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