FUND PARTICIPATION AGREEMENT
BETWEEN
THE LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
LINCOLN NATIONAL INTERNATIONAL FUND, INC.
THIS AGREEMENT, made and entered into this 2ND day of NOVEMBER, 1998, by
and between Lincoln National International Fund, Inc., a corporation organized
under the laws of Maryland (the "Fund"), 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 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. 811-3212) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) 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 and/or variable life insurance policies described in Schedule 2 to
this Agreement as in effect at the time this Agreement is executed and such
other variable annuity contracts and variable life insurance policies which may
be added to Schedule 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being 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 Fund 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 Fund agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund 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 Fund 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 Fund shall
use its best efforts to calculate and deliver such net asset value by 7:00 p.m.,
E.S.T., on each such Business Day. Notwithstanding any other provision in this
Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board")
may suspend or terminate the offering of shares, if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Fund Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or termination is
necessary and in the best interests of the shareholders (it being understood
that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by the Account or the Company, executing such
requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the extent permitted by the 1940 Act, any rules, regulations or orders
thereunder, or the then currently effective Fund Prospectus.
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1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall
be the agent of the Fund for the limited purpose of receiving
redemption and purchase requests from 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 Fund prior to the time
prescribed in the current Fund Prospectus (which as of the date of
execution of this Agreement is 4 p.m., E.S.T.) shall constitute
receipt by the Fund on that same Business Day, provided that the Fund
receives notice of such redemption or purchase request by 9:00 a.m.,
E.S.T. on the next following Business Day. For purposes of this
Agreement, "Business Day" shall mean any day on which the New York
Stock exchange is open for trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Fund to purchase those Fund shares for an
Account. Payment for Fund shares will be made by the Account or the
Company in Federal Funds transmitted to the Fund by wire to be
received by 11:00 a.m., E.S.T. on the day the Fund is properly
notified of the purchase order for shares. The Fund will confirm
receipt of each trade and these confirmations will be received by the
Company via Fax or E-mail by 3:00 p.m. E.S.T. If Federal Funds are not
received on time, such funds will be invested, and shares purchased
thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the Company
will be made in Federal Funds transmitted to the Company by wire on
the same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of
redemption proceeds, but in no event may such payment be delayed
longer than the period permitted under Section 22(e) of the ▇▇▇▇ ▇▇▇.
The Fund 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 Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the 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 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 Fund. 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 Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
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1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 7:00 p.m., E.S.T. each Business Day, and in
any event, as soon as reasonably practicable after the net asset value per share
is calculated, and shall calculate such net asset value in accordance with the
then currently effective Fund Prospectus. The Fund 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 Fund.
1.8. (a) The Company may withdraw the Account's investment in the
Fund only: (i) as necessary to facilitate Contract owner requests;
(ii) upon a determination by a majority of the Fund Board, or a
majority of disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of (x) any Product
Owners or (y) the interests of the Participating Insurance Companies
investing in the Fund; (iii) upon requisite vote of the Contract
owners having an interest in the 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 Fund
(unless otherwise required by applicable law), take any action to
operate the Accounts as management investment companies under the
▇▇▇▇ ▇▇▇.
1.9. The Fund agrees that Fund shares will be sold only to Participating
Insurance Companies and their separate accounts. The Fund will not sell Fund
shares to any insurance company or separate account unless an agreement
complying with Article VII of this Agreement is in effect to govern such sales.
No Fund 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
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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 Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
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.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement. 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 Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately
notify the Company in the event the fidelity bond coverage should lapse at any
time.
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ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the current
Fund Prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each case
in a form suitable for printing, as determined by the Company. The
Fund shall be responsible for the costs of printing and distributing
these materials to Contract owners.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contract owner names and addresses to the Fund for
this purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each piece of
sales literature or other promotional material in which the Fund is named. No
such material shall be used, except with the prior written permission of the
Fund. The Fund agrees to respond to any request for approval on a prompt and
timely basis. Failure of the Fund to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund,
except with the prior written permission of the Fund. The Fund agrees to respond
to any request for permission on a prompt and timely basis. If the Fund 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 Fund.
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3.6. The Fund 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 Fund, then the Fund is relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, 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,
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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 Fund
shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of 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 of
such Series 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 the Account that are not attributable to Contract owners in
the same proportion as Fund 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 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 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 decided to 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 Contractowners.)
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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 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 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.
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 a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under 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.
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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 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 Contract owners and, as
appropriate, segregating the assets of any particular group (i.e., variable
annuity Contract owners, variable life insurance policy owners, 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 Fund and
to seek reimbursement from the Fund 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 Fund, if within 45 days after the
Board's determination the Company elects to press the dispute, it shall so
notify the Board in writing. The parties shall then attempt to resolve the
matter amicably through negotiation by individuals from each party who are
authorized to settle the matter. If the matter has not been amicably
resolved within 60 days from the date of the Company's notice of its intent
to press the dispute, then before either party shall undertake to litigate
the dispute it shall be submitted to non-binding arbitration conducted
expeditiously in accordance with the CPR Rules for Non-Administered
Arbitration of Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER,
that if one party has requested the other party to seek an amicable
resolution and the other party has failed to participate, the requesting
party may initiate arbitration before expiration of the 60-day period set
out just above.
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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 ▇▇▇▇▇, Indiana. The Arbitrator is not
empowered to award damages in excess of compensatory damages.
(d) If the Board shall determine that the Fund or another was
responsible for the conflict, then the Board shall notify the Company
immediately of that determination. The Fund shall assure the Company
that it (the Fund) or that other 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 Fund,
if the Fund 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 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 Contract owners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund and each person who controls or is associated with the
Fund (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:
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(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 a person authorized in writing to
do so on behalf of the Fund) 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 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 I; 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.
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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 FUND. The Fund 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 Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund 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 Fund (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund not supplied by the Distributor or the Fund or
persons under their control) or wrongful conduct of the Fund 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 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 Fund to the Company (or a person
authorized in writing to do so on behalf of the Fund); or
13
(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 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 Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund 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.
14
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 Maryland,
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 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 the Account, the administration of the
Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of formal
proceedings against the Fund, 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 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
15
(f) 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
(g) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of disinterested Fund
Board members, that an irreconcilable material conflict exists among
the interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(h) 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
(i) 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
(j) 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
(k) at the option of the Fund if the Fund 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 Fund; or
(l) at the option of the Company, if the Company shall determine,
in its sole judgment exercised in good faith, that: (1) the Fund shall
have suffered a material adverse change in its business or financial
condition; or (2) the Fund 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 Fund, as the case may be.
16
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 Fund 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) If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1(a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances
but, if given by the Fund, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not apply to
any termination made pursuant to Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth
or incorporated by reference therein.
17
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 Fund. 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 Fund:
Lincoln National International Fund, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
If to the Company:
Lincoln Life & Annuity Company of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
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.
18
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 Lincoln Life
& Annuity Company of New York and the Fund.
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 NATIONAL INTERNATIONAL FUND, INC.
Signature: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Title: President
--------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Signature: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------
Title: President, Treasurer & Director,
Lincoln Life & Annuity Company of
New York
#78997
19
SCHEDULE 1
Lincoln National International Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of November 2, 1998
LLANY ACCOUNT Q VARIABLE ANNUITY
SCHEDULE 2
Lincoln National International Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of November 2, 1998
GROUP MULTI FUND
The Fund Participation Agreement (the "Agreement"), dated November 2, 1998,
by and among Lincoln Life & Annuity Company of New York and Lincoln National
International Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each Account
with the SEC (unless exempt therefrom) as a unit investment trust under the 1940
Act before any Contracts are issued by that Account; and"
Page 4, Article 2.1 is replaced in its entirety with the following:
"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."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL INTERNATIONAL
FUND, INC.
Date: 9/16/99 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------- ----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: President
--------------------------
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
Date: 9/16/99 By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------- -----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: President
--------------------------
