FUND PARTICIPATION AGREEMENT
BETWEEN
THE LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK
AND
LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC.
THIS AGREEMENT, made and entered into this _____ day of ______________,
1998, by and between Lincoln National Aggressive Growth Fund, Inc. a
corporation organized under the laws of Maryland (the "Fund"), and THE
LINCOLN NATIONAL AND 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 0000 Xxx. 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 0000 Xxx.
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 as
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a separate account under ______________________________ 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; 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 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.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which
the Fund must comply, the Company shall arrange with the
Fund to amend Schedule 3, pursuant to the requirements of
Article XI.
(b) Should the Fund 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.
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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.
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
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matter. If the matter has not been amicably resolved
within 60 days from the date of the Company's notice of its
intent to press the dispute, then before either party shall
undertake to litigate the dispute it shall be submitted to
non-binding arbitration conducted expeditiously in accordance
with the CPR Rules for Non-Administered Arbitration of
Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER,
that if one party has requested the other party to seek an
amicable resolution and the other party has failed to
participate, the requesting party may initiate arbitration
before expiration of the 60-day period set out just above.
If within 45 days of the commencement of the process to
select an arbitrator the parties cannot agree upon the
arbitrator, then he or she will be selected from the CPR
Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place
of arbitration shall be Fort Xxxxx, Indiana. The Arbitrator is
not empowered to award damages in excess of compensatory
damages.
(d) If the Board shall determine that the 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.
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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:
(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
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(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.
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
13
(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
(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
14
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
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
15
(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
(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
16
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.
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.
17
(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.
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 Aggressive Growth Fund, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
If to the Company:
Lincoln Life and Annuity Company of New York
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
18
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or
more counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation
the SEC, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.5. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate or trust action, as
applicable, by such party, and when so executed and delivered this Agreement
will be the valid and binding obligation of such party enforceable in
accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Fund Participation Agreement, as of its effective date, hereby
supersedes any and all prior agreements to purchase shares between Lincoln
Life and Annuity Company of New York and the Fund.
19
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 AGGRESSIVE GROWTH FUND, INC.
Signature: /s/ XXXXX X. XXXXXXXXX
Name: XXXXX X. XXXXXXXXX
Title: PRESIDENT
LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK
Signature: /s/ XXXXXXX XXXXXXXX
Name: XXXXXXX XXXXXXXX
Title: PRESIDENT, TREASURER & DIRECTOR, LINCOLN LIFE AND ANNUITY
COMPANY OF NEW YORK
