FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT ("AGREEMENT") made as of the 17th day of
November, 2008, by and between Lord Xxxxxx Series Fund, INC. (the "FUND") a
Maryland Corporation, 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") Lord Xxxxxx
Distributor LLC, a New York limited liability company (the "DISTRIBUTOR"), and
Lincoln Life & Annuity Company of New York (the "COMPANY"), a life insurance
company organized under the laws of the State of New York.
WHEREAS, the Fund 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 Fund is organized as a series fund comprised of separate
investment series, namely the Portfolios; and
WHEREAS, the Fund 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; and
WHEREAS, the Fund has filed an application with the SEC requesting an order
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit Fund shares to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated participating insurance companies accounts ("PARTICIPATING
COMPANIES") and qualified pension and retirement plans outside the separate
account context (including, without limitation, those trusts, plans, accounts,
contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(a),
408(b), 414(d), 457(b), 408(k), 501(c)(18) of the Internal Revenue Code of 1986,
as amended (the "CODE") and any other trust, plan, account, contract or annuity
trust that is determined to be within the scope of Treasury Regulation Section
1.817.5(f)(3)(iii) ("PLANS"); 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 Fund 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 Fund's principal underwriter; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Fund to fund the
aforementioned Variable Contracts and the Fund is authorized to sell such shares
to the Company at NAV.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, and the Distributor agree as follows:
Article I. SALE OF FUND SHARES
1.1 The Fund agrees to make Variable Contract Class shares ("SHARES") of
the Fund available to the Separate Accounts of the Company for the investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in the Fund'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 Fund 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 ("OWNER") to give instructions
to the Company which would require the Company to redeem or exchange Shares of
the Fund.
1.2 The Fund agrees to sell to the Company those Shares of the selected
Portfolios of the Fund which the Company orders, executing such orders on a
daily basis at the net asset value ("NAV") next computed after receipt by the
Fund 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 Fund for receipt of
such orders from the designated Separate Account and receipt by such designee
shall constitute receipt by the Fund; provided, to the extent not inconsistent
with regulatory requirements, that the Company receives the order by 4:00 p.m.
Eastern time and the Fund receives notice from the Company by telephone,
facsimile (orally confirmed) or by such other means as the Fund and the Company
may mutually agree of such order by 9:00 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 Fund calculates its NAV pursuant
to the rules of the SEC. Confirmation of the execution of such orders shall be
provided to the Company by the Fund at a mutually agreeable time and in a
mutually agreeable format.
1.3 The Fund 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 Fund or its designee
of the request for redemption, in accordance with the provisions of this
agreement and the Fund's then current registration statement. For purposes of
this Section 1.3, the Company shall be the designee of the Fund for receipt of
requests for redemption from the designated Separate Account and receipt by such
designee shall constitute receipt by the Fund; provided, to the extent not
inconsistent with regulatory requirements, that the Company receives the request
for redemption by 4:00 p.m. Eastern time and the Fund receives notice from the
Company by telephone, facsimile (orally confirmed) or by such other means as the
Fund and the Company may mutually agree of such request for redemption by 9:00
a.m. Eastern time on the next following Business Day. Confirmation of the
execution of such orders shall be provided to the Company by the Fund at a
mutually agreeable time and in a mutually agreeable format.
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1.4 The Fund shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
Shares of any Portfolios of the Fund. 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 Fund shall notify
the Company or its designee of the number of Shares so issued as payment of such
dividends and distributions.
1.5 The Fund 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.
1.6 At the end of each Business Day, the Company shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, the Company shall process each such Business Day's
Separate Account transactions based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m. Eastern time) to determine the net dollar amount of Fund Shares which shall
be purchased or redeemed at that day's closing NAV per share. To the extent not
inconsistent with regulatory requirements, the net purchase or redemption orders
so determined shall be transmitted to the Fund by the Company by 9:00 a.m.
Eastern time on the Business Day next following the Company's receipt of such
requests and premiums in accordance with the terms of Sections 1.2 and 1.3
hereof.
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 use its best efforts to wire
the redemption proceeds to the Company on the day the order is transmitted by
the Company, unless doing so would require the Fund to dispose of Portfolio
securities or otherwise incur additional costs. In any event, proceeds shall be
wired to the Company within three Business Days or such longer period permitted
by the '40 Act or the rules, orders or regulations thereunder and the Fund shall
notify the person designated in writing by the Company as the recipient for such
notice of such delay by 3:00 p.m. Eastern time the same Business Day that the
Company transmits the redemption order to the Fund.
1.8 The Fund agrees that all Shares of the Portfolios of the Fund will be
sold only to Participating Insurance Companies which have agreed to participate
in the Fund 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
Section 1.817-5. Shares of the Portfolios of the Fund will not be sold directly
to the general public.
1.9 The Fund 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 Directors/Trustees of the Fund (the
"BOARD"), deemed necessary, desirable or appropriate.
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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 Fund
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 Fund or that may otherwise adversely affect the Fund. The
Company agrees to use its reasonable best efforts to render assistance to, and
to cooperate with, the Fund to achieve compliance with the Fund'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.
Article II. OWNER TRANSACTION INFORMATION
2.1 The Company agrees to provide to the Funds or their 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"). 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 Funds or
their 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 Funds for the purpose of eliminating or reducing any
dilution of the value of the outstanding Shares issued by the Funds;
(ii) In accordance with the preceding paragraph, the Company agrees to
transmit the Information to the Funds or their designee promptly, but in any
event not later than ten (10) 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 Funds or their designee, the Company agree to use best efforts to determine
promptly whether any specific person about whom it has received Information is
itself a financial intermediary ("INDIRECT INTERMEDIARY") and, upon further
request of the Funds or their designee, promptly either: (i) provide or arrange
to provide to the Funds or their 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 Funds or their designee whether
the Company will perform (i) or (ii). For purposes of this paragraph, an
"Indirect
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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 Funds 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 Funds agree 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.
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 ten (10) 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 "FUNDS" does not include any "excepted funds" as defined in
Rule 22c-2.
(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.
(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 Fund and the
Distributor shall pay no fee or other compensation to the Company under this
Agreement, and
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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 New York 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 Fund promptly of any investment restrictions imposed by state insurance law
applicable to the Fund.
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 Fund immediately 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.
4.6 The Fund 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
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all applicable federal and state laws, and the Fund shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such Shares. The
Fund 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 Fund.
4.7 The Fund 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 Section 1.817-5, 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.
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 to qualify for such treatment for
each taxable year 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 and warrants that it is and will be a member
in good standing of the Financial Industry Regulatory Authority, Inc. ("FINRA")
and is and will be registered as a broker-dealer with the SEC. The Distributor
further represents that it will sell and distribute Portfolio Shares in
accordance with all applicable state and federal laws and regulations, including
without limitation the '33 Act, the '34 Act and the '40 Act.
4.10 The Distributor represents and warrants that it will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and federal laws.
4.11 The Fund represents and warrants that all its directors, trustees,
officers, employees, and other individuals/entities who deal with the money
and/or securities of the Fund are and shall 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 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. The Fund shall make all reasonable
efforts to see that this bond or another bond containing these same provisions
is always in effect, and each agrees to notify the Company in the event such
coverage no longer applies.
4.12 The Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund 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
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reputable bonding company. The Company shall make all reasonable efforts to see
that this bond or another bond containing these same provisions is always in
effect, and each agrees to notify the Fund in the event such coverage no longer
applies.
Article V. PROSPECTUS AND PROXY STATEMENTS
5.1 The Fund 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 Fund.
5.2 At least annually, the Fund or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus 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 Fund or
its designee shall provide the Company, at the Company's expense, with as many
more copies of 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 in lieu thereof, the Fund or its designee
shall provide such documentation in a mutually agreeable form 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 Fund 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 Fund, no alterations, edits or changes whatsoever
are made to prospectuses or other Fund 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 Fund documentation after it has been furnished to the
Company or its designee.
5.3 The Fund shall provide the Company with copies of the Fund's proxy
statements, Fund reports to shareholders, and other Fund communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Owners. Alternatively and in lieu thereof, the Company may elect
to print at its own expense any of the Fund's proxy statements, Fund reports to
shareholders, and other Fund communications to shareholders.
5.4 The Fund will provide the Company with at least one complete 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 promptly after the filing of each such document
with the SEC or other regulatory authority. The Company will provide the Fund
with at least one complete 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
promptly after the filing of each such document with the SEC or other regulatory
authority.
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Article VI. SALES MATERIALS
6.1 The Company will furnish, or will cause to be furnished, to the Fund or
the Distributor, each piece of sales literature or other promotional material in
which the Fund, the Distributor or any affiliate thereof is named, at least
fifteen (15) Business Days prior to its intended use. No such material shall be
used unless the Fund or the Distributor approves such material. Such approval
shall be presumed given if notice to the contrary is not received by the Company
within fifteen (15) Business Days after receipt by the Fund or the Distributor
of such material.
6.2 The Fund 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
fifteen (15) Business Days prior to its intended use. No such material shall be
used unless the Company approves such material. Such approval shall be presumed
given if notice to the contrary is not received by the Fund or within fifteen
(15) Business Days after receipt by the Company of such material.
6.3 Except with the permission of the Company, neither the Fund 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 Fund 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 permission of the Fund 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 Fund, the Distributor or any
affiliate thereof or concerning the Fund, the Distributor or any affiliate
thereof, other than the information or representations contained in the
registration statements or prospectuses for the Fund, 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 Fund, or in sales
literature or other promotional material approved by the Fund 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 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,
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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.
Article VII. POTENTIAL CONFLICTS
7.1 The parties acknowledge that the Fund has received an exemptive order
from the SEC granting relief from various provisions of the '40 Act and the
rules thereunder to the extent necessary to permit the Fund Shares to be sold to
and held by variable annuity and variable life insurance separate accounts of
Participating Companies and Plans. The terms of such exemptive order (the "MIXED
AND SHARED FUNDING EXEMPTIVE ORDER"); require the Fund 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 Fund's Board will monitor the Fund 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 Fund, 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 Fund 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.
7.3 The Company will report 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.
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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 Fund, 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 Fund or any Portfolio
thereof and reinvesting those assets in a different investment medium, which may
include another Portfolio of the Fund, 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. 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 election of the Fund to
withdraw the Separate Account's investment in the Fund, 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 Fund or its investment adviser (or any other investment adviser of the Fund)
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 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 Fund 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
11
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 Fund 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 Fund 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 Fund Shares held for such Owners.
Article IX. INDEMNIFICATION
9.1 Indemnification by the Company. Subject to Section 9.3 below, the
Company agrees to indemnify and hold harmless the Fund and the Distributor, and
each of their trustees, directors, members, principals, officers, partners,
employees and agents and each person, if any, who controls the Fund 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 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 Fund'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), 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
12
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts or Fund 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 Fund not supplied by the Company, or
persons under its control) or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Variable Contracts
or Fund 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 Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Fund by or on
behalf of the Company; or
(iv) arises as a result of any failure by the Company to provide the
services and furnish the materials under the terms 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
Fund Shares; or
(vi) arise out of or result from any material breach of any representation
and/or 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
13
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 Fund and the Distributor. (a) Subject to Section
9.3 below, the Fund 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 Fund and the
Distributor which consent shall not be unreasonably withheld) or litigation
(including 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 Fund'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 Fund (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 Fund or the Distributor by or on behalf of the
Company for use in the registration statement or prospectus for the Fund (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts or 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 for the Variable Contracts not
supplied by the Fund or the Distributor or persons under its control) or
wrongful conduct of the Fund 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 Fund or the Distributor; or
(iv) arise as a result of a failure by the Fund or the Distributor to
provide the services and furnish the materials under the terms of this
Agreement; or
14
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the Distributor in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Fund or the Distributor.
(b) The Fund 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 Fund 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 Fund 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 Fund or the Distributor of any such claim
shall not relieve the Fund 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 Fund or the Distributor shall be entitled
to participate at its own expense in the defense thereof. The Fund 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 Fund or the
Distributor to such party of the Fund'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 Fund 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 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 Fund, the parties agree that each is obligated to
make the Separate Accounts and/or the Fund, 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, each party
agrees that neither will receive compensation from the other for the costs of
any reprocessing necessary as a result of an error or delay. Each party agrees
to provide the other with prompt notice of any errors or delays of the type
referred to in this Section.
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.
15
10.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of the Company or the Fund 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 Fund Shares are not reasonably
available to meet the requirements of the Variable Contracts as determined by
the Company. Prompt notice of election to terminate shall be furnished by the
Company, said termination to be effective ten days after receipt of notice
unless the Fund 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 Fund by the SEC, the National Association of Securities
Dealers, Inc., 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 Fund's ability to meet and perform the Fund's obligations
and duties hereunder. Prompt notice of election to terminate shall be furnished
by the Company with said termination to be effective upon receipt of notice;
(d) At the option of the Fund, 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
Fund'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 Fund with said termination to be effective
upon receipt of notice;
(e) In the event the Fund'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 Fund if the Variable Contracts cease to qualify as
annuity contracts or life insurance contracts, as applicable, under the Code, or
if the Fund 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 Fund'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 notice of such breach is delivered
to the Fund;
(h) At the option of the Fund, upon the Company's breach of any material
provision of this Agreement, which breach has not been cured to the satisfaction
of the Fund within ten days after written notice of such breach is delivered to
the Company;
(i) At the option of the Fund, if the Variable Contracts are not
registered, issued or
16
sold in accordance with applicable federal and/or state law. Termination shall
be effective immediately upon such occurrence without notice; and
(j) In the event this Agreement is assigned without the prior written
consent of the Company, the Fund, 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 Fund at the option of the Company will continue to make
available additional Fund 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"). 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 Fund, redeem investments
in the Fund and/or invest in the Fund 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 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 Fund:
Lord Xxxxxx Family of Funds
00 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: General Counsel
If to the Distributor:
Lord Xxxxxx Distributor LLC
00 Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: General Counsel
If to the Company:
Lincoln Life & Annuity Company of New York
0000 X. Xxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
17
Notice shall be deemed given on the date of receipt by the addressee as evidence
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 State of 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 Fund by
the undersigned officer of the Fund in his or her capacity as an officer of the
Fund. The obligations of this Agreement shall be binding upon the assets and
property of the Fund and each respective Portfolio thereof only and shall not be
binding on any Director/Trustee, officer or shareholder of the Fund
individually. In addition, notwithstanding any other provision of this
Agreement, no 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
18
and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.7 Subcontractors, Agents or Affiliates. The Company may hire or make
arrangements for subcontractors, agents or affiliates to perform the services
set forth in this Agreement. The Company shall provide the Fund with written
notice of the names of any subcontractors, agents or affiliates the Company
hires 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.
12.9 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.
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.
LORD XXXXXX SERIES FUND, INC. LORD XXXXXX DISTRIBUTOR LLC
By: Lord, Xxxxxx & Co. LLC, its
Managing Member
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxx
-------------------------------------- -------------------------------
Xxxxxxxx X. Xxxxxx Xxxxxxxx X. Xxxxxx
Vice President and Secretary Member
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By: /s/ Xxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Second Vice President
19
