Exhibit 8(b)(viii)
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT ("Agreement") made as of the 6th day of May,
2014, by and between Xxxxx Xxxxx Variable Trust (the "TRUST"), a Massachusetts
business trust, on its behalf and on behalf of each separate investment series
thereof, whether existing as of the date above or established subsequent
thereto, (each a "PORTFOLIO" and collectively, the "PORTFOLIOS"), Xxxxx Xxxxx
Distributors, Inc. (the "DISTRIBUTOR"), and Lincoln Life and Annuity Company of
New York (the "COMPANY" or "LINCOLN"), a life insurance company organized under
the laws of New York.
WHEREAS, the Trust is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "'40 ACT"), as
an open-end, diversified management investment company; and
WHEREAS, the Trust is organized as a series fund comprised of separate
investment series, namely the Portfolios; and
WHEREAS, the Trust was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("VARIABLE CONTRACTS")
offered by life insurance companies through separate accounts of such life
insurance companies and also offers its shares to certain qualified pension and
retirement plans, Xxxxx Xxxxx Management ("EVM") and affiliated advisers to the
Trust and any other person permitted to hold shares of the Trust pursuant to
applicable Treasury regulations and the Mixed and Shared Funding Exemptive Order
(defined below); and
WHEREAS, the Trust has obtained, or warrants and agrees that prior to any
issuance or sale of shares it will obtain an order from the Securities and
Exchange Commission (the "SEC"), granting Participating Insurance Companies and
their separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the 40 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by Qualified Plans and by variable annuity and variable life insurance
separate accounts of Participating Insurance Companies that may or may not be
affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company has established or will establish one or more separate
accounts ("SEPARATE ACCOUNTS") to offer Variable Contracts and is desirous of
having the Trust as one of the underlying funding vehicles for such Variable
Contracts; and
WHEREAS, the Distributor is registered with the SEC as a broker-dealer under the
Securities Exchange Act of 1934, (the "'34 ACT") as amended, and acts as the
Trust's principal underwriter; and
WHEREAS, EVM, a Massachusetts business trust, which serves as investment adviser
to the Trust, is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, any applicable state securities laws; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Trust to fund the aforementioned
Variable Contracts and the Trust is authorized to sell such shares to the
Company at net asset value ("NAV").
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust, and the Distributor agree as follows:
Article I. Sale of Trust Shares
1.1 The Trust agrees to make shares of the Trust ("Shares") available to the
Separate Accounts of the Company for investment of purchase payments of Variable
Contracts allocated to the designated Separate Accounts as provided in the
Trust's then current prospectus and statement of additional information. The
Company agrees to purchase and redeem the Shares of the Portfolios offered by
the then current prospectus and statement of additional information of the Trust
in accordance with the provisions of such prospectus and statement of additional
information. The Company shall not permit any person other than a Variable
Contract owner, or such owner's investment adviser, registered representative or
attorney-in-fact ("OWNER") to give instructions to the Company which would
require the Company to redeem or exchange Shares of the Trust.
1.2 The Trust agrees to sell to the Company those Shares of the selected
Portfolios of the Trust which the Company orders, executing such orders on a
daily basis at the NAV next computed after receipt by the Trust or its designee
of the order for the Shares of the Fund. For purposes of this Section 1.2, the
Company shall be the designee of the Trust for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by the Trust; provided, to the extent not inconsistent with regulatory
requirements, that (i) the Company receives the order by 4:00 p.m. Eastern time
(or other applicable closing time of the New York Stock Exchange), and (ii) the
Fund receives notice of such order by 10:00 a.m. Eastern time on the next
following "Business Day." "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Trust calculates its
NAV pursuant to the rules of the SEC. In the event that the Company is unable to
meet the 10:00 a.m. time stated immediately above, then the Company shall
immediately notify the Trust and the Trust will allow The Company additional
time to notify the Fund of the order. Notwithstanding the foregoing, the
trustees of the Trust may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the trustees of the Trust acting in good faith and in
light of their fiduciary duties under federal laws, necessary in the best
interests of the shareholders of that Portfolio.
1.3 The Trust agrees to redeem on the Company's request, any full or fractional
Shares of the Fund held by the Company, executing such requests on a daily basis
at the NAV next computed after receipt by the Trust or its designee of the
request for redemption, in accordance with the provisions of this agreement and
the Trust's then current registration statement. However, if one or more
Portfolios has determined to settle redemption transactions for all of its
shareholders on a delayed basis, the Trust shall be permitted to delay sending
redemption proceeds to the Company by the same number of days that the Trust is
delaying sending redemption proceeds to the other shareholders of the Portfolio.
For purposes of this Section 1.3, the Company shall be the designee of the Trust
for receipt of requests for redemption from the designated Separate Account and
receipt by such designee shall constitute receipt by the Trust provided, to the
extent not
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inconsistent with regulatory requirements, that (i) the Company receives the
request for redemption by 4:00 p.m. Eastern time (or other applicable closing
time of the New York Stock Exchange) and (ii) the Trust receives notice of such
redemption by 10:00 a.m. Eastern time on the next following Business Day. In the
event that the Company is unable to meet the 10:00 a.m. time stated immediately
above, then the Company shall immediately notify the Trust and the Trust will
allow The Company additional time to notify the Fund of purchase orders.
1.4 The Trust shall furnish notice to the Company of any income dividends or
capital gain distributions payable on the Shares of any Portfolios of the Trust
as soon as reasonably practicable. The Company hereby elects to receive all such
income dividends and capital gain distributions as are payable on a Portfolio's
Shares in additional Shares of the Portfolio. The Trust shall notify the Company
or its designee of the number of Shares so issued as payment of such dividends
and distributions.
1.5 The Trust shall make the NAV per share for the selected Portfolios available
to the Company on a daily basis, via a mutually agreeable form, as soon as
reasonably practicable after the NAV per share is calculated but shall use its
best efforts to make such NAV available by 6:30 p.m. Eastern time. In accordance
with Section 9.3 below, if the Trust provides materially incorrect share NAV
information, the Trust may make an adjustment to the number of shares purchases
or redeemed for the Separate Account to reflect the correct NAV.
1.6 Each purchase, redemption and exchange order placed by the Company shall be
placed separately for each Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust, the
Company and the Trust shall net purchase and redemption orders with respect to
each Portfolio and shall transmit one net payment for all of the Portfolios.
1.7 If the Company's order requests the purchase of Fund Shares, the Company
shall pay for such purchase by wiring federal funds to the Fund or its
designated custodial account on the day the order is transmitted by the Company.
If the Company's order requests a net redemption resulting in a payment of
redemption proceeds to the Company, the Fund shall wire the redemption proceeds
to the Company as described in the FundServ Processing and Manual Trade
Processing Procedures attached hereto. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, an emergency as defined by the SEC exists, or as
permitted by the SEC (including Section 22(e) of the 1940 Act and the rules
thereunder and in accordance with the policies and procedures of the Trust as
described in the then current prospectus.) The Trust reserves the right to
redeem Portfolio shares in assets other than cash in accordance with the
procedures and policies of the Trust as described in the then current
prospectus.
1.8 The Trust agrees that all Shares of the Portfolios of the Trust will be sold
only to Participating Insurance Companies which have agreed to participate in
the Trust to fund their Separate Accounts and/or to Plans, all in accordance
with the requirements of Section 817(h) of the Code and Treasury Regulation
Section1.817-5, certain qualified pension and retirement plans, EVM and
affiliated advisers to the Trust and any other person permitted to hold shares
of the Trust pursuant to applicable Treasury regulations and the Mixed and
Shared Funding Exemptive Order; . Shares of the Portfolios of the Trust will not
be sold directly to the general public.
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1.9 As described in Section 1.2 above, the Trust may refuse to sell Shares of
any Portfolios to any person, or suspend or terminate the offering of the Shares
of any Portfolios if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board of Trustees of
the Trust (the "BOARD"), deemed necessary, desirable or appropriate. Without
limiting the foregoing, it has been determined that there is a significant risk
that the Fund and its shareholders may be adversely affected by short-term or
excessive trading activity, particularly activity used to try and take advantage
of short-term swings in the market. Accordingly, the Trust reserves the right to
reject any purchase order, including those purchase orders with respect to
shareholders or accounts whose trading has been or may be disruptive to the
Trust or that may otherwise adversely affect the Trust. The Company agrees to
use its reasonable best efforts to render assistance to, and to cooperate with,
the Trust to achieve compliance with the Trust's policies and restrictions on
short-term or excessive trading activity as they may be amended from time to
time, or to the extent required by applicable regulatory requirements.
1.10 Issuance and transfer of Portfolio Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Separate Accounts. Shares
ordered from Portfolios will be recorded in appropriate book entry titles for
the Separate Accounts.
1.11 NAV errors shall be handled in accordance with Section 9.3 below.
Article II. Owner Transaction Information
2.1 The Company agrees to provide to the Trust or its designee, upon request,
the taxpayer identification number ("TIN"), the Individual/International
Taxpayer Identification Number ("ITIN"), or other government-issued identifier
("GII"), if known, of any or all Owners underlying an Account and the amount,
date, name or other identifier of any investment professional(s) associated with
such Owners (if known), and transaction type (purchase, redemption, transfer, or
exchange) of every purchase, redemption, transfer, or exchange of Shares held
through an Account (the "INFORMATION"). Upon further request by the Trust or its
designee, Company agrees to provide the name or other identifier of any
investment professionals (if known) associated with any Contract Owner(s)
account which has been identified by EVD as having violated policies established
by the Trust for the purpose of eliminating or reducing any dilution of the
value of the outstanding shares issued by the Trust. In addition:
(i) Requests for Information must set forth a specific period, not to
exceed ninety (90) business days from the date of the most recent calendar
month-end preceding the request, for which Information is sought. The Trust or
its designee may request Information older than ninety (90) business days from
the date of the request as they deem necessary to investigate compliance with
policies established by the Trust for the purpose of eliminating or reducing any
dilution of the value of the outstanding Shares issued by the Trust;
(ii) In accordance with the preceding paragraph, the Company agrees to
transmit the Information to the Trust or its designee promptly, but in any event
not later than five (5) business days, after receipt of a request for
Information or after the last day of a period for which the Information has been
requested, unless mutually agreed upon otherwise by the parties. If requested by
the Trust or its designee, the Company agrees to use reasonable efforts to
determine promptly whether any specific person about whom it has received
Information is itself a financial
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intermediary ("INDIRECT INTERMEDIARY") and, upon further request of the Trust or
its designee, promptly either: (i) provide or arrange to provide to the Trust or
its designee the Information and any other information required to be provided
by law, rule, or regulation for those Owners who hold accounts with an Indirect
Intermediary; or (ii) restrict or prohibit the Indirect Intermediary from
purchasing Shares in nominee name on behalf of other persons. The Company agrees
to inform the Trust or its designee whether the Company will perform (i) or
(ii). For purposes of this paragraph, an "Indirect Intermediary" has the same
meaning as provided in Rule 22c-2 under the '40 Act ("RULE 22c-2");
(iii) To the extent practicable, the format for any Information provided to
the Trust should be consistent with the NSCC's Standardized Data Reporting
Format, or if not practicable, in an alternative format mutually agreed upon by
the parties; and
(iv) The Trust agrees not to use Information received from the Company
solely as a result of entering into this Agreement for marketing or any other
similar purpose without the Company's prior written consent, unless otherwise
required by law, rule, or regulation, in which case the Trust shall promptly
notify The Company of any Information used under such law, rule, or regulation.
The Trust may, however, use the information received to ensure compliance with
the Trust's compliance policies and procedures established by the Trust for the
purpose of eliminating or reducing any dilution of the value of the outstanding
shares issued by the Portfolios.
2.2 The Company agrees to execute instructions from the Funds or their designee
("INSTRUCTIONS") to restrict or prohibit further purchases or exchanges of
Shares by Owners that have been identified by the Funds or a designee as having
engaged in transactions in Shares (directly or indirectly through the Account)
that may violate the Funds' policies regarding short term or excessive trading
activity. The Funds or their designee will include in the Instructions the TIN,
ITIN, or GII, if known, and the specific restriction(s) to be implemented. If
the TIN, ITIN, or GII, is not known, the Instructions must include an equivalent
identifying number of the Owners or other agreed upon information to which the
Instructions relate. In addition, the Company agrees as follows:
(i) To implement Instructions as soon as reasonably practicable, but not
later than five (5) business days after receipt of the Instructions by the
Company; and
(ii) To provide confirmation to the Funds in a mutually agreed upon format
that Instructions have been implemented. The Company agrees to provide
confirmation as soon as is reasonably practicable, but not later than ten (10)
business days after the Instructions have been implemented.
2.3 For the purpose of this Article 2:
(i) The term "TRUST" does not include any "excepted funds" as defined in
Rule 22c.
(ii) The term "SHARES" means the interests of Owners corresponding to the
redeemable securities of record issued by the Funds under the 1940 Act that are
held by the Company.
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(iii) The term "OWNER" means the beneficial Owner of Shares, whether the
Shares are held directly or by the Company in nominee name.
Article III. Fees and Expenses
3.1 Except as otherwise provided under this Agreement, the Trust and the
Distributor shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the Fund or
the Distributor, except as made a part of this Agreement as it may be amended
from time to time with the mutual consent of the parties hereto. All expenses
incident to performance by each party of its respective duties under this
Agreement shall be paid by that party, unless otherwise specified in this
Agreement
Article IV. Representations and Warranties
4.1 The Company represents and warrants that it is an insurance company duly
organized and in good standing under the laws of Indiana and that it has legally
and validly established each Separate Account as a segregated asset account
under such laws.
4.2 The Company represents and warrants that it has registered or, prior to any
issuance or sale of the Variable Contracts, will register each Separate Account
as a unit investment trust ("UIT") in accordance with the provisions of the '40
Act and cause each Separate Account to remain so registered to serve as a
segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
4.3 The Company represents and warrants that the income, gains and losses,
whether or not realized, from assets allocated to each Separate Account are, in
accordance with the applicable Variable Contracts, to be credited to or charged
against such Separate Account without regard to other income, gains or losses
from assets allocated to any other accounts of the Company. The Company
represents and warrants that the assets of the Separate Account are and will be
kept separate from the General Account of the Company and any other separate
accounts the Company may have, and will not be charged with liabilities from any
business that the Company may conduct or the liabilities of any companies
affiliated with the Company.
4.4 The Company represents and warrants that the Variable Contracts will be
registered under the Securities Act of 1933 (the "'33 ACT") unless an exemption
from registration is available prior to any issuance or sale of the Variable
Contracts and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state laws and further
that the sale of the Variable Contracts shall comply in all material respects
with state insurance law suitability requirements. The Company agrees to notify
the Trust promptly of any investment restrictions imposed by state insurance law
applicable to the Trust.
4.5 The Company represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify the Trust promptly upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future. The
foregoing does not encompass Contracts which fail to qualify for treatment as
annuity contracts or life insurance policies under the applicable Code
provisions because of the actions or inaction of the purchasers of such
Contracts.
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4.6 The Trust represents and warrants that the Portfolio Shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and the Trust shall be
registered under the '40 Act prior to and at the time of any issuance or sale of
such Shares. The Trust shall amend its registration statement under the '33 Act
and the '40 Act from time to time as required in order to effect the continuous
offering of its Shares. The Fund shall register and qualify its Shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
4.7 The Trust represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation Section1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance. Upon request, the Fund shall provide
Company a certification of its compliance with Section 817(h) of the Code and
Treasury Regulation 1.817-5 within thirty (30) days of the end of each calendar
quarter.
4.8 The Fund represents and warrants that each Portfolio invested in by the
Separate Account intends to elect to be treated as a "regulated investment
company" under Subchapter M of the Code, and that it will make every effort to
maintain each Portfolio's qualification (under Subchapter M or an successor or
similar provision) and will notify the Company immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
4.9 The Distributor represents that it is and warrants that it shall remain duly
registered as a broker-dealer under all applicable federal and state securities
laws and agrees that it shall perform is obligations for the Trust in compliance
in all material respects with the laws of the Commonwealth of Massachusetts and
any applicable state and federal securities laws. The Distributor further
represents that it is a member in good standing of the Financial Industry
Regulatory Authority, Inc. ("FINRA").
4.10 The Trust represents and warrants that all its trustees, officers,
employees, and other individuals/entities who deal with the money and/or
securities of the Trust are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Trust in an
amount not less than that required by Rule 17g-1 under the '40 Act. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
4.12 The Company represents and warrants that all of its employees and agents
who deal with the money and/or securities of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage in an
amount not less than that required to be maintained by entities subject to the
requirements of Rule 17g-1 of the '40 Act. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company.
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Article V. Prospectus and Proxy Statements
5.1 The Trust shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the
Portfolios.
5.2 At least annually, the Trust or its designee shall provide the Company, free
of charge, in portable document format (I.E., PDF) only (or other electronic
means as agreed to by the Distributor and the Company) the current statutory
prospectus and summary prospectus (if requested by Company) for the Shares of
the Portfolios as the Company may reasonably request for distribution to
existing Owners whose Variable Contracts are funded by such Shares. The Trust or
its designee shall also provide the Company in PDF only the current prospectus
for the Shares as the Company may reasonably request for distribution to
prospective purchasers of Variable Contracts. If requested by the Company the
Trust or its designee shall provide such documentation in PDF and such other
assistance as is reasonably necessary in order for the parties hereto once a
year (or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Variable Contracts and the prospectus
for the Trust Shares and any other fund shares offered as investments for the
Variable Contracts printed at the Company's expense together in one document,
provided however that the Company shall ensure that, except as expressly
authorized in writing by the Trust, no alterations, edits or changes whatsoever
are made to prospectuses or other Trust documentation after such documentation
has been furnished to the Company or its designee, and the Company shall assume
liability for any and all alterations, errors or other changes that occur to
such prospectuses or other Trust documentation after it has been furnished to
the Company or its designee. The Distributor shall reimburse the Company for the
costs associated with printing and delivering prospectuses and supplements to
exiting Owners of the Shares.
5.3 The Trust, at the Trust's expense, shall provide the Company with copies of
the Trust's proxy statements, Trust reports to shareholders, and other Trust
communications to shareholders in PDF. Alternatively and in lieu thereof, the
Company may elect to print any of the Trust's proxy statements, Trust reports to
shareholders, and other Trust communications to shareholders and the Distributor
agrees to reimburse the Company for expenses related to thereto.
5.4 Upon reasonable request, the Trust will provide the Company with at least
one complete PDF copy of all prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, and all amendments or
supplements to any of the above that relate to the Portfolios after the filing
of each such document with the SEC or other regulatory authority. Upon
reasonable request, the Company will provide the Trust with at least one
complete PDF copy of all prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, and all amendments or
supplements to any of the above that relate to a Separate Account after the
filing of each such document with the SEC or other regulatory authority.
Article VI. Sales Materials
6.1 The Company will furnish, or will cause to be furnished, to the Trust or the
Distributor, each piece of sales literature or other promotional material in
which the Trust, the Distributor or any affiliate thereof is named, at least
five (5) business days prior to its intended use. No material shall be used if
the Trust or its designee reasonably objects to such use within five (5)
Business Days after receipt of such material.
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6.2 The Trust or the Distributor will furnish, or will cause to be furnished, to
the Company, each piece of sales literature or other promotional material in
which the Company or its Separate Accounts are named, at least five (5) business
days prior to its intended use. No such material shall be used unless the
Company approves such material.
6.3 Except with the express, prior permission of the Company, neither the Trust
nor the Distributor shall give any information or make any representations on
behalf of the Company or concerning the Company, the Separate Accounts, or the
Variable Contracts other than the information or representations contained in
the registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports of the Separate Accounts for distribution to Owners of
such Variable Contracts, or in sales literature or other promotional material
approved by the Company or its designee. Neither the Trust nor the Distributor
shall give such information or make such representations or statements in a
context that causes the information, representations or statements to be false
or misleading.
6.4 Except with the express, prior permission of the Trust or the Distributor,
neither the Company nor its affiliates or agents shall give any information or
make any representations or statements on behalf of the Trust, the Distributor
or any affiliate thereof or concerning the Trust, the Distributor or any
affiliate thereof, other than the information or representations contained in
the registration statements or prospectuses for the Trust, as such registration
statements and prospectuses may be amended or supplemented from time to time, or
in reports to shareholders or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust or the
Distributor or designee thereof. Neither the Company nor its affiliates or
agents shall give such information or make such representations or statements in
a context that causes the information, representations or statements to be false
or misleading.
6.5 At the request of any party to this Agreement, each other party will make
available to the other party's independent auditors and/or representative of the
appropriate regulatory agencies, all records, data and access to operating
procedures that may be reasonably requested.
6.6 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
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),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under the National Association of Securities Dealers, Inc. or FINRA
rules, the '40 Act or the '33 Act.
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Article VII. Potential Conflicts
7.1 The parties acknowledge that the Trust has received the "Mixed and Shared
Funding Exemptive Order which, requires the Trust and each Participating Company
and Plan to comply with conditions and undertakings substantially as provided in
this Article. In the event of any inconsistencies between the terms of the Mixed
and Shared Funding Exemptive Order and those provided for in this Article, the
conditions and undertakings imposed by the Mixed and Shared Funding Exemptive
Order shall govern this Agreement.
7.2 The Trust's Board will monitor each Portfolio for the existence of any
material irreconcilable conflict between and among the interests of the Owners
of all Participating Companies and of Plan Participants and Plans investing in
the Portfolio, and determine what action, if any, should be taken in response to
such conflicts. An irreconcilable material conflict may arise for a variety of
reasons, which may include: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling 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 the Portfolios are being managed; (e) a difference
in voting instructions given by variable annuity and variable life insurance
contract Owners; (f) a decision by a Participating Insurance Company to
disregard the voting instructions of Owners and (g) if applicable, a decision by
a Plan to disregard the voting instructions of plan participants. The Board
shall have sole authority to determine whether an irreconcilable material
conflict exists and its determination shall be binding upon Company.
7.3 The Company will report promptly any potential or existing conflicts to the
Board. The Company will be obligated to assist the Board in carrying out its
duties and responsibilities under the Mixed and Shared Funding Exemptive Order
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. The responsibility includes, but is not limited
to, an obligation by the Company to inform the Board whenever it has determined
to disregard Owners voting instructions.
7.4 If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract Owner investments in the Trust, the Board shall give prompt notice
of the conflict and the implications thereof to all Participating Companies and
Plans. If the Board determines that the Company is a relevant Participating
Company or Plan with respect to said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is necessary
to remedy or eliminate the irreconcilable material conflict. Such necessary
action may include but shall not be limited to: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Trust or any
Portfolio thereof and reinvesting those assets in a different investment medium,
which may include another Portfolio of the Trust, or another investment company;
(b) submitting the question as to whether such segregation should be implemented
to a vote of all affected Owners and as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity or variable life insurance
contract Owners of one or more Participating Insurance Companies) that votes in
favor of such segregation, or offering to the affected Owners the option of
making such a change; and (c) establishing a new registered management
investment company (or series thereof) or managed separate account and obtaining
any necessary approvals or orders of the SEC in connection therewith. If a
material irreconcilable conflict arises because of the Company's decision to
disregard Owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, the Company may be required, at the
10
election of the Trust to withdraw the Separate Account's investment in the
Trust, and no charge or penalty will be imposed as a result of such withdrawal.
The responsibility to take such remedial action shall be carried out with a view
only to the interests of the Owners. For the 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 material conflict
but in no event will the Portfolio(s) or its investment adviser (or any other
investment adviser of the Portfolio) be required to establish a new funding
medium for any Variable Contract. Further, the Company shall not be required by
this Article to establish a new funding medium for any Variable Contracts if any
offer to do so has been declined by a vote of a majority of Owners materially
and adversely affected by the irreconcilable material conflict.
7.5 The Board's determination of the existence of an irreconcilable material
conflict and its implications shall be made known promptly and in writing to the
Company.
7.6 No less than annually, the Company shall submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if reasonably deemed appropriate by the Board.
7.7 If and to the extent that the SEC promulgates new rules or regulations with
respect to mixed or shared funding on terms and conditions materially different
from those contained in the Mixed and Shared Funding Exemptive Order, then (a)
the Trust and/or the Participating Insurance Companies as appropriate, shall
take such steps as may be necessary to comply with such rules and regulations,
as adopted, to the extent such rules are applicable; and (b) this Article VI
shall be deemed to incorporate such new terms and conditions, and any term or
condition of this Article VI that is inconsistent therewith, shall be deemed to
be succeeded thereby.
7.8 The Company acknowledges it has been advised by the Trust that it may be
appropriate for the Company to disclose the potential risks of mixed and shared
funding in prospectuses or other applicable disclosure documents.
Article VIII. Voting
8.1 The Company will provide pass-through voting privileges to all Owners so
long as the SEC continues to interpret the '40 Act as requiring pass-through
voting privileges for Owners. Accordingly, the Company, where applicable, will
vote Shares of the Portfolio held in its Separate Accounts in a manner
consistent with voting instructions timely received from its Owners. The Company
will be responsible for assuring that each of its Separate Accounts that
participates in the Trust calculates voting privileges in a manner consistent
with other Participating Insurance Companies. The Company will vote Shares for
which it has not received timely voting instructions, as well as Shares it owns,
in the same proportion as its votes those Shares for which it has received
voting instructions. The Company and its agents shall not oppose or interfere
with the solicitation of proxies for Trust Shares held for such Owners. The
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order as communicated by
the Trust (in addition to those specified in this Agreement) and any reasonable
standards that the Trust may adopt and provide in writing.
11
Article IX. Indemnification
9.1 Indemnification by the Company. Subject to Section 9.3 below, the Company
agrees to indemnify and hold harmless the Trust and the Distributor, and each of
their trustees, directors, members, principals, officers, partners, employees
and agents and each person, if any, who controls the Trust or the Distributor
within the meaning of Section 15 of the '33 Act (collectively, the "INDEMNIFIED
PARTIES" for purposes of this Article) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company, which consent shall not be unreasonably withheld) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Trust's Shares or the Variable Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Variable Contracts or contained in the Variable Contracts (or
any amendment or supplement to any of the foregoing) (which shall include a
written description of a Variable Contract that is not registered under the 33
Act), 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 the Company by or on behalf of an Indemnified
Party for use in the registration statement or prospectus for the Variable
Contracts or in the Variable Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Variable
Contracts or Trust Shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Trust 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 Variable Contracts
or Trust Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Trust 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 if
such statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Trust by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the qualification requirements specified in Section 4.5 of this Agreement; or
(v) arises out of information or instructions from the Company or its
agents concerning the purchase, redemption, transfer or other transaction in
Trust Shares; or
(vi) arise out of or result from any material breach of any representation
and/or
12
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
(c) The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim 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 the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, the Company shall be entitled to participate at its own
expense in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
9.2 Indemnification by the Trust and the Distributor.
(a) Subject to Section 9.3 below, the Trust and the Distributor agree to
indemnify and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust and the Distributor which consent shall not be unreasonably
withheld) or litigation (including reasonable legal and other expenses) to which
the Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Trust's Shares or the Variable Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus of the Trust (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 the Trust or the
Distributor by or on behalf of the Company for use in the registration statement
or prospectus for the Trust (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Contracts or Shares; or
13
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Trust or the Distributor or persons under its control) or wrongful conduct of
the Trust or the Distributor or persons under its control, with respect to the
sale or distribution of the Variable Contracts or Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus covering the
Variable Contracts, 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 if
such statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Company for
inclusion therein by or on behalf of the Trust or the Distributor; or
(iv) arise as a result of a failure by the Trust or the Distributor to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Trust or the Distributor in this Agreement or arise
out of or result from any other material breach of this Agreement by the Trust
or the Distributor; or
(vi) arises out of information or instructions from the Trust or its agents
concerning the purchase, redemption, transfer or other transaction in Trust
Shares.
(b) The Trust or the Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
(c) The Trust or the Distributor, as the case may be, shall not be liable
under this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the Trust or
the Distributor, as the case may be, in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim 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 the Trust or the Distributor of any such claim
shall not relieve the Trust or the Distributor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust or the Distributor shall be entitled
to participate at its own expense in the defense thereof. The Trust or the
Distributor also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Trust or
the Distributor to such party of the Trust's or the Distributor's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Trust or the
Distributor will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
14
investigation.
9.3 Indemnification for Errors. In the event of any error or delay with respect
to information regarding the purchase, redemption, transfer or registration of
Shares of the Trust, the parties agree that each is obligated to make the
Separate Accounts and/or the Trust, respectively, whole for any error or delay
that it causes, subject in the case of pricing errors to the related Portfolio's
policies on materiality of pricing errors. In addition, the parties agree to
work together in good faith with respect to consideration of payment of
reasonable costs of administrative costs of any reprocessing resulting from a
pricing error or delay, insofar as any such costs arise out of or is based on
any error or alleged error made in the pricing of shares of a Portfolio. Each
party agrees to provide the other with prompt notice of any errors or delays of
the type referred to in this Section. The Company and the Trust agree that Xxxxx
Xxxxx Pricing Error Procedures shall govern.
9.4 The parties agrees to notify each other promptly of the commencement of any
material litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale or operation of Trust Shares,
Variable Contracts or the operation of the Separate Accounts.
Article X. Term; Termination
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate in accordance with the following provisions:
(a) At the option of the Company or the Trust at any time from the date
hereof upon ninety (90) days notice, unless a shorter time is agreed to by the
parties;
(b) At the option of the Company, if Trust Shares are not reasonably
available to meet the requirements of the Variable Contracts as determined by
the Company, provided, however, that such termination shall apply only to the
Portfolio(s) not reasonably available. Prompt advance notice of election to
terminate shall be furnished by the Company, said termination to be effective
ten days after receipt of notice unless the Trust makes available a sufficient
number of Shares to reasonably meet the requirements of the Variable Contracts
within said ten-day period;
(c) At the option of the Company, upon the institution of formal
proceedings against the Trust by the SEC, the National Association of Securities
Dealers, Inc., FINRA or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in the Company's reasonable
judgment, materially impair the Trust's ability to meet and perform the Trust's
obligations and duties hereunder. Prompt notice of election to terminate shall
be furnished by the Company with said termination to be effective upon
15
receipt of notice;
(d) At the option of the Trust, upon the institution of formal proceedings
against the Company by the SEC, FINRA, or any other regulatory body, the
expected or anticipated ruling, judgment or outcome of which would, in the
Trust's reasonable judgment, materially impair the Company's ability to meet and
perform its obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by the Trust with said termination to be effective
upon receipt of notice;
(e) In the event the Trust's Shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law precludes the use
of such Shares as the underlying investment medium of Variable Contracts issued
or to be issued by the Company. Termination shall be effective upon such
occurrence without notice;
(f) At the option of the Trust if the Variable Contracts cease to qualify
as annuity contracts or life insurance contracts, as applicable, under the Code,
or if the Trust reasonably believes that the Variable Contracts may fail to so
qualify. Termination shall be effective upon receipt of notice by the Company;
(g) At the option of the Company, upon the Trust's breach of any material
provision of this Agreement, which breach has not been cured to the satisfaction
of the Company within ten days after written advance notice of such breach is
delivered to the Trust;
(h) At the option of the Trust, upon the Company's breach of any material
provision of this Agreement, which breach has not been cured to the satisfaction
of the Trust within ten days after written advance notice of such breach is
delivered to the Company;
(i) At the option of the Trust, if the Variable Contracts are not
registered, issued or sold in accordance with applicable federal and/or state
law. Termination shall be effective immediately upon such occurrence without
notice;
(ii) In the event this Agreement is assigned without the prior written
consent of the Company, the Trust, and the Distributor, termination shall be
effective immediately upon such occurrence without notice.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, the Trust at the option of the Company will continue to make available
additional Trust Shares, as provided below, pursuant to the terms and conditions
of this Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts"),
unless the Distributor requests that the Company seek an order pursuant to
Section 26(c) of the 1940 Act to permit the substitution of other securities for
shares of the Portfolio(s) Specifically, without limitation, 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 Portfolio(s), redeem
investments in the Trust and/or invest in the Trust upon the payment of
additional premiums under the Existing Contracts.
Article XI. Notices
11.1 Any notice hereunder shall be given by registered or certified mail return
receipt requested or via overnight delivery to the other party at the address of
such party set forth below or at such other address as such party may from time
to time specify in writing to the other party.
If to the Trust
c/o Xxxxx Xxxxx Distributors, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
00
Xxxxxx, XX 00000:
Attention: Chief Legal Officer
If to the Distributor:
Xxxxx Xxxxx Distributors, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Chief Legal Officer
If to the Company:
0000 X. Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Funds Management
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article XII. MISCELLANEOUS
12.1 Privacy. Each party hereto acknowledges that, by reason of its performance
under this Agreement, it shall have access to, and shall receive from the other
party (and its affiliates, partners and employees), the confidential information
of the other party (and its affiliates, partners and employees), including but
not limited to the "nonpublic personal information" of their consumers within
the meaning of SEC Regulation S-P (collectively, "Confidential Information").
Each party shall hold all such Confidential Information in the strictest
confidence and shall use such Confidential Information solely in connection with
its performance under this Agreement and for the business purposes set forth in
this Agreement. Under no circumstances may a party cause any Confidential
Information of the other party to be disclosed to any third party or reused or
redistributed without the other party's prior written consent.
12.2 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.3 Severability. 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.
12.4 Governing Law. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the New York. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the SEC granting exemptive relief
therefrom and the conditions of such orders.
12.5 Liability. This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his or her capacity as an officer of the
Trust. The obligations of this Agreement shall be binding upon the assets and
property of the Trust and each respective Portfolio thereof only and shall not
be binding on any Director/Trustee, officer or shareholder of the Trust
individually. In addition, notwithstanding any other provision of this
Agreement, no
17
Portfolio shall be liable for any loss, expense, fee, charge or liability of any
kind relating to or arising from the actions or omissions of any other Portfolio
or from the application of this Agreement to any other Portfolio. It is also
understood that each of the Portfolios shall be deemed to be entering into a
separate Agreement with the Company so that it is as if each of the Portfolios
had signed a separate Agreement with the Company and that a single document is
being signed simply to facilitate the execution and administration of the
Agreement.
12.6 Inquiries and Investigations. Each party shall cooperate with each other
party and all appropriate governmental authorities (including without limitation
the SEC, FINRA and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation,
examination or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7 Subcontractors, Agents or Affiliates. The parties may hire or make
arrangements for subcontractors, agents or affiliates to perform the services
set forth in this Agreement. The parties shall provide each other with written
notice of the names of any subcontractors, agents or affiliates the parties hire
or arranges to perform such services, and any specific operational requirements
that arise as a result of such arrangement. The Company agrees that it is and
will be responsible for the acts and omissions of its subcontractors,
affiliates, and agents and that the indemnification provided by the Company in
Section 9 of this Agreement shall be deemed to cover the acts and omissions of
such subcontractors, affiliates, and agents to the same extent as if they were
the acts or omissions of the Company.
12.8 Client Lists. The Company hereby consents to the Distributor's, the
Trust's, or its investment adviser's use or reference to the Company's name in
connection with any full, partial or representative list of clients.
12.9 Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior agreement and
understandings relating to the subject matter hereof.
12.10 Amendment, Waiver and Other Matters. Neither this Agreement, nor any
provision hereof, may be amended, waived, modified or terminated in any manner
except by a written instrument properly authorized and executed by all parties
hereto. 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, which the parties hereto are entitled to under state and
federal laws.
12.11 The Portfolios are portfolio series of a Massachusetts business trust
formed under a declaration of trust. The obligations of this Agreement with
respect to each Portfolio are binding only upon the assets and property of such
series and are not binding upon any other series of the Trust, and all persons
dealing with a Portfolio must look solely to the property of that Portfolio for
satisfaction of claims of any nature against the Portfolio, as neither the
trustees, officers, employees nor shareholders of the Trust assume any personal
liability in connection with its business or for obligations entered into on its
behalf.
18
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
Lincoln Life and Annuity Company of New York
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
Xxxxx Xxxxx Distributors, Inc.
By: /s/ Xxxx X. Xxxxx
----------------------------------
Xxxx X. Xxxxx, CFA
SVP, Managing Director
Xxxxx Xxxxx Variable Trust
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
FUND/SERV PROCESSING PROCEDURES
AND
MANUAL PROCESSING PROCEDURES
The purchase, redemption and settlement of shares of a Fund ("Shares") will
normally follow the Fund/SERV-Defined Contribution Clearance and Settlement
Service ("DCCS") Processing Procedures below and the rules and procedures of the
SCC Division of the National Securities Clearing Corporation ("NSCC") shall
govern the purchase, redemption and settlement of Shares of the Funds through
NSCC by Lincoln National Life Insurance Company ("Lincoln"). In the event of
equipment failure or technical malfunctions or the parties' inability to
otherwise perform transactions pursuant to the FUND/SERV Processing Procedures,
or the parties' mutual consent to use manual processing, the Manual Processing
Procedures below will apply.
19
It is understood and agreed that, in the context of Section 22 of the Investment
Company Act of 1940 (the "1940 Act") and the rules and public interpretations
thereunder by the staff of the Securities and Exchange Commission (SEC Staff),
receipt by Lincoln of any Instructions from the contract owner prior to the
Close of Trade on any Business Day shall be deemed to be receipt by the Funds of
such Instructions solely for pricing purposes and shall cause purchases and
sales to be deemed to occur at the Share Price for such Business Day, except as
provided in 4(c) of the Manual Processing Procedures. Each Instruction shall be
deemed to be accompanied by a representation by Lincoln that it has received
proper authorization from each contract owner whose purchase, redemption,
account transfer or exchange transaction is effected as a result of such
Instruction.
FUND/SERV-DCCS PROCESSING PROCEDURES
1. On each business day that the New York Stock Exchange (the "Exchange") is
open for business on which the Funds determine their net asset values
("Business Day"), the Fund shall accept, and effect changes in its records
upon receipt of purchase, redemption, exchanges, account transfers and
registration instructions from Lincoln electronically through Fund/SERV
("Instructions") without supporting documentation from the contract owner.
On each Business Day, the Fund shall accept for processing any Instructions
from Lincoln and shall process such Instructions in a timely manner.
2. The Trust shall perform any and all duties, functions, procedures and
responsibilities assigned to it under this Agreement and as otherwise
established by the NSCC. The Trust shall conduct each of the foregoing
activities in a competent manner and in compliance with (a) all applicable
laws, rules and regulations, including NSCC Fund/SERV-DCCS rules and
procedures relating to Fund/SERV; (b) the then-current Prospectus of a
Fund; and (c) any provision relating to Fund/SERV in any other agreement of
the Trust that would affect its duties and obligations pursuant to this
Agreement.
3. Confirmed trades and any other information provided by the Distributor or
Trust to Lincoln through Fund/SERV and pursuant to this Agreement shall be
accurate, complete, and in the format prescribed by the NSCC.
4. Trade information provided by Lincoln to the Distributor or Trust through
Fund/SERV and pursuant to this Agreement shall be accurate, complete and,
in the format prescribed by the NSCC. All Instructions by Lincoln regarding
each Fund/SERV Account shall be true and correct and will have been duly
authorized by the registered holder.
5. For each Fund/SERV transaction, Lincoln shall provide the Funds and the
Distributor with all information necessary or appropriate to establish and
maintain each Fund/SERV transaction (and any subsequent changes to such
information), which Lincoln hereby certifies is and shall remain true and
correct. Lincoln shall maintain documents required by the Funds to effect
Fund/SERV transactions. Lincoln certifies that all Instructions delivered
to Distributor or the Trust on any Business Day shall have been received by
Lincoln from the contract owner by the close of trading (generally 4:00
p.m. Eastern Time ("ET")) on the Exchange (the "Close of Trading") on such
Business Day and that any Instructions received by it after the Close of
Trading on any given Business Day will be transmitted to Distributor on the
next Business Day.
20
MANUAL PROCESSING PROCEDURES
1. On each Business Day, Lincoln may receive Instructions from the contract
owner for the purchase or redemption of shares of the Funds based solely
upon receipt of such Instructions prior to the Close of Trading on that
Business Day. Instructions in good order received by Lincoln prior to the
close of trading on any given Business Day (generally, 4:00 p.m. ET (the
"Trade Date") and transmitted to the Distributor or Trust by no later than
9:30 a.m. ET the Business Day following the Trade Date ("Trade Date plus
One" or "T+1"), will be executed at the NAV ("Share Price") of each
applicable Fund, determined as of the Close of Trading on the Trade Date.
2. As noted in Paragraph 1 above, by 9:30 a.m. ET on T+1 ("Instruction Cutoff
Time") and after Lincoln has processed all approved transactions, Lincoln
will transmit to the Distributor via facsimile, telefax or electronic
transmission or system-to-system, or by a method acceptable to Lincoln, the
Distributor and the Trust, a report (the "Instruction Report") detailing
the Instructions that were received by Lincoln prior to the Funds' daily
determination of Share Price for each Fund (i.e., the Close of Trading) on
Trade Date.
(a) It is understood by the parties that all Instructions from the
contract owner shall be received and processed by Lincoln in
accordance with its standard transaction processing procedures.
Lincoln or its designees shall maintain records sufficient to identify
the date and time of receipt of all contract owner transactions
involving the Funds and shall make or cause to be made such records
available upon reasonable request for examination by the Funds or its
designated representative or, by appropriate governmental authorities.
Under no circumstances shall Lincoln change, alter or modify any
Instructions received by it in good order.
(b) Following the completion of the transmission of any Instructions by
Lincoln to the Distributor or Trust by the Instruction Cutoff Time,
Lincoln will verify that the Instruction was received by the
Distributor.
(c) In the event that Lincoln transmits an Instruction to the Distributor
or Trust on any Business Day prior to the Instruction Cutoff Time and
such Instruction is not received by the Distributor or Trust due to
circumstances caused by the Distributor or Trust that prohibit the
Distributor's or Trust's receipt of such Instruction, such Instruction
shall nonetheless be treated by the Distributor as if it had been
received by the Instruction Cutoff Time, provided that Lincoln
retransmits such Instruction by facsimile transmission to the
Distributor.
(d) With respect to all Instructions, the Trust's financial control
representative will manually adjust a Fund's records for the Trade
Date to reflect any Instructions sent by Lincoln.
3. As set forth below, upon the timely receipt from Lincoln of the
Instructions, the Fund will execute the purchase or redemption transactions
(as the case may be) at the Share Price for each Fund computed as of the
Close of Trading on the Trade Date.
(a) Except as otherwise provided herein, all purchase and redemption
transactions will settle on T+1. Settlements will be through net
Federal Wire transfers to an
21
account designated by a Fund. In the case of Instructions which
constitute a net purchase order, settlement shall occur by Lincoln
initiating a wire transfer on T+1 to the custodian for the Fund for
receipt by the Funds' custodian by no later than the Close of Business
at the New York Federal Reserve Bank on T+1, causing the remittance of
the requisite funds to the Distributor to cover such net purchase
order.
In the case of Instructions which constitute a net redemption order,
settlement shall occur by the Trust causing the remittance of the
requisite funds to cover such net redemption order by Federal Funds
Wire on T+1, provided that the Fund reserves the right to (i) delay
settlement of redemptions for up to seven (7) Business Days after
receiving a net redemption order in accordance with Section 22 of the
1940 Act and Rule 22c-1 thereunder, or (ii) suspend redemptions
pursuant to the 1940 Act or as otherwise required by law. The parties
agree to work together with respect to any delays described herein.
The Trust reserves the right to redeem Fund shares in assets other
than cash in accordance with the then current Xxxxx Xxxxx Funds
Procedures for Redemptions in Kind and the policies of the Trust as
described in the Funds' then current prospectus.
(b) Lincoln (and its Variable Accounts) shall be designated as record
owner of each account ("Record Owner") and the Trust shall provide
Lincoln with all written confirmations required under federal and
state securities laws.
(c) On any Business Day when the Federal Reserve Wire Transfer System is
closed, all communication and processing rules will be suspended for
the settlement of Instructions. Instructions will be settled on the
next Business Day on which the Federal Reserve Wire Transfer System is
open. The original T+1 Settlement Date will not apply. Rather, for
purposes of this Paragraph 3(c) only, the Settlement Date will be the
date on which the Instruction settles.
(d) Lincoln shall, upon receipt of any confirmation or statement
concerning the accounts, verify the accuracy of the information
contained therein against the information contained in Lincoln's
internal record-keeping system and shall promptly, advise the
Distributor and Trust in writing of any discrepancies between such
information. The parties shall cooperate to resolve any such
discrepancies as soon as reasonably practicable.
PRICE COMMUNICATION TIME
By no later than 7:00 p.m. ET (to the extent reasonably practicable) on each
Trade Date ("Price Communication Time"), the Trust will communicate to Lincoln
via electronic transmission acceptable to both parties, the Share Price of each
applicable Fund, as well as dividend and capital gain information and, in the
case of funds that credit a daily dividend, the daily accrual or interest rate
factor, determined at the Close of Trading on that Trade Date.
ADJUSTMENTS
In the event of any error or delay with respect to both the Fund/SERV Processing
Procedures and the Manual Processing Procedures outlined in Exhibit D herein:
(i) which is caused by the Funds
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or the Distributor, the Distributor shall make any adjustments on the Funds'
accounting system necessary to correct such error or delay and the responsible
party or parties shall reimburse the contract owner and Lincoln, as appropriate,
for any losses or reasonable costs incurred directly as a result of the error or
delay but specifically excluding any and all consequential punitive or other
indirect damages or (ii) which is caused by Lincoln, the Distributor shall make
any adjustment on the Funds' accounting system necessary to correct such error
or delay and the affected party or parties shall be reimbursed by Lincoln for
any losses or reasonable costs incurred directly as a result of the error or
delay, but specifically excluding any and all consequential punitive or other
indirect damages. In the event of any such adjustments on the Funds' accounting
system, Lincoln shall make the corresponding adjustments on its internal
record-keeping system. In the event that errors or delays with respect to the
Procedures are contributed to by more than one party hereto, each party shall be
responsible for that portion of the loss or reasonable cost which results from
its error or delay. All parties agree to provide the other parties prompt notice
of any errors or delays of the type referred to herein and to use reasonable
efforts to take such action as may be appropriate to avoid or mitigate any such
costs or loss.
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