PARTICIPATION AGREEMENT
Among
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
And
LIBERTY ADVISORY SERVICES CORPORATION
And
LIBERTY VARIABLE INVESTMENT TRUST
And
LIBERTY FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, made and entered into this 1st day of May, 2000 by and
among Liberty Variable Investment Trust, a Massachusetts Business Trust
organized under the laws of Massachusetts (the "Fund") on behalf of the Series
named in Schedule I that may be amended from time to time in accordance with the
provisions of Article X1 of this Agreement, Lincoln Life & Annuity Company of
New York, a New York insurance corporation (the "Company"), on its own behalf
and on behalf of each separate account of the Company named in Schedule 1 to
this Agreement as in effect at the time this Agreement is executed and such
other separate accounts that may be added to Schedule I from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"), Liberty Advisory Services Corporation
(the "Investment Manager"), and Liberty Funds Distributor, Inc., each a
Massachusetts corporation (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Fund Prospectus") on Form N-1A to register itself as an open-end management
investment company (File No. 811-7556) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 33-59216) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act (unless exempt therefrom) certain variable annuity
contracts described in Schedule 2 to this Agreement as in effect at the time
this Agreement is executed and such other variable annuity contracts and
variable life insurance policies which may be added to Schedule 2 from time to
time in accordance with Article XI of this Agreement (such policies and
contracts shall be referred to herein collectively as the "Contracts," each such
registration statement for a class or classes of contracts listed on Schedule 2
being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
WHEREAS, each Account, a validly existing separate account, duly authorized
by resolution of the Board of Directors of the Company on the date set forth on
Schedule 1, sets aside and invests assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
(unless exempt therefrom) with the SEC as a unit investment trust under the 1940
Act before any Contracts are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an agreement (the
AFund Distribution Agreement") pursuant to which the Distributor will distribute
Fund shares; and
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940 and any applicable state securities
laws and serves as an investment manager to the Fund pursuant to an agreement,
and may delegate its responsibilities to selected Sub-Investment Managers; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Distributor agree as follows:
ARTICLE 1. Sale of Fund Shares
1.1. The Distributor agrees to sell to the Company those Fund shares which
the Company orders on behalf of each Account, executing such orders on a daily
basis in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the Company
on behalf of each Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Fund shall
use its best efforts to calculate and deliver such net asset value by 6:00 p.m.,
New York time, on each such Business Day. Notwithstanding any other provision in
this Agreement to the contrary, the Trustees of the Fund may suspend or
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terminate the offering of shares, if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Trustees acting in good faith and in light of its fiduciary duties under Federal
and any applicable state laws, suspension or termination is necessary and in the
best interests of the shareholders (it being understood that "shareholders" for
this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by each Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect
redemption wires on the same day as notification of redemption unless unusual
circumstances evolve which cause the Fund to have to redeem securities) in
accordance with Section 1.4 of this Agreement, the applicable provisions of the
1940 Act and the then currently effective Fund Prospectus. Notwithstanding the
foregoing, the Fund may delay redemption of Fund shares of any Fund to the
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Fund shall treat
receipt on any Business Day by the Company of redemption and purchase
requests from each Account prior to the time prescribed in the current
Fund Prospectus (which as of the date of execution of this Agreement
is the close of the New York Stock Exchange) as receipt by the Fund on
that same Business Day, provided that the Fund receives notice of such
redemption or purchase request by 10:00 a.m., New York time on the
next following Business Day. For purposes of this Agreement, "Business
Day" shall mean any day on which the New York Stock Exchange is open
for trading.
(b) The Company, which in addition to being a life insurance company
is a broker/dealer and member of the NASD, shall pay for the shares on
the same day that it places an order with the Fund to purchase those
Fund shares for an Account. Payment for Fund shares will be made by
each Account or the Company in Federal Funds transmitted to the Fund
by wire to be received by 2:00 p.m., New York time on the day the Fund
is properly notified of the purchase order for shares. The Fund will
confirm receipt of each trade and these confirmations will be received
by Company via Fax or Email by 2:00 p.m. New York time. If Federal
Funds are not received on time, such funds will be invested, and
shares purchased thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by each Account or the Company will
be made in Federal Funds transmitted to the Company by wire on the
same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of redemption
proceeds as permitted under Section 22(e) of the 1940 Act. Neither the
Fund nor the Distributor shall bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds if
securities must be redeemed; the Company alone shall be responsible
for such action.
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1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or each Account. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
each Account or the appropriate subaccount of each Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of each Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of each Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 6 p.m., New York time each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance with
the then currently effective Fund Prospectus. Neither the Fund, the Distributor,
nor the Investment Manager nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by the Company to the Fund, the
Distributor or the Investment Manager.
1.8. (a) The Company may withdraw each Account's investment in the Fund
only: (i) as necessary to facilitate Contract owner requests; (ii)
upon a determination by a majority of the Trustees, or a majority of
disinterested Trustees, that an irreconcilable material conflict
exists among the interests of (x) any Product Owners or (y) the
interests of the Participating Insurance Companies investing in the
Fund; (iii) upon requisite vote of the Contractowners having an
interest in the affected Fund to substitute the shares of another
investment company for shares in accordance with the terms of the
Contracts; (iv) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general
application; or (v) at the Company's sole discretion, pursuant to an
order of the SEC under Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive and that the Fund shares may be
sold to other insurance companies (subject to Section 1.9 hereof) and
the cash value of the Contracts may be invested in other investment
companies.
(c) The Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action to
operate each Account as a management investment company under the 1940
Act.
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1.9. The Fund and the Distributor agree that Fund shares will be sold only
to Participating Insurance Companies and their separate accounts. The Fund and
the Distributor will not sell Fund shares to any insurance company or separate
account unless an agreement substantially complying with Article VII of this
Agreement is in effect to govern such sales. No Fund shares will be sold to the
general public.
ARTICLE 11. Representations and Warranties
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, unless exempt therefrom, (b) that the Contracts will be issued in
compliance in all material respects with all applicable Federal and state laws
and (c) that the Company will require of every person distributing the Contracts
that the Contracts be offered and sold in compliance in all material respects
with all applicable Federal and state laws. The Company further represents and
warrants that it is an insurance company duly organized and validly existing
under applicable law and that it has legally and validly authorized each Account
as a separate account under Section 4240 of the New York Insurance Law, and has
registered or, prior to the issuance of any Contracts, will register each
Account (unless exempt therefrom) as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a separate account for its Contracts,
and that it will maintain such registrations for so long as any Contracts issued
under them are outstanding.
2.2. The Fund represents and warrants that shares of any Series sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund shares
are sold. The Fund further represents and warrants that it is a Massachusetts
Business Trust duly organized and in good standing under the laws of
Massachusetts.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder. In the event of a
breach of this Section 2.4 by the Fund, it will: (a) immediately notify the
Company of such breach; and (b) take the steps necessary to adequately diversify
each portfolio so as to achieve such compliance within the period allowed by
regulation.
2.5. The Company represents and warrants that the Contracts are currently
and at the time of issuance will be treated as annuity contracts or life
insurance policies, whichever is
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appropriate, under applicable provisions of the Code. The Company shall make
every effort to maintain such treatment and shall notify the Fund and the
Distributor immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.6. The Fund (except for the Newport Tiger Fund, Variable Series)
represents and warrants that the Fund's investment policies, fees and expenses,
and operations are and shall at all times remain in material compliance with the
laws of the state of New York, to the extent required to perform this Agreement;
and with any state-mandated investment restrictions set forth on Schedule 3, as
amended from time to time by the Company in accordance with Section 6.6. The
Fund, however, makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) otherwise complies with the insurance laws or regulations of any
state. The Company alone shall be responsible for informing the Fund of any
investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Distributor represents and warrants that it is duly registered as
a broker-dealer under the 1934 Act, a member in good standing of the NASD, and
duly registered as a brokerdealer under applicable state securities laws; its
operations are in compliance with applicable law, and it will distribute the
Fund shares according to applicable law.
2.8. The Investment Manager represents and warrants that it is registered
as an investment adviser under the Investment Advisers Act of 1940 and is in
compliance with applicable federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g- I under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE 111. Prospectuses and Proxy Statements; Sales Material and Other
Information
3.1. The Distributor shall provide the Company with as many copies of the
current Prospectus of any Series named in Schedule I as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund at its
expense shall provide to the Company a camera-ready copy, and electronic
version, of the current Fund Prospectus suitable for printing and other
assistance as is reasonably necessary in order for the Company to have a new
Contracts Prospectus printed together with the Fund Prospectus in one document.
See Article V for a detailed explanation of the responsibility for the cost of
printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Distributor, and the Distributor
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
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3.3. (a) The Fund at its expense shall provide to the Company a camera-
ready copy of the Fund's shareholder reports with respect to the
Series named in Schedule I and other communications to shareholders
(except proxy material), in each case in a form suitable for printing,
as determined by the Company. The Fund shall be responsible for the
costs of printing and distributing these materials to Contract owners,
subject to the limitation in Article V.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contractowner names and addresses to a third party
proxy house for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Distributor prior to its use. No such material shall be used, except with the
prior written permission of the Distributor. The Distributor agrees to respond
to any request for approval on a prompt and timely basis. Failure of the
Distributor to respond within 10 days of the request by the Company shall
relieve the Company of the obligation to obtain the prior written permission of
the Distributor.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the
Distributor, except with the prior written permission of the Distributor. The
Distributor agrees to respond to any request for permission on a prompt and
timely basis. If the Distributor does not respond within 10 days of a request by
the Company, then the Company shall be relieved of the obligation to obtain the
prior written permission of the Distributor.
3.6. The Fund and the Distributor shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account or the Contracts other than the information or representations contained
in the Contracts Registration Statement or Contracts Prospectus, as such
Registration Statement and Prospectus may be amended or supplemented from time
to time, or in published reports of each Account which are in the public domain
or approved in writing by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved in writing by the
Company, except with the prior written permission of the Company. The Company
agrees to respond to any request for permission on a prompt and timely basis. If
the Company fails to respond within 10 days of a request by the Fund or the
Distributor, then the Fund and the Distributor are relieved of the obligation to
obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to any Series
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of the Fund named in Schedule 1, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contract Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts and their investment in the Fund, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
3.9. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the order referred to in Article VII, the
Fund shall: solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the order referred to in Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in accordance
with instructions or proxies received in timely fashion from such
Contract owners;
(b) vote Fund shares attributable to Contract owners for which no
instructions have been received in the same proportion as Fund shares
for which instructions have been received in timely fashion; and
(c) vote Fund shares held by the Company on its own behalf or on
behalf of each Account that are not attributable to Contract owners in
the same proportion as Fund shares for which instructions have been
received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
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ARTICLE V. Fees and Expenses
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required of the Fund by any
Federal or state securities law, all taxes on the issuance or transfer of Fund
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b- I under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAls to existing Contractowners. (If for this purpose the
Company may print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contract owners.)
During the calendar year 2000, the Fund will not pay more than $15,000 of
the cost of printing and distributing Fund Prospectuses, Statements of
Additional Information and annual and semi-annual reports to existing Contract
owners.
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. Compliance Undertakings
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and each Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as described
in the then currently effective Fund Prospectus. The Fund shall register and
qualify Fund shares for sale to the extent required by applicable securities
laws of the various states.
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6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have its Trustees, a majority of
whom shall not be interested persons of the Fund, formulate and approve any plan
under Rule 12b- I to finance distribution expenses.
6.6. (a) The Company shall amend Schedule 3 when appropriate in order to
inform the Fund of any applicable state-mandated investment
restrictions with which the Fund must comply.
(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3, the
Company shall be informed immediately of the substance of those
restrictions.
ARTICLE VII. Potential Conflicts
7.1. Company has reviewed a copy of the order (the "Mixed and Shared
Funding Order") dated July 1, 1998 of the Securities and Exchange Commission
under Section 6c of the Act and, in particular, has reviewed the conditions to
the relief set forth in the related Notice. As set forth therein, the Company
agrees to report to the Trustees any potential or existing conflicts between the
interests of Product Owners of all separate accounts investing in the Fund, and
to assist the Trustees in carrying out their responsibilities under the
conditions of the Mixed and Shared Funding Order by providing all information
reasonably necessary for the Trustees to consider any issues raised, including
information as to a decision to disregard voting instructions of variable
contract owners.
7.2. If a majority of the Trustees, or a majority of disinterested
Trustees, determines that a material irreconcilable conflict exists, the
Trustees shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the Trustees, after notice to the Company and a
reasonable opportunity for the Company to appear before it and present
its case, determine that the Company is responsible for said conflict,
and if the Company agrees with that determination, the Company shall,
at its sole cost and expense, take whatever steps are necessary to
remedy the irreconcilable material conflict. These steps could
include: (i) withdrawing the assets allocable to some or all of the
affected Accounts from the Fund and reinvesting such assets in a
different investment vehicle, or submitting the question of whether
such segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of
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any particular group (i.e., variable annuity Contractowners, variable
life insurance policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option of
making such a change; and (ii) establishing a new registered mutual
fund or management separate account, or taking such other action as is
necessary to remedy or eliminate the irreconcilable material conflict.
(b) If the Company disagrees with the Trustees' determination, the
Company shall file a written protest with the Trustees, reserving its
right to dispute the determination as between just the Company and the
Fund. After reserving that right the Company, although disagreeing
with the Trustees that it (the Company) was responsible for the
conflict, shall take the necessary steps, under protest, to remedy the
conflict, substantially in accordance with paragraph (a) just above,
for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45 days after the
Trustees' determination the Company elects to press the dispute, it
shall so notify the Trustees in writing. The parties shall then
attempt to resolve the matter amicably Through negotiation by
individuals from each party who are authorized to settle the matter.
If the matter has not been amicably resolved within 60 days from
the date of the Company's notice of its intent to press the dispute,
then before either party shall undertake to litigate the dispute it
shall be submitted to non-binding arbitration conducted expeditiously
in accordance with the American Arbitration Association's (AAA) Rules
for Non-Administered Arbitration of Business Disputes, by a sole
arbitrator; provided, however, that if one party has requested the
other party to seek an amicable resolution and the other party has
failed to participate, the requesting party may initiate arbitration
before expiration of the 60-day period set out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the AAA Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Syracuse, New York. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Trustees shall determine that the Fund or another insurer
was responsible for the conflict, then the Trustees shall notify the
Company immediately of that determination. The Fund shall assure the
Company that it (the Fund) or that other insurer, as applicable,
shall, at its sole cost and expense, take whatever steps are necessary
to eliminate the conflict.
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7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) each Account's investment in
the Fund, if the Fund so elects.
7.4. Subject to the terms of Section 7.2 above, the Company shall carry out
the responsibility to take remedial action in the event of a Trustees
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested Trustees
shall determine whether or not any proposed action adequately remedies any
irreconcilable conflict, but in no event will the Fund be required to establish
a new funding medium for any variable contract, nor will the Company be required
to establish a new funding medium for any Contract if in either case an offer to
do so has been declined by a vote of a majority of affected Contractowners.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Fund, the Investment Manager, the Distributor and each person
who controls, is controlled by or is affiliated with any of them (other than
another Participating Insurance Company) within the meaning of such terms under
the federal securities laws and any officer, trustee, director, employee or
agent of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts
Registration Statement, Contracts Prospectus, sales literature or
other promotional material for the Contracts or the Contracts
themselves (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission
or such alleged statement or alleged omission was made in reliance
upon and in conformity with information furnished in writing to the
Company by the Fund or the Investment Manager (or a person authorized
in writing to do so on behalf of the Fund or the Investment Manager)
for use in the Contracts Registration Statement, Contracts Prospectus
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
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(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company
(other than statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or other
promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
Persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Fund Registration Statement, Fund
Prospectus or sales literature or other promotional material of the
Fund or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Company;
or
(d) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments under the
terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis in
accordance with the procedures set forth in Article 1; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. Indemnification by the Investment Manage. The Investment Manager on
behalf of itself, the Fund, and the Distributor agrees to indemnify and hold
harmless the Company and each person who controls, is controlled by or is
affiliated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
13
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund or the Investment Manager for use
in the Fund Registration Statement, Fund Prospectus (or any amendment
or supplement thereto) or sales literature for the Fund or otherwise
for use in connection with the sale of the Contracts or Fund shares;
or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact made by the Investment Manager,
the Fund or the Distributor (other than statements or representations
contained in the Fund Registration Statement, Fund Prospectus or sales
literature or other promotional material of the Fund not supplied by
the Investment Manager or the Fund or persons under their control) or
wrongful conduct of the Investment Manager or persons under its
control with respect to the sale or distribution of the Contracts or
Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Contracts Registration Statement,
Contracts Prospectus or sales literature or other promotional material
for the Contracts (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon information
furnished in writing by the Investment Manager or the Fund to the
Company (or a person authorized in writing to do so on behalf of the
Fund or the Investment Manager); or
(d) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Article VI of this
Agreement; and (ii) to provide the Company with accurate information
sufficient for it to calculate its accumulation and/or annuity unit
values in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Investment Manager or the
Fund of this Agreement.
14
This indemnification will be in addition to any liability which the Investment
Manager may otherwise have; provided, however, that no party shall be entitled
to indemnification if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
8.3. Indemnification Procedures. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
15
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such
cause shall be furnished by the Company. Termination shall be
effective ten days after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of each Account, the administration of the
Contracts or the purchase of Fund shares, or an expected or
anticipated ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's ability to
perform the Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment
Manager or any Sub-Investment Manager, by the NASD, the SEC, or any
state securities or insurance commission or any other regulatory
body regarding the duties of the Fund or the Distributor under this
Agreement, or an expected or anticipated ruling, judgment or outcome
which would, in the Company's reasonable judgment, materially impair
the Fund's or the Distributor's ability to perform Fund's or
Distributor's obligations and duties hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or any Sub-Investment
Manager by the NASD, the SEC, or any state securities or insurance
commission or any other regulatory body which would, in the good
faith opinion of the Company, result in material harm to the
Accounts, the Company, or Contract owners.
(f) upon requisite vote of the Contract owners having an interest
in the affected Fund (unless otherwise required by applicable law)
and written approval of the Company, to substitute the shares of
another investment company for the corresponding shares of the Fund
in accordance with the terms of the Contracts; or
(g) at the option of the Fund in the event any of the Contracts are
not registered, issued or sold in accordance with applicable Federal
and/or state law; or
16
(h) at the option of the Company or the Fund upon a determination
by a majority of the Trustees, or a majority of disinterested
Trustees, that an irreconcilable material conflict exists among the
interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(i) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code, or
under any successor or similar provision, or if the Company
reasonably believes, based on an opinion of its counsel, that the
Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code
and any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify; or
(l) at the option of either the Fund or the Distributor if the Fund
or the Distributor, respectively, shall determine, in their sole
judgment exercised in good faith, that either (1) the Company shall
have suffered a material adverse change in its business or financial
condition; or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the Fund
or the Distributor; or
(m) at the option of the Company, if the Company shall determine,
in its sole judgment exercised in good faith, that either: (1) the
Fund and the Distributor, or either of them, shall have suffered a
material adverse change in their respective businesses or financial
condition; or (2) the Fund or the Distributor, or both of them,
shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company; or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to another
insurance company pursuant to an assumption reinsurance agreement)
unless the non-assigning party consents thereto or unless this
Agreement is assigned to an affiliate of the Distributor.
10.2. Notice Requirement. Except as otherwise provided in Section 10.1, no
termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties to
this Agreement of its intent to terminate which notice shall set forth the basis
for such termination. Furthermore:
17
(a) In the event that any termination is based upon the provisions
of Article VII or the provisions of Section 10.1 (a) of this
Agreement, such prior written notice shall be given in advance of
the effective date of termination as required by such provisions;
and
(b) In the event that any termination is based upon the provisions
of Section 10.1 (c) or 10.1 (d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination, or sooner if required by law or
regulation.
(c) in the event that any termination is based upon the provisions
of Section 10.1 (e) of this Agreement, such prior written notice
shall be given at least sixty (60) days before the date of any
proposed vote to replace the Fund's shares.
10.3. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor will,
at the option of the Company, continue to make available additional
Fund shares for so long after the termination of this Agreement as
the Company desires, pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts in
effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Company so elects to make additional Fund
shares available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so, shall be
permitted to reallocate investments in the Fund, redeem investments
in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts.
(b) In the event of a termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor shall
make Fund shares available pursuant to Section 10.3(a) above.
However, Fund and Distributor in the event of negative financial
impact to either, may notify Company in writing of their intent to
cease offering Fund Shares to Company. Fund and Distributor agree to
continue to offer such Fund shares for a period of twelve months
from the date of such written notice, or until Company receives a
valid SEC Substitution Order allowing the movement of assets to
another fund, and the Company is able to effectuate such
substitution, whichever is sooner.
(c) The parties agree that this Section 10.3 shall not apply to any
termination made pursuant to Article VII or any conditions or
undertakings incorporated by reference in Article VII, and the
effect of such Article VII termination shall be governed by the
provisions set forth or incorporated by reference therein.
18
ARTICLE XI. Applicability to New Accounts and New Contacts
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through a Separate Account investing in the Fund.
The provisions of this Agreement shall be equally applicable to each such class
of contracts or policies, unless the context otherwise requires.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Fund:
Liberty Variable Investment Trust
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Secretary
If to the Company:
Lincoln Life & Annuity Company of New York
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
If to the Investment Manager:
Liberty Advisory Services Corp.
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: President
If to the Distributor:
Liberty Funds Distributors, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: President
With a copy to: General Counsel
19
ARTICLE XIII. Miscellaneous
-------------
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
20
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
Liberty Variable Investment Trust (Fund)
Date: Signature:
Name:
Title:
Lincoln Life & Annuity Company of New York (Company)
Date: Signature:
Name:
Title:
Liberty Funds Distributor, Inc. (Distributor)
Date: Signature:
Name:
Title:
Liberty Advisory Services Corporation (investment Manager)
Date: Signature:
Name:
Title:
21
Schedule I
----------
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Series of the Fund
As of May 1, 2000
Company Separate Account(s)/Date Authorized Eligible Variable Series of the Fund
------------------------------------------- ------------------------------------
Lincoln New York Separate Account N Newport Tiger Fund, Variable Series
for Variable Annuities
22
Schedule 2
----------
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule I
As of May 1, 2000
Lincoln New York ChoicePlus Variable Annuity (individual annuity)
23
Schedule 3
----------
State-mandated Investment Restrictions
Applicable to the Fund
As of May 1, 2000
None
24
