PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
LINCOLN FINANCIAL ADVISORS CORPORATION
TABLE OF CONTENTS
Description Page
Section 1. Available Funds............................................................................2
1.1 Availability.............................................................................2
1.2 Addition, Deletion or Modification of Funds..............................................2
1.3 No Sales to the General Public...........................................................2
Section 2. Processing Transactions......................................................................3
2.1 Timely Pricing and Orders................................................................3
2.2 Timely Payments..........................................................................3
2.3 Applicable Price.........................................................................3
2.4 Dividends and Distributions..............................................................4
2.5 Book Entry...............................................................................4
Section 3. Costs and Expenses...........................................................................4
3.1 General..................................................................................4
3.2 Parties To Cooperate.....................................................................4
Section 4. Legal Compliance.............................................................................5
4.1 Tax Laws.................................................................................5
4.2 Insurance and Certain Other Laws.........................................................7
4.3 Securities Laws..........................................................................7
4.4 Notice of Certain Proceedings and Other Circumstances....................................8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF ...............................9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY...............................10
Section 5. Mixed and Shared Funding....................................................................11
5.1 General ................................................................................11
5.2 Disinterested Directors ................................................................12
5.3 Monitoring for Material Irreconcilable Conflicts .......................................12
5.4 Conflict Remedies ......................................................................13
5.5 Notice to LIFE COMPANY .................................................................14
5.6 Information Requested by Board of Directors ............................................14
5.7 Compliance with SEC Rules ..............................................................14
5.8 Other Requirements .....................................................................14
Section 6. Termination.................................................................................15
6.1 Events of Termination...................................................................15
6.2 Notice Requirement for Termination .....................................................16
6.3 Funds To Remain Available ..............................................................16
i
DESCRIPTION PAGE
----------- ----
6.4 Survival of Warranties and Indemnifications..............................................16
6.5 Continuance of Agreement for Certain Purposes............................................16
Section 7. Parties To Cooperate Respecting Termination..................................................17
Section 8. Assignment ..................................................................................17
Section 9. Notices......................................................................................17
Section 10. Voting Procedures ..........................................................................18
Section 11. Foreign Tax Credits ........................................................................18
Section 12. Indemnification.............................................................................19
12.1 Of AVIF and AIM by LIFE COMPANY ........................................................19
12.2 Of LIFE COMPANY by AVIF and AIM ........................................................21
12.3 Effect of Notice .......................................................................23
12.4 Successors .............................................................................23
Section 13. Applicable Law .............................................................................23
Section 14. Execution in Counterparts ..................................................................24
Section 15. Severability............................................................................... 24
Section 16. Rights Cumulative ..........................................................................24
Section 17. Headings................................................................................... 24
Section 18. Confidentiality ............................................................................24
Section 19. Trademarks and Fund Names ..................................................................25
Section 20. Parties to Cooperate .......................................................................26
ii
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the day of ________,, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A. I M Distributors, Inc., a Delaware corporation
("AIM"), Lincoln Life & Annuity Company of New York, a New York life
insurance company ("LIFE COMPANY"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts"); and Lincoln Financial Advisors Corporation ("UNDERWRITER"),
an affiliate of LIFE COMPANY and the principal underwriter of the Accounts
and the Contracts (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold
to one or more separate accounts of life insurance companies to fund benefits
under variable annuity contracts and variable life insurance policies; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent
the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts" or Policies")
as set forth on Schedule A hereto, as the Parties hereto may amend from time
to time, which Contracts, if required by applicable law, will be registered
under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount
thereof to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust investment company
under the 1940 Act (or exempt therefrom), and the security interests deemed
to be issued by the Accounts under the Policies will be registered as
securities under the 1933 Act (or exempt therefrom); and
1
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the
Funds on behalf of the Accounts to fund the Policies; and
WHEREAS, LIFE COMPANY is a broker-dealer registered with the SEC
under the Securities Exchange Act of 1934 ("1934 Act") and a member in
good standing of the National Association of Securities Dealers, Inc.
("NASD");
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC
under the Securities Exchange Act of 1934 ("1934 Act") and a member in
good standing of the National Association of Securities Dealers, Inc.
("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject
to the terms and conditions of this Agreement. The Board of Directors of AVIF
may refuse to sell Shares of any Fund to any person, or suspend or terminate
the offering of Shares of any Fund if such action is required by law or by
regulatory authorities having, jurisdiction or if, in the sole discretion of
the Directors acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, such action is deemed in the
best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding- media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein
shall include a reference to any such additional Fund or Fund resulting from
a deletion or modification. Schedule A, as amended from time to time, is
incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
2
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its desipated agent will use its best efforts to
provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00
p.m. Central Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open for
regular trading and (ii) AVIF calculates the Fund's net asset value.
(b) LIFE COMPANY will use the data provided by AVIF each Business
Day pursuant to paragraph (a) immediately above to calculate Account unit
values and to process transactions that receive that same Business Day's
Account unit values. LIFE COMPANY will perform such Account processing the
same Business Day, and will place corresponding orders to purchase or redeem
Shares with AVIF by 9:00 a.m. Central Time the following Business Day;
PROVIDED, however, that AVIF shall provide additional time to LIFE COMPANY in
the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph
(a) immediately above. Such additional time-shall be equal to the additional
time that AVIF takes to make the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY
and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase
and redemption orders with respect to each Fund and shall transmit one net
payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be
entitled to an adjustment to the number of Shares purchased or redeemed to
reflect the correct net asset value per Share. Any material error in the
calculation or reporting- of net asset value per Share, dividend or capital
gain information shall be reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by LIFE COMPANY by 1:00 p.m.
Central Time on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date
the order is placed in order to enable LIFE COMPANY to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result
from purchase payments, premium payments, surrenders and other transactions
under Policies (collectively, "Policy transactions") and that LIFE COMPANY
receives prior to the close of regular trading on the New York Stock Exchange
on a Business Day will be executed at the net asset values of the appropriate
3
Funds next computed after receipt by AVIF or its designated agent of the
orders. For purposes of this Section 2.3(a), LIFE COMPANY shall be the
designated agent of AVIF for receipt of orders relating to Policy transactions
on each Business Day and receipt by such designated agent shall constitute
receipt by AVIF; PROVIDED that AVIF receives notice of such orders by 9:00 a.m.
Central Time on the next following Business Day or such later time as computed
in accordance with Section 2.1 (b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY
will be effected at the net asset values of the appropriate Funds next
computed after receipt by AVIF or its designated agent of the order therefor,
and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund.
LIFE COMPANY hereby elects to reinvest all dividends and capital gains
distributions in additional Shares of the corresponding Fund at the
ex-dividend date net asset values until LIFE COMPANY otherwise notifies AVIF
in writing, it being agreed by the Parties that the ex-dividend date and the
payment date with respect to any dividend or distribution will be the same
Business Day. LIFE COMPANY reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY..
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF
will be recorded in an appropriate title for LIFE COMPANY, on behalf of its
Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear all expenses incident to
its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
4
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and represents
that it will use its best efforts to qualify and to maintain qualification of
each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify or that
it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply
and to maintain each Fund's compliance with the diversification requirements
set forth in Section 817(h) of the Code and Section 1.817-5(b) of the
regulations under the Code. AVIF will notify LIFE COMPANY immediately upon
having a reasonable basis for believing that a Fund has ceased to so comply
or that a Fund might not so comply in the future. In the event of a breach of
this Section 4. 1 (b) by AVIF, it will take all reasonable steps to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Section 1.817-5 of the regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental audit or
review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participant,
that any Fund has failed to comply with the diversification requirements of
Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any
facts that could give rise to any claim against AVIF or its affiliates as a
result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to
minimize any liability that may arise as a result of
such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize
any liability of AVIF or its affiliates resulting
from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations
Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and
their legal and accounting, advisors to participate in
any conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding
any claims that could give rise to liability to
AVIF or its affiliates as a result of such a failure
or alleged failure; PROVIDED, however, that LIFE
COMPANY will retain control of the conduct of such
conferences discussions, proceedings, contests or
appeals;
5
(v) any written materials to be submitted by LIFE
COMPANY to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided
by LIFE COMPANY to AVIF (together with any supporting
information or analysis); subject to the
confidentiality provisions of Section 18, at least
ten (10) business days or such shorter period to
which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by LIFE COMPANY
to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates
and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of LIFE COMPANY) in order
facilitate review by AVIF or its advisors of any
written submissions provided to it pursu-ant to the
preceding clause or its assessment of the validity
or amount of any claim against its arising from such
a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim
of the IRS or any Participant that would give rise
to a claim against AVIF or its affiliates (a)
compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the
express written consent of AVIF or its
affiliates, which shall not be unreasonably
withheld, PROVIDED that LIFE COMPANY shall not
be required, after exhausting all administrative
penalties, to appeal any adverse judicial
decision unless AVIF or its affiliates shall
have provided an opinion of independent counsel
to the effect that a reasonable basis exists
for taking such appeal; and PROVIDED FURTHER that
the costs of any such appeal shall be borne equally
by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if LIFE
COMPANY fails to comply with any of the foregoing
clauses (i) through (vii), and such failure could be
shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder,
LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act
in the name of LIFE COMPANY in, and to control the conduct of, such
conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF or its
affiliates shall bear the fees and expenses associated with the conduct of
the proceedings that it is so authorized to control; PROVIDED, that in no
event shall LIFE COMPANY have any liability resulting from AVIFs refusal to
accept the proposed settlement or
6
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
policies under applicable provisions of the Code and that it will use its
best efforts to maintain such treatment; LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated
in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to
be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY, including, the furnishing of information not
otherwise available to LIFE COMPANY which is required by state insurance law
to enable LIFE COMPANY to obtain the authority needed to issue the Contracts
in any applicable state.
(b) LIFE COMPANY represents and warrants that (1) it is an
insurance company duly organized, validly existing, under the laws of the
State of New York and has full corporate power, authority and legal right to
execute, deliver and per-form its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established and
maintains each Account as a segregated asset account under New York Insurance
Law and the regulations thereunder, and (iii) the Contracts comply in all
material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Maryland and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
(d) AIM represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has full power, authority and right to execute, deliver and
perform its duties and comply with its obligations under this agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the
7
Contracts will be duly authorized for issuance and sold in compliance with
all applicable federal and state laws, INCLUDING, WITHOUT limitation, the
1933 Act, the 1934 Act, the 1940 Act and New York law, (iii) each Account is
and will remain registered under the 1940 Act, to the extent required by the
1940 Act, (iv) each Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to the
Contracts (to the extent required), together with any amendments thereto,
will at all times comply in all material respects with the requirements of
the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend any
registration statement for its Contracts under the 1933 Act and for its
Accounts under the 1940 Act from time to time to the extent required in order
to effect the continuous offering of its Policies or as may otherwise be
required by applicable law, and (vii) each Account Prospectus will at all
times comply in all material respects with the requirements of the 1933 Act
and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to
this Agreement will be, registered under the 1933 Act to the extent required
by the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to
the extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act
from time to time as required in order to effect the continuous offering of
its Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all
times comply in all material respects with the requirements of the 1933 Act
and rules thereunder, and (vi) AVIF's Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(c) AVIIF will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a
majority of whom are not "interested" persons of the Fund, formulate and
approve any plan under Rule l2b-I to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to the funds and/or securities of the Fund are and continue to
be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(l) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes coverage
for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the
1933 Act or AVIF Prospectus, (1i) any request by the SEC
8
for any amendment to such registration statement or AVIF Prospectus that may
affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings against AVIF, AIM or the investment adviser to AVIF for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance
with applicable state and federal law, or (b) such law precludes the use of
such Shares as an underlying investment medium of the Policies issued or to
be issued by LIFE COMPANY. AVIF will make every reasonable effort to prevent
the issuance, with respect to any Fund, of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to each Account's registration statement
under the 1933 Act relating to the Policies or each Account Prospectus, (ii)
any request by the SEC for any amendment to such registration statement or
Account Prospectus that may affect the offering of Shares of AVIF, (iii) the
initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering, of each Account's interests
pursuant to the Policies, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold
in accordance with applicable state and federal law. LIFE COMPANY will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS: INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction
solicitation material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to each Account
or the Contracts and to one (1) or more Funds, within twenty (20) calendar
days of the filing of such document with the SEC or other regulatory
authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at
least ten (10) Business Days prior to its use or such shorter period as the
Parties hereto may, from time to time, agree upon. No such material shall be
used if AVIF or its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon. AVIF hereby designates AIM
as the entity to receive such sales literature, until such time as AVIF
appoints another designated agent by giving notice to LIFE COMPANY in the
manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with
9
the sale of the Policies other than (i) the information or representations
contained in the registration statement, including the AVIF Prospectus
contained therein, relating to Shares, as such registration statement and AVIF
Prospectus may be amended from time to time; or (ii) in reports or proxy
materials for AVIF; or (iii) in published reports for AVIF that are in the
public domain and approved by AVIF for distribution; or (iv) in sales
literature or other promotional material approved by AVIF, except with the
express written permission of AVIF or AW.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that
is intended for use only by brokers or agents selling the Policies (I.E.,
information that is not intended for distribution to Participants) ("broker
only materials") is so used, and neither AVIF nor any of its affiliates
shall be liable for any losses, damages or expenses relating to the improper
use of such broker only materials.
(e) For the purposes of this Section 4.5, 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, signs or billboards, motion pictures, or
other public media, (E.G., on-line networks such as the Internet or other
electronic messages), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the
0000 Xxx.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that relate to
one (1) or more Funds, within twenty (20) calendar days of the filing of such
document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready copies of all
AVIF prospectuses relating to the Funds and printed copies, in an amount
specified by LIFE COMPANY, of AVIF statements of additional information,
proxy materials, periodic reports to shareholders and other materials
required by law to be sent to Participants who have allocated any Contract
value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely
manner so as to enable LIFE COMPANY, as the case may be, to print and
distribute such materials within the time required by law to be furnished to
Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective
affiliates is named, or that refers to the Policies, at least ten (10)
Business Days prior to its use or such shorter period as the Parties hereto
may, from time to time,
10
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent objects to such use within five (5) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. LIFE COMPANY shall receive all such sales literature until such
time as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any
information or make any representations or statements on behalf of or
concerning LIFE COMPANY, each Account, or the Contracts other than (i) the
information or representations contained in the registration statement,
including each Account Prospectus contained therein, relating to the
Contracts, as such registration statement and Account Prospectus may be
amended from time to time; or (ii) in published reports for the Account or
the Contracts that are in the public domain and approved by LIFE COMPANY for
distribution; or (iii) in sales literature or other promotional material
approved by LIFE COMPANY or its affiliates, except with the express written
permission of LIFE COMPANY.
(e) AIM shall adopt and implement procedures reasonably designed
to ensure that information concerning LIFE COMPANY, and its respective
affiliates that is intended for use only by brokers or agents selling the
Policies (I.E., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither LIFE
COMPANY, nor any of its respective affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, 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, signs or billboards, motion pictures, or
other public media, (E.G., on-line networks such as the Internet or other
electronic messages), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training, materials or other
communications distributed or made generally available to some or all agents
or employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under the NASD rules, the 1933
Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life
insurance policies, separate accounts of insurance companies unaffiliated
with LIFE COMPANY, and trustees of qualified pension and retirement plans
(collectively, "Mixed and Shared Funding"). The Parties recognize that the
SEC has imposed terms and conditions for such orders that are
11
substantially identical to many of the provisions of this Section 5. Sections
5.2 through 5.8 below shall apply pursuant to such an exemptive order granted
to AVIF. AVIF hereby notifies LIFE COMPANY that AVIF has implemented Mixed
and Shared Funding and it may be appropriate to include in the prospectus
pursuant to which a Contract is offered disclosure regarding the potential
risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not
interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940
Act and the rules thereunder and as modified by any applicable orders of the
SEC, except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the
operation of this condition shall be suspended (a) for a period of forty-five
(45) days if the vacancy or vacancies may be filled by the Board;(b) for a
period of sixty (60) days if a vote of shareholders is required to fill the
vacancy or vacancies; or (c) for such longer period as the SEC may prescribe
by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing
AVIF ("Participating Insurance Companies"), including each Account, and
participants in all qualified retirement and pension plans investing, in AVIF
("Participating Plans"). LIFE COMPANY agrees to inform the Board of
Directors of AVIF of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a ,"material
irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants
of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to
disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
12
Consistent with the SEC's requirements in connection with exemptive orders of
the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the
Board of Directors, upon their request, with all information reasonably
necessary for the Board of Directors to consider any issue raised, including
information as to a decision by LIFE COMPANY to disregard voting instructions
of Participants. LIFE COMPANY's responsibilities in connection with the
foregoing shall be carried out with a view only to the interests of
Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of the Disinterested
Directors that a material irreconcilable conflict exists, LIFE COMPANY will,
if it is a Participating Insurance Company for which a material
irreconcilable conflict is relevant, at its own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not
limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such
assets in a different investment medium, including, but
not limited to, another Fund of AVIF, or submitting the
question whether such segregation should be implemented
to a vote of all affected Participants and, as
appropriate, segregating the assets of any particular
group (e.g., annuity Participants, life insurance
Participants or all Participants) that votes in favor
of such segregation, or offering, to the affected
Participants the option of making such a change; and
ii) establishing a new registered investment company of the
type defined as a "management company" in Section
4(3) of the 1940 Act or a new separate account that is
operated as a management company.
(b) If the material irreconcilable conflict arises because of
LIFE COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position-or would preclude a majority vote,
LIFE COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal must take place within six (6)
months after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to LIFE COMPANY
conflicts with the majority of other state regulators, then LIFE COMPANY will
withdraw each Account's investment in AVIF within six (6) months after AVIF's
Board of Directors informs LIFE COMPANY that it has determined that such
decision has created a material irreconcilable conflict, and until such
withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY
for the purchase and redemption of Shares of AVIF. No charge or penalty will
be imposed as a result of such withdrawal.
13
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested
Directors will determine whether or not any proposed action adequately
remedies any material irreconcilable conflict. In no event, however, will
AVIF or any of its affiliates be required to establish a new funding medium
for any Contracts. LIFE COMPANY will not be required by the terms hereof to
establish a new funding medium for any Contracts if an offer to do so has
been declined by vote of a majority of Participants materially adversely
affected by the material irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the
provisions hereof or any exemptive order granted by the SEC to permit Mixed
and Shared Funding, and said reports, materials and data will be submitted at
any reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and
all Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans
of a conflict, and determining whether any proposed action adequately
remedies a conflict, will be properly recorded in the minutes of the Board of
Directors or other appropriate records, and such minutes or other records
will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if
applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive
relief with respect to Mixed and Shared Funding, AVIF agrees that it will
comply with the terms and conditions thereof and that the terms of this
Section 5 shall be deemed modified if and only to the extent required in
order also to comply with the terms and conditions of such exemptive relief
that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in
substance the same provisions as are set forth in Sections 4. 1 (b), 4. 1 (d),
4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
14
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with
respect to the Fund, upon six (6) months advance written notice to the other
parties, or, if later, upon receipt of any required exemptive relief (i.e., a
substitution order) from the SEC, unless otherwise agreed to in writing by
the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding LIFE COMPANY's
obligations under this Agreement or related to the sale of the Contracts, the
operation of each Account, or the purchase of Shares, if, in each case, AVIF
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, AIM or the Fund's investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body
regarding AVIF's obligations under this Agreement or related to the operation
or management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on which
such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount
corresponding, to the Fund with respect to which the Agreement is to be
terminated; or
(d) at the option of any Party in the event that (1) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (H) such law
precludes the use of such Shares as an underlying, investment medium of the
Policies issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's
investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify
as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to
so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply
with Section 817(h) of the Code or with successor or similar provisions, or
if LIFE COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Policies issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance policies under the
Code (other than by reason of the Fund's
15
noncompliance with Section 817(h) or Subchapter M of the Code) or if interests
in an Account under the Contracts are not registered, where such registration
is required, and, in all material respects, are not issued or sold in
accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until
the Party terminating this Agreement gives prior written notice to the other
Party to this Agreement of its intent to terminate, and such notice shall set
forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the
provisions of Sections 6. 1 (a) or 6. 1 (e) hereof, such prior written notice
shall be given at least six (6) months in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the
provisions of Sections 6. 1 (b) or 6. 1 (c) hereof, such prior written notice
shall be given at least ninety (90) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the
provisions of Sections 6. 1 (d), 6. 1 (f), 6. 1 (g), 6. 1 (h) or 6. 1 (i)
hereof, such prior written notice shall be given as soon as possible within
twenty-four (24) hours after the terminating Party learns of the event
causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Policies
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Policies"). Specifically, without limitation, the
owners of the Existing Policies will be permitted to reallocate investments
in the Fund (as in effect on such date), redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Policies. The parties agree that this Section 6.3 will not
apply to any terminations under Section 5 and the effect of such terminations
will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6. 1 (b), 6. 1 (c), 6. 1 (d), 6. 1 (f), 6. 1 (g), 6. 1 (h) or
6. 1 (i) hereof, this Agreement shall nevertheless continue in effect as to
any Shares of that Fund that are outstanding as of the date of such
termination (the
16
"Initial Termination Date"). This continuation shall extend to the
earlier of the date as of which an Account owns no Shares of the affected
Fund or a date (the "Final Termination Date") six (6) months
following the Initial Termination Date, except that LIFE COMPANY may, by
written notice shorten said six (6) month period in the case of a
termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6. 1(h) or 6. 1 (i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance
to one another in taking all necessary and appropriate steps for the purpose
of ensuring that an Account owns no Shares of a Fund after the Final
Termination Date with respect thereto, or, in the case of a termination
pursuant to Section 6. l (a), the termination date specified in the notice of
termination. Such steps may include combining the affected Account with
another Account, substituting other mutual fund shares for those of the
affected Fund, or otherwise terminating participation by the Policies in such
Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will be
given to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
LINCOLN LIFE & ANNUITY COMPANY of New York
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxxxx 0. Xxxxxxxx, Esq.
17
LINCOLN FINANCIAL ADVISORS CORPORATION
0000 X. Xxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
Vice President
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be
extended and will solicit voting instructions from Participants. LIFE COMPANY
will vote Shares in accordance with timely instructions received from
Participants. LIFE COMPANY will vote Shares that are (a) not attributable to
Participants to whom pass-through voting privileges are extended, or (b)
attributable to Participants, but for which no timely instructions have been
received, in the same proportion as Shares for which said instructions have
been received from Participants, so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass through voting privileges
for Participants. Neither LIFE COMPANY nor any of its affiliates will in any
way recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Shares held for such Participants.
Notwithstanding the foregoing, LIFE COMPANY reserves the right to vote shares
held in any Account in its own right, to the extent permitted by law. LIFE
COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE
COMPANY of any changes of interpretations or amendments to Mixed and Shared
Funding, exemptive order it has obtained. AVIF will comply with all
provisions of the 1940 Act requiring voting by shareholders, and in
particular, AVIF either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to require such
meetings) or will comply with Section 16(c) of the 1940 Act (although AVIF is
not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, AVIF will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the
SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
18
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and
12.1(c), below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold
harmless AVIF, AIM, their affiliates, and each person, if any, who controls
AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933
Act and each of their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12. 1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of LIFE COMPANY and/or UNDERWRITER or
actions in respect thereof (including, to the extent reasonable, legal and
other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise; PROVIDED, the Account
owns shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus,
the Contracts, or sales literature or advertising
for the Contracts (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; PROVIDED, that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY and/or UNDERWRITER by
or on behalf of AVIF for use in any Account's 1933
Act registration statement, any Account
Prospectus, the Contracts, or sales literature or
advertising, or otherwise for use in connection
with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than
statements or representations contained in
AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of
the foregoing, not supplied for use therein by
or on behalf of LIFE COMPANY, UNDERWRITER, or
their affiliates and on which such persons
have reasonably relied) or the negligent, illegal
or fraudulent conduct of LIFE COMPANY,
UNDERWRITER, or their respective affiliates or
persons under their control (including, without
limitation, their employees and "persons
associated with a member", as that term is
defined in paragraph (q) of Article I of the
NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIFs 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any
19
amendment or supplement to any of the foregoing, 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 if such a statement or omission was made
in reliance upon and in conformity with information
furnished to AVIF, AIM or their affiliates by or on
behalf of LIFE COMPANY, UNDERWRITER, or their
affiliates for use in AVIFs 1933 Act registration
statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY
and/or LJNDERWRITER to perform the obligations,
provide the services and furnish the materials
required of it under the terms of this Agreement, or
any material breach of any representation and/or
warranty made by LIFE COMPANY and/or UNDERWRITER in
this Agreement or arise out of or result from any
other material breach of this Agreement by LIFE
COMPANY and/or UNDERWRITER; or
(v) arise as a result of failure by the Policies issued
by LIFE COMPANY to qualify as annuity contracts or
life insurance policies under the Code, otherwise
than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by
that Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii)
to AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any action against an Indemnified Party
unless AVIF or AIM shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY
and/or LTNDERWRITER of any such action shall not relieve LIFE COMPANY and/or
UNDERWRITER from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12. 1. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, LIFE COMPANY and/or UNDERWRITER shall
be entitled to participate, at its own expense, in the defense of such action
and also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from LIFE COMPANY and/or
UNDERWRITER to such Indemnified Party of LIFE COMPANY's and/or UNDERWRITER's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with LIFE COMPANY and/or UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY
nor UNDERWRITER will be liable to such Indemnified Party under this Agreement
for any legal or other
20
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
(a). Except to the extent provided in Sections 12.2(c), 12.2(d)
and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE
COMPANY, UNDERWRITER, their respective affiliates, and each person, if any,
who controls LIFE COMPANY, UNDERWRITER, or their respective affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
AVIF and/or AIM) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law, or otherwise;
PROVIDED, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIFs 1933 Act registration
statement, AVIF Prospectus or sales literature or
advertising, of AVIF (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;
PROVIDED, that this agreement to indemnify shall
not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER, or their respective affiliates for
use in AVIF's 1933 Act registration statement,
AVIF Prospectus, or in sales literature or
advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than
statements or representations contained in any
Account's 1933 Act registration statement, any
Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or
supplement to any of the foregoing, not supplied
for use therein by or on behalf of AVIF, AIM or
their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, AIM or their
affiliates or persons under their control
(including, without limitation, their employees
and "persons associated with a member" as that
term is defined in Section (q) of Article I of the
NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act
21
registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing,
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, if such statement or omission was made
in reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER, or their
affiliates by or on behalf of AVIF or AIM for use in
any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform
the obligations, provide the services and furnish
the materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d)
and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder, or (ii) Section 817(h) of the Code
and regulations thereunder, including, without limitation, any income taxes
and related penalties, rescission charges, liability under state law to
Participants asserting, liability against LIFE COMPANY pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of
another investment company or portfolio for those of any adversely affected
Fund as a funding medium for each Account that LIFE COMPANY reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or actions to which
an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (1) under this Agreement, or
(1i) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2
with respect to any action against an Indemnified Party unless the
Indemnified Party shall have notified AVIF and/or AIM in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify AVIIF or AIM
of any such action shall not relieve AVIF or AIM from any liability
22
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this Section 12.2. Except as otherwise
provided herein, in case any such action is brought against an Indemnified
Party, AVIF and/or AIM will be entitled to participate, at its own expense,
in the defense of such action and also shall be entitled to assume the
defense thereof (which shall include, without limitation, the conduct of any
ruling request and closing agreement or other settlement proceeding with the
IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF
and/or AIM to such Indemnified Party of AVIF's or AIM's election to assume
the defense thereof, the Indemnified Party will cooperate fully with AVIF and
AIM shall bear the fees and expenses of any additional counsel retained by
it, and AVIF and AIM will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, LIFE COMPANY; UNDERWRITER, or any
other Participating Insurance Company or any Participant, with respect to any
losses, claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made by
LIFE COMPANY hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund)
as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by
LIFE COMPANY or any Participating Insurance Company to maintain its variable
annuity contracts or life insurance policies (with respect to which any Fund
serves as an underlying, funding vehicle) as annuity contracts or life
insurance policies under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1 (c) or 12.2(d) above of participation in or
control of any action by the indemnifying Party will in no event be deemed to
be an admission by the indemnifying Party of liability, culpability or
responsibility, and the indemnifying Party will remain free to contest
liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
23
SECTION 14. EXECUTION IN COUP
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under
federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of
reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other
information developed by the LIFE COMPANY Protected Parties or any of their
employees or agents in connection with LIFE COMPANY's performance of its
duties under this Agreement are the valuable property of the LIFE COMPANY
Protected Parties. AVIF agrees that if it comes into possession of any list
or compilation of the identities of or other information about the LIFE
COMPANY Protected Parties' customers, or any other information or property of
the LIFE COMPANY Protected Parties, other than such information as may be
independently developed or compiled by AVIF from information supplied to it
by the LIFE COMPANY Protected Parties' customers who also maintain accounts
directly with AVIF, AVIF will hold such information or property in confidence
and refrain from using, disclosing or distributing any of such information or
other property except: (a) with LIFE COMPANY's prior written consent; or (b)
as required by law or judicial process. LIFE COMPANY acknowledges that the
identities of the customers of AVIF or any of its affiliates (collectively,
the "AVIF Protected Parties" for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and
procedures or other information developed by the AVIF Protected Parties or
any of their employees or agents in connection with AVIF's performance of its
duties under this Agreement are the valuable property of the AVIF Protected
Parties. LIFE COMPANY agrees that if it comes into possession of any list
24
or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently
developed or compiled by LIFE COMPANY from information supplied to it by the
AVIF Protected Parties' customers who also maintain accounts directly with
LIFE COMPANY, LIFE COMPANY will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with AVIF's prior written consent;
or (b) as required by law judicial process. Each party acknowledges that any
breach of the agreements in this Section 18 would result in immediate and
irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("ALM" or "licensor"), an
affiliate of AVIF, owns all right, title and interest in and to the name,
trademark and service xxxx "AIM" and such other trade names, trademarks and
service marks as may be set forth on Schedule B, as amended from time to time
by written notice from ADA to LIFE COMPANY (the "AIM licensed marks" or the
"licensor's licensed marks") and is authorized to use and to license other
persons to use such marks. LIFE COMPANY and its affiliates are hereby granted
a non-exclusive license to use the AIM licensed marks in connection with LIFE
COMPANY's performance of the services contemplated under this Agreement,
subject to the terms and conditions set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this
Agreement. Upon automatic termination, the licensee shall cease to use the
licensor's licensed marks, except that LIFE COMPANY shall have the right to
continue to service any outstanding Contracts bearing any of the AIM licensed
marks. Upon AIM's elective termination of this license, LIFE COMPANY and its
affiliates shall immediately cease to issue any new annuity or life insurance
Policies bearing any of the AIM licensed marks and shall likewise cease any
activity which suggests that it has any right under any of the AIM licensed
marks or that it has any association with AIM, except that LIFE COMPANY shall
have the right to continue to service outstanding Contracts bearing any of
the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any of the
licensor's licensed marks which were previously approved by the licensor but,
due to changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor,
25
when requesting reconsideration of a prior approval, shall assume the
reasonable expenses of withdrawing and replacing such disapproved materials.
The licensee shall obtain the prior written approval of the licensor for the
use of any new materials developed to replace the disapproved materials, in
the manner set forth above.
(e). The licensee hereunder: (i) acknowledges and stipulates that,
to the best of the knowledge of the licensee, the licensor's licensed marks
are valid and enforceable trademarks and/or service marks and that such
licensee does not own the licensor's licensed marks and claims no rights
therein other than as a licensee under this Agreement; (ii) agrees never to
contend otherwise in legal proceedings or in other circumstances; and (iii)
acknowledges and agrees that the use of the licensor's licensed marks
pursuant to this grant of license shall inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD, the IRS and state insurance regulators) and will permit each
other and such authorities reasonable access to its books and records
(including copies thereof) in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
26
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
Name: Name:
Title: Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: By:
Name: Name:
Title: Assistant Secretary President
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK, on behalf of itself and
its separate accounts
Attest: By:
Name: Name:
Title: Assistant Secretary President
LINCOLN FINANCIAL ADVISORS
CORPORATION as principal
underwriter for the separate
accounts of Lincoln Life & Annuity
Company of New York
Attest: By:
Name: Name:
Title: Assistant Secretary President
27
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
- AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Lincoln Life & Annuity Flexible Premium Variable Life Account M
LLANY Separate Account R for Flexible Premium Variable Life Insurance
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Lincoln Life & Annuity Company of New York:
Flexible Premium Variable Life Insurance Policy
LN615 NY LNY
Lincoln Life & Annuity Company of New York
Flexible Premium Variable Life Insurance Policy On the Lives of Two
Insureds
LN650 NY
28
SCHEDULE B
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Fund
AIM and Design
AIM LOGO
29
SCHEDULE C
EXPENSE ALLOCATIONS
DESCRIPTION LIFE COMPANY AIM/AVIF
REGISTRATION
Prepare and file Account registration Fund registration statements
registration statements(1) statements
Payment of fees Account fees Fund fees
PROSPECTUSES
Typesetting Account Prospectuses Fund Prospectuses
Account Prospectuses, and Fund Prospectuses distributed
Printing Fund Prospectuses to existing Participants'
(but not for EXISTING,
PARTICIPANTS)
SAIS
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
SUPPLEMENTS (TO
PROSPECTUSES OR SAlS
Typesetting and Printing Account Supplements, and Fund Supplements to existing
Fund Supplements (but not for Participants(2)
existing Participants)
(1) Includes all filings and costs necessary to keep registrations
current and effective; including, without limitation, filing Forms N-SAR and
Rule 2417-2 Notices as required by law.
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated
as between AINVAVIF on the one hand and LIFE COMPANY on the other based on
(a) the ratio of the number of pages of the combined prospectus, report, or
other document, for each Fund listed on Schedule A hereto to the total number
of pages in such combined prospectus, report, or other document; and (b) the
ratio of the number of Participants who invest in all Funds of AVIF to the
total number of Participants.
30
Description LIFE COMPANY AIM/AVIEF
FINANCIAL REPORTS
Typesetting Account Reports Fund Reports to existing
ParticipantS(2)
Printing Account Reports, and Fund
Reports (not to existing
PARTICIPANTS)
MAILING AND DISTRIBUTION
To Contract owners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAls,
SUPPLEMENTS and REPORTS
PROXIES
Typesetting, printing and Account and Fund Proxies Fund Proxies where the
mailing of proxy where the matters submitted matters submitted are solely
solicitation materials and are solely Account-related Fund-related
voting instruction
solicitation materials and Account Proxies even where
tabulation of proxies to the matters submitted are
Participants solely Fund-related
OTHER (SALES-RELATED)
Contract owner Account-related items and\
communication Fund-related items
Distribution Policies
Administration Account (Policies)
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated
as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on
(a) the ratio of the number of pages of the combined prospectus, report, or
other document, for each Fund listed on Schedule A hereto to the total number
of pages in such combined prospectus, report, or other document; and (b) the
ratio of the number of Participants who invest in all Funds of AVIF to the
total number of Participants.
31
