present its case, determine 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:
(i) 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
10
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 (ii) 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 Trustees' determination,
the Company shall file a written protest with the Trustees,
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 Trustees 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 Contractowners.
(c) As between the Company and the Fund, if within 45 days
after the Trustees' determination the Company elects to press
the dispute, it shall so notify the Trustees 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
American Arbitration Association's (AAA) 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 AAA
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 Syracuse, New York. The Arbitrator is
not empowered to award damages in excess of compensatory
damages.
(d) If the Trustees shall determine that the Fund or another
insurer was responsible for the conflict, then the Trustees
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
11
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 Account's 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 Trustees
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
Trustees 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 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 Investment Manager, the Distributor and each
person who controls, is controlled by or is affiliated with any of them (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 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
Investment Manager (or a person authorized in writing to do so
on behalf of the Fund or the Investment Manager) 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 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
12
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 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 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 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 INVESTMENT MANAGER. The Investment Manager
on behalf of itself, the Fund, and the Distributor agrees to indemnify and hold
harmless the Company and each person who controls, is controlled by or is
affiliated 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
13
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
Investment Manager for use in the Fund 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 shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the
Investment Manager, the Fund or the Distributor (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
Investment Manager or the Fund or persons under their control)
or wrongful conduct of the Investment Manager or persons under
its control with respect to the sale or distribution of the
Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contracts
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 Investment
Manager or the Fund to the Company (or a person authorized in
writing to do so on behalf of the Fund or the Investment
Manager); 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
(e) arise out of any material breach by the Investment Manager
or the Fund of this Agreement.
This indemnification will be in addition to any liability which the Investment
Manager may otherwise have; provided, however, that no party shall be entitled
to indemnification if such loss,
14
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 New York.
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:
15
(a) at the option of any party upon six months advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund 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 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
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 any
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
Contract owners.
(f) upon requisite vote of the Contract owners having an
interest in the affected Fund (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
(h) at the option of the Company or the Fund upon a
determination by a majority of the Trustees, or a majority of
disinterested Trustees, that an irreconcilable material
conflict exists among the interests of (i) any Product owners
16
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
determine, 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:
(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
17
(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 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
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 make Fund shares available pursuant to
Section 10.3(a) above. However, Fund and Distributor in the
event of negative financial impact to either, may notify
Company in writing of their intent to cease offering Fund
Shares to Company. Fund and Distributor agree to continue to
offer such Fund shares for a period of twelve months from the
date of such written notice, or until Company receives a valid
SEC Substitution Order allowing the movement of assets to
another fund, and the Company is able to effectuate such
substitution, whichever is sooner.
(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.
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
18
contracts and variable life insurance policies to be issued by the Company
through a Separate 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:
Liberty Variable Investment Trust
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Secretary
If to the Company:
Lincoln Life & Annuity Company of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
If to the Investment Manager:
Liberty Advisory Services Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
If to the Distributor:
Liberty Funds Distributors, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
With a copy to: General Counsel
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.
19
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.
20
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.
LIBERTY VARIABLE INVESTMENT TRUST (FUND)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK(Company)
Date: Signature:
-----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO/2nd Vice President
LIBERTY FUNDS DISTRIBUTOR, INC. (DISTRIBUTOR)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
LIBERTY ADVISORY SERVICES CORPORATION (INVESTMENT MANAGER)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
21
SCHEDULE 1
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Series of the Fund
As of February 1, 2000
Company Separate Account(s)/Date Authorized Eligible Variable Series of the Fund
------------------------------------------- ------------------------------------
Lincoln Life Variable Annuity Account N Newport Tiger Fund, Variable Series
22
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of February 1, 2000
Delaware-Lincoln ChoicePlus Variable Annuity (individual annuity)
23
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of February 1, 2000
None
24
