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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
1933 ACT REGISTRATION NO. 333-42507
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
ON
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
LINCOLN LIFE & ANNUITY FLEXIBLE PREMIUM
VARIABLE LIFE ACCOUNT M
(EXACT NAME OF REGISTRANT)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
120 Madison Street, Suite 1700, Syracuse, NY 13202
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
Depositor's Telephone Number, including Area Code
(888) 223-1860
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<S> <C>
Robert O. Sheppard, Esquire COPY TO:
Lincoln Life & Annuity Company of New York George N. Gingold, Esquire
120 Madison Street, Suite 1700 197 King Philip Drive
Syracuse NY 13202 West Hartford, CT 06117-1409
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
Approximate date of proposed public offering: Continuous.
INDEFINITE NUMBER OF UNITS OF INTEREST IN VARIABLE LIFE INSURANCE CONTRACTS
(TITLE OF SECURITIES BEING REGISTERED)
An indefinite amount of the securities being offered by the Registration
Statement has been registered pursuant to Rule 24F-2 under the Investment
Company Act of 1940. The first Form 24F-2 for Registrant, for the fiscal year
ending December 31, 1998 is not yet due.
It is proposed that this filing will become effective:
/ / immediately on filing pursuant to Rule 485(b)
/ / on 1999, pursuant to Rule 485(b)
/ / 60 days after filing pursuant to Rule 485(a)
/X/ on May 3, 1999 pursuant to Rule 485(a)
<PAGE>
CROSS REFERENCE SHEET
(RECONCILIATION AND TIE)
REQUIRED BY INSTRUCTION 4 TO FORM S-6
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ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
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1 Cover Page Highlights
2 Cover Page
3 *
4 Distribution of Policies
5 LLANY, the Separate Account and the General Account
6(a) LLANY, the Separate Account and the General Account
6(b) *
9 Legal Proceedings
10(a)-(c) Right-to-Examine Period; Surrenders; Accumulation Value;
Reports to Owners
10(d) Right to Exchange the Policy; Policy Loans; Surrender of the
Policy; Allocation of Net Premium Payments
10(e) Lapse and Reinstatement
10(f) Voting Rights
10(g)-(h) Substitution of Securities
10(i) Premium Payments; Transfers; Death Benefit; Policy Values;
Settlement Options
11 The Funds
12 The Funds
13 Charges; Fees
14 The Policy
15 Premium Payments; Transfers
16 LLANY, the Separate Account and the General Account
17 Surrender of the Policy
18 LLANY, the Separate Account and the General Account
19 Reports to Policy Owners
20 *
21 Policy Loans
22 *
23 LLANY, the Separate Account and the General Account
24 Incontestability; Suicide; Misstatement of Age or Gender
25 LLANY, the Separate Account and the General Account
26 Fund Participation Agreements
27 LLANY, the Separate Account and the General Account
</TABLE>
<PAGE>
<TABLE>
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ITEM OF FORM
N-8B-2 LOCATION IN PROSPECTUS
- ----------------- --------------------------------------------------------------
<S> <C>
28 Directors and Officers of LLANY
29 LLANY, the Separate Account and the General Account
30 *
31 *
32 *
33 *
34 *
35 *
37 *
38 Distribution of Policies
39 Distribution of Policies
40 *
41(a) Distribution of Policies
42 *
43 *
44 The Funds; Premium Payments
45 *
46 Surrender of the Policy
47 LLANY, the Separate Account and the General Account; Surrender
of the Policy, Transfers
48 *
49 *
50 LLANY, the Separate Account and the General Account
51 Cover Page; Highlights; Premium Payments; Right to Exchange
the Policy
52 Substitution of Securities
53 Tax Matters
54 *
55 *
</TABLE>
* Not Applicable
<PAGE>
PROSPECTUS 2
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
LINCOLN LIFE & ANNUITY FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M -- PROSPECTUS
DATED XXXXX
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HOME OFFICE LOCATION: ADMINISTRATIVE OFFICE:
120 MADISON STREET PERSONAL SERVICE CENTER MVLI
SUITE 1700 350 CHURCH STREET
SYRACUSE, NY 13202 HARTFORD, CT 06103-1106
(888) 223-1860 (800) 552-9898
</TABLE>
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A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
This Prospectus describes a flexible premium variable life insurance contract
(the "Policy"), offered by Lincoln Life & Annuity Company of New York ("LLANY"
"we," "our" or "us"). (Page references are to this Prospectus unless otherwise
stated.)
The Policy features:
- flexible premium payments (see page 10);
- a choice of one of two death benefit options (see page 26)
- a choice of underlying investment options (see page 15).
It may not be advantageous to replace existing insurance or supplement an
existing flexible premium variable life insurance contract with the Policy.
The Policy described in this prospectus is available only in New York.
The mutual funds available through LLANY's Separate Account M ("Variable
Account") are:
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST
Baron Capital Asset Fund
BT INSURANCE FUNDS TRUST
BT EAFE-Registered Trademark- Equity Index Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND, INC.
Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio -- Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
Growth Opportunities Portfolio -- Service Class
JANUS ASPEN SERIES
Balanced Portfolio
Worldwide Growth Portfolio
LINCOLN NATIONAL FUNDS
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND
International Fund -- Class 2
Stock Fund -- Class 2
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AVAILABLE AS INVESTMENT OPTIONS UNDER THE POLICY OFFERED BY THIS
PROSPECTUS. ALL PROSPECTUSES SHOULD BE READ CAREFULLY TO UNDERSTAND THE POLICY
AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
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<S> <C>
HIGHLIGHTS..................................... 3
Initial Choices To Be Made................... 3
Level or Varying Death Benefit............... 3
Amount of Premium Payments................... 4
Selection of Funding Vehicles................ 4
Charges and Fees............................. 5
Changes in Specified Amount.................. 5
LLANY, THE SEPARATE ACCOUNT AND THE GENERAL
ACCOUNT....................................... 6
BUYING VARIABLE LIFE INSURANCE................. 7
Replacements................................. 8
APPLICATION.................................... 8
OWNERSHIP...................................... 9
BENEFICIARY.................................... 9
THE POLICY..................................... 9
Policy Specifications........................ 10
PREMIUM FEATURES............................... 10
Planned Premiums; Additional Premiums........ 10
Limits on Right to Make Payments of
Additional and Planned Premiums........... 10
Premium Load; Net Premium Payment.......... 11
RIGHT-TO-EXAMINE PERIOD........................ 11
TRANSFERS AND ALLOCATION AMONG ACCOUNTS........ 11
Allocation of Net Premium Payments........... 11
Transfers.................................... 11
Optional Sub-Account Allocation Programs..... 12
Dollar Cost Averaging...................... 12
Automatic Rebalancing...................... 13
POLICY VALUES.................................. 13
Accumulation Value........................... 13
Variable Account Value....................... 14
Variable Accumulation Unit Value........... 14
Variable Accumulation Units................ 14
Fixed Account and Loan Account Value......... 14
Net Accumulation Value....................... 15
FUNDS.......................................... 15
Substitution of Securities................... 19
Voting Rights................................ 19
Fund Participation Agreements................ 20
CHARGES AND FEES............................... 20
Deductions Made Monthly...................... 20
Monthly Deduction.......................... 20
Cost of Insurance Charge................... 21
Mortality and Expense Risk Charge............ 21
Fund Expenses................................ 22
Surrender Charges............................ 24
Transaction Fee for Excess Transfers......... 25
DEATH BENEFITS................................. 25
Death Benefit Options........................ 25
Changes in Death Benefit Options and
Specified Amount............................ 26
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CONTENTS PAGE
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<S> <C>
Federal Income Tax Definition of Life
Insurance................................... 27
NOTICE OF DEATH OF INSURED..................... 26
PAYMENT OF DEATH BENEFIT PROCEEDS.............. 27
Settlement Options........................... 27
POLICY LIQUIDITY............................... 28
Policy Loans................................. 28
Partial Surrender............................ 29
Surrender of the Policy...................... 29
Surrender Value............................ 30
Deferral of Payment and Transfers............ 30
ASSIGNMENT; CHANGE OF OWNERSHIP................ 30
LAPSE AND REINSTATEMENT........................ 30
Lapse of a Policy............................ 30
No Lapse Provision......................... 31
Reinstatement of a Lapsed Policy............. 31
COMMUNICATIONS WITH LLANY...................... 31
Proper Written Form.......................... 31
OTHER POLICY PROVISIONS........................ 32
Issuance..................................... 32
Date of Coverage............................. 32
Right to Exchange the Policy................. 32
Incontestability............................. 32
Misstatement of Age or Gender................ 32
Suicide...................................... 33
Nonparticipating Policies.................... 33
Riders....................................... 33
TAX ISSUES..................................... 33
Tax Treatment of Death Benefit............... 33
Federal Income Tax Considerations............ 33
Taxation of LLANY............................ 34
Other Considerations......................... 35
FAIR VALUE OF THE POLICY....................... 35
DIRECTORS AND OFFICERS OF LLANY................ 35
DISTRIBUTION OF POLICIES....................... 37
CHANGES OF INVESTMENT POLICY................... 38
OTHER CONTRACTS ISSUED BY LLANY................ 38
STATE REGULATION............................... 38
REPORTS TO OWNERS.............................. 38
ADVERTISING.................................... 38
PREPARING FOR YEAR 2000........................ 39
EXPERTS........................................ 40
REGISTRATION STATEMENT......................... 40
APPENDIX 1: MAXIMUM COST OF INSURANCE RATES.... 41
APPENDIX 2: ILLUSTRATION OF SURRENDER
CHARGES....................................... 42
APPENDIX 3: CORRIDOR PERCENTAGES............... 44
APPENDIX 4: ILLUSTRATION OF ACCUMULATION
VALUES, SURRENDER VALUES AND DEATH BENEFITS... 45
FINANCIAL STATEMENTS........................... S-1
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2
<PAGE>
HIGHLIGHTS
This section is an overview of key Policy features. Your
Policy is a flexible premium variable life insurance policy.
Its value may change on a:
1) fixed basis;
2) variable basis; or a
3) combination of both fixed and variable bases.
Review your personal financial objectives and discuss them
with a qualified financial counselor before you buy a
variable life insurance policy. This Policy may, or may not,
be appropriate for your individual financial goals. The
value of the Policy and, under one option, the death benefit
amount depend on the investment results of the funding
options you select.
At all times, your Policy must qualify as life insurance
under the Internal Revenue Code of 1986 (the "Code") to
receive favorable tax treatment under Federal law. If these
requirements are met, you may benefit from such tax
treatment. LLANY reserves the right to return your premium
payments if they result in your Policy failing to meet Code
requirements.
INITIAL CHOICES TO BE MADE
The Policy Owner (the "Owner" or "you") is the person named
in the "Policy Specifications" who has all of the Policy
ownership rights. If no Owner is named, the Insured (the
person whose life is insured under the Policy) will be the
Owner of the Policy. You, as the Owner, have three important
choices to make when the Policy is first purchased. You need
to choose:
1) one of the two Death Benefit Options (described on page
26);
2) the amount of premium you want to pay; and
3) the amount of your Net Premium Payment to be placed in
each of the funding options you select. The Net Premium
Payment is the balance of your Premium Payment that
remains after certain charges are deducted from it.
LEVEL OR VARYING DEATH BENEFIT
The Death Benefit is the amount LLANY pays to the
Beneficiary(ies) when the Insured dies. Before we pay the
Beneficiary(ies), any outstanding loan account balances or
outstanding amounts due are subtracted from the Death
Benefit. LLANY calculates the Death Benefit payable as of
the date on which the Insured died.
When you purchase your Policy, you must choose one of two
Death Benefit Options:
1) a level death benefit; or
2) a varying death benefit.
If you choose the level Death Benefit Option, the Death
Benefit will be the greater of:
1) the Specified Amount, which is the amount of the death
benefit in effect for the Policy when the Insured died (The
Specified Amount is on the Policy's Specification Page); or
2) the Corridor Death Benefit, which is the death benefit
calculated as a percentage of the Accumulation Value.
If you choose the varying Death Benefit Option, the Death
Benefit will be the greater of:
3
<PAGE>
1) the Specified Amount plus the Net Accumulation Value when
the Insured died. The Net Accumulation Value is the total of
the balances in the Fixed Account and the Variable Account
minus any outstanding Loan Account amounts; or
2) the Corridor Death Benefit.
See page 26.
This policy contains a No Lapse Provision. This means that
the Policy will not lapse regardless of the gains or losses
of the Funds you select as long as you pay the specified No
Lapse Premium. Therefore, the Initial Death Benefit under
your Policy will be guaranteed to maturity even though your
Net Accumulation Value is insufficient to pay your current
Monthly Deductions. Loans or Partial Surrenders may
jeopardize the No Lapse Provision.
You may borrow within described limits against the Policy.
You may surrender the Policy in full or withdraw part of its
value. A Surrender Charge may be applied if the Policy is
surrendered totally.
If you have borrowed against your Policy or surrendered a
portion of your Policy, your Initial Death Benefit will be
reduced by the Loan Account balance and any surrendered
amount.
AMOUNT OF PREMIUM PAYMENT
When you apply for your Policy, you must decide how much
premium to pay. Premium payments may be changed within the
limits described on page 10.
You may use the value of the Policy to pay the premiums due
and continue the Policy in force if sufficient values are
available for premium payments. Be careful; if the
investment options you choose do not do as well as you
expect, there may not be enough value to continue the Policy
in force without more premium payments. Charges against
Policy values for the cost of insurance (see page 21)
increase as the Insured gets older.
If your Policy lapses because your Monthly Premium Deduction
is larger than the Net Accumulation Value, you may reinstate
your Policy. Your Policy will not lapse if, on each Monthly
Anniversary, you meet the No Lapse Premium Requirement. See
pages 30-31.
When you first receive your Policy you will have 10 days to
look it over. This is called the "Right-to-Examine" time
period. Use this time to review your Policy and make sure it
meets your needs. During this time period, your Initial
Premium Payment will be deposited in the Money Market
Account. If you then decide you do not want your Policy, we
will return all Premium Payments to you with no interest
paid. See page 11.
SELECTION OF FUNDING VEHICLES
This Prospectus focuses on the Variable Account investment
information that makes up the "variable" part of the Policy.
If you put money into the variable funding options, you
assume all the investment risk on that money. This means
that if the mutual fund(s) you select go up in value, the
value of your Policy, net of charges and expenses, also goes
up. If those funds lose value, so does your Policy. Each
fund has its own investment objective. You should carefully
read each Fund's prospectus before making your decision.
You must choose the Fund(s) in which you want to place your
Net Premium Payment. These Fund Sub-Accounts make up the
Variable Account. Each Sub-Account invests in
4
<PAGE>
shares of a certain Fund. You may also place your Net
Premium Payment or part of it into the Fixed Account. A
Variable Sub-Account is not guaranteed and will increase or
decrease in value according to the particular Fund's
investment performance. See page 13.
You may also use LLANY's Fixed Account to fund your Policy.
Net Premium payments put into the Fixed Account:
- become part of Lincoln Life's General Account;
- do not share the investment experience of the Separate
Account; and
- have a guaranteed minimum interest rate of 4% per year.
Interest beyond 4% is credited at LLANY's discretion. For
additional information on the Fixed Account, see page 7 and
the Policy itself.
CHARGES AND FEES
We deduct a premium charge of 5% from each Premium Payment.
We make monthly deductions for administrative expenses
(currently, $15 per month for the first Policy Year and $5
per month afterwards, guaranteed not to exceed $10 after the
first Policy Year) along with the Cost of Insurance and any
riders that are placed on your Policy. We make daily charges
against the Variable Account for mortality and expense risk,
at an annual rate of 0.75% for Policy Years 1-10, 0.35% for
Policy Years 11-20 and 0.20% for Policy Years 21 and beyond.
Each Fund has its own management fee charge, also deducted
daily. Each Fund's expense levels will affect its investment
results. The table on page 22 shows you current expense
levels for each Fund.
Each Policy Year you may make 12 transfers between funding
options without charge. Beyond 12, a $25 fee may apply.
We charge you $25, but not more than 2% of the amount
withdrawn, each time you request a partial surrender of your
Policy. If you totally surrender your Policy, a surrender
charge may be deducted in computing what will be paid you.
The length of the surrender charge period varies based on
your age at the date of issue or any increase in the
Specified Amount, but it will never be more than 15 years.
See page 24.
If you borrow against your Policy, 8% annual interest will
be charged to the Loan Account Value. You may pay that
interest or have it added to your loan. LLANY will credit
interest on the Loan Account Value at an annual rate equal
to the interest rate charged minus 1% for the first ten
Policy Years, and thereafter at the annual interest rate
charged on the loan.
LLANY may derive a profit from its charges and may use these
profits to finance distribution of the Policies.
CHANGES IN SPECIFIED AMOUNT
The Initial Specified Amount is the amount originally chosen
by the applicant, initially equal to the Death Benefit.
Within certain limits, you may decrease or, with
satisfactory evidence of insurability, increase the
Specified Amount. The minimum Specified Amount is currently
$100,000. Such changes will affect other aspects of your
Policy. See page 26.
5
<PAGE>
LLANY, THE SEPARATE ACCOUNT AND
THE GENERAL ACCOUNT
Lincoln Life & Annuity Company of New York is a life
insurance company chartered under New York law on June 6,
1996. Wholly-owned by The Lincoln National Life Insurance
Company ("Lincoln Life") and in turn by Lincoln National
Corporation ("LNC"), a publicly held Indiana insurance
holding company incorporated in 1968, it is licensed to sell
life insurance policies and annuity contracts in New York.
Its principal office is at 120 Madison Street, Suite 1700,
Syracuse, NY 13202. LLANY, Lincoln Life, LNC and their
affiliates comprise the "Lincoln Financial Group" which
provides a variety of wealth accumulation and protection
products and services.
Lincoln Life & Annuity Flexible Premium Variable Life
Account M ("Account M") is a "separate account" established
pursuant to a resolution of the Board of Directors of LLANY.
Under New York law, the assets of Account M attributable to
the Policies, though LLANY's property, are not chargeable
with liabilities of any other business of LLANY and are
available first to satisfy LLANY's obligations under the
Policies. Account M income, gains, and losses are credited
to or charged against Account M without regard to other
income, gains, or losses of LLANY. Account M's values and
investment performance are not guaranteed. Account M is
registered with the Securities and Exchange Commission (the
"Commission") as a "unit investment trust" under the 1940
Act and meets the 1940 Act's definition of "separate
account". Such registration does not involve supervision by
the Commission of Account M's or LLANY's management,
investment practices, or policies. LLANY has numerous other
registered separate accounts which fund its variable life
insurance policies and variable annuity contracts.
Account M is divided into Sub-Accounts, each of which is
invested solely in the shares of one of the mutual funds
available as funding vehicles under the Policies. On each
Valuation Day, Net Premium Payments allocated to Account M
will be invested in Fund shares at net asset value, and
monies necessary to pay for deductions, charges, transfers
and surrenders from Account M are raised by selling Fund
shares at net asset value.
The Funds now available in Account M and their investment
objectives are on pages 15-19. More Fund information is in
the Funds' prospectuses, which must accompany or precede
this prospectus and should be read carefully. The Funds may
or may not achieve their investment objectives.
Some Funds have investment objectives and policies similar
to those of other funds managed by the same investment
adviser. Their investment results may be higher or lower
than those of the other funds, and there can be no
assurance, and no representation is made, that a Fund's
investment results will be comparable to the investment
results of any other fund.
LLANY reserves the right to add, withdraw or substitute
Funds, subject to the conditions of the Policy and to
compliance with regulatory requirements, if in its sole
discretion legal, regulatory, marketing, tax or investment
considerations so warrant or in the event a particular Fund
is no longer available to LLANY for investment by the
Sub-Accounts. No substitution will take place without prior
approval of the Commission, to the extent required by law.
Shares of the Funds may be used by LLANY and other insurance
companies to fund both variable annuity contracts and
variable life insurance policies. While this is not
perceived as problematic, the Funds' governing bodies
(Boards of Directors/Trustees)
6
<PAGE>
have agreed to monitor events to identify any material
irreconcilable conflicts which might arise and to decide
what responsive action might be appropriate. If a separate
account were to withdraw its investment in a Fund because of
a conflict, a Fund might have to sell portfolio securities
at unfavorable prices.
A Policy may also be funded in whole or in part through the
"Fixed Account", part of LLANY's General Account supporting
its insurance and annuity obligations. We will credit
interest on amounts held in the Fixed Account as we
determine from time to time, but not less than 4% per year.
Interest, once credited, and Fixed Account principal are
guaranteed. Interests in the Fixed Account have not been
registered under the 1933 Act in reliance on exemptive
provisions. The Commission has not reviewed Fixed Account
disclosures, but they are subject to securities law
provisions relating to accuracy and completeness.
BUYING VARIABLE LIFE INSURANCE
The Policies this Prospectus offers are variable life
insurance policies which provide death benefit protection.
Investors not needing death benefit protection should
consider other forms of investment, as there are extra costs
and expenses of providing the insurance feature. Further,
life insurance purchasers who are risk-aversive or want more
predictable premium levels and benefits may be more
comfortable buying more traditional, non-variable life
insurance. However, variable life insurance is a flexible
tool for financial and investment planning for persons
needing death benefit protection and willing to assume
investment risk and to monitor investment choices they have
made.
Flexibility starts with the ability to make differing levels
of premium payments. A young family just starting out may
only be able to pay modest premiums initially but hope to
increase premium payments over time. At first, this family
would be paying primarily for the insurance feature (perhaps
at ages where the insurance cost is relatively low) and
later use a Policy more as a savings vehicle. A customer at
peak earning capacity may wish to pay substantial premiums
for a limited number of years prior to retirement, after
which Policy values may suffice, based on future expected
return results, though not guaranteed, to keep the Policy
inforce for the expected lifetime and to provide, through
loans, supplemental retirement income. A customer may be
able to pay a large single premium, using the Policy
primarily as a savings and investment vehicle for potential
tax advantages. A parent or grandparent may find a policy on
the life of a child or grandchild a useful gifting
opportunity over a period of years and the basis of an
investment program for the donee. A business may be able to
use a Policy to fund non-qualified executive compensation or
business continuation plans.
Sufficient premiums must always be paid to keep a policy
inforce, and there is a risk of lapse if premiums are too
low in relation to the insurance amount and if investment
results are less favorable than anticipated. The No Lapse
Provision may help to assure a death benefit even if
investment results are unfavorable.
Flexibility also results from being able to select, monitor
and change investment choices within a Policy. With the wide
variety of fund options available, it is possible to fine
tune an investment mix and change it to meet changing
personal objectives or investment conditions. Policy owners
should be prepared to monitor their investment choices on an
ongoing basis.
Variable life insurance has significant tax advantages under
current tax law. A transfer of values from one fund to
another within the Policy generates no taxable gain or loss.
And any investment income and realized capital gains within
a fund are automatically
7
<PAGE>
reinvested without being taxed to the Policy owners. Policy
values therefore accumulate on a tax-deferred basis. These
situations would normally result in immediate tax
liabilities in the case of direct investment in mutual
funds.
While these tax deferral features also apply to variable
annuities, liquidity (the ability of Policy owners to access
Policy values) is normally more easily achieved with
variable life insurance. Unless a policy has become a
"modified endowment contract" (see page 33), an owner can
borrow Policy values tax-free, without surrender charges and
at very low net interest cost. Policy loans can be a source
of retirement income. Variable annuity withdrawals are
generally taxable to the extent of accumulated income, may
be subject to surrender charges, and will result in penalty
tax if made before age 59 1/2.
Depending on the death benefit option chosen, accumulated
Policy values may also be part of the eventual death benefit
payable. If a Policy is heavily funded and investment
performance is very favorable, the death benefit may
increase even further because of tax law requirements that
the death benefit be a certain multiple of Policy value,
depending on the Insured's age (see page 27). The death
benefit is income-tax free and may, with proper estate
planning, be estate-tax free. A tax advisor should be
consulted.
The costs and expenses of variable life insurance ownership
which are directly related to Policy values (i.e. asset
based costs) are not unlike those incurred through
investment in mutual funds or variable annuities. The
significant additional cost of variable life insurance is
the "cost of insurance" charge which is imposed on the
"amount at risk" (the death benefit less Policy value) and
increases as the insured grows older. This charge varies by
age, underwriting classification, smoking status and in most
states by gender. The effect of its increase can be seen in
illustrations in this Prospectus (see Appendix 4) or in
personalized illustrations available upon request.
REPLACEMENTS
Before purchasing the Policy to replace, or to be funded
with proceeds borrowed or withdrawn from, an existing life
insurance policy, the applicant should consider whether any
commission will be paid to an agent or any other person with
respect to the replacement, and whether coverages and
comparable values are available from the Policy, as compared
to his or her existing policy. The Insured may no longer be
insurable, or the contestability period may have elapsed
with respect to the existing policy, while the Policy could
be contested. The Owner should consider similar matters
before deciding to replace the Policy or withdraw funds from
the Policy for the purchase of funding a new policy of life
insurance.
APPLICATION
Any person who wants to buy a Policy must first complete an
application on a form provided by LLANY.
A completed application identifies the prospective Insured
and provides sufficient information about the prospective
insured to permit LLANY to begin underwriting the risks
under the Policy. We require a medical history and
examination of the Insured. LLANY may decline to provide
insurance, or may place the Insured into a special
underwriting category (these include preferred, non-smoker
standard, smoker standard, non-smoker substandard and smoker
substandard). The amount of the Cost of Insurance deducted
monthly from the Policy value after issue varies among the
underwriting categories as well as by age of the Insured at
his/her nearest birthday and, in most states, gender of the
Insured.
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The applicant will initially select the Beneficiary or
Beneficiaries who are to receive Death Benefit Proceeds, the
initial face amount (the Initial Specified Amount) of the
Death Benefit and which of two methods of computing the
Death Benefit is to be used. (See DEATH BENEFITS, Death
Benefit Options). The applicant will also indicate both the
frequency and amount of Premium Payments, (see PREMIUM
FEATURES), AND HOW POLICY VALUES ARE INITIALLY TO BE
ALLOCATED AMONG THE AVAILABLE FUNDING OPTIONS FOLLOWING THE
EXPIRATION OF THE RIGHT-TO-EXAMINE PERIOD. (SEE
RIGHT-TO-EXAMINE PERIOD).
OWNERSHIP
The Owner is the person or persons named as Owner in the
application, and on the Date of Issue will usually be
identified as Owner in the Policy Specifications. If no
person is identified as Owner in the Policy Specifications,
then the Insured is the Owner. The person or persons
designated to be Owner of the Policy must have, or hold
legal title for the sole benefit of a person who has, an
"insurable interest" in the life of the Insured under
applicable state law. The Owner may be the Insured, or any
other natural person or non-natural entity.
The Owner is entitled to exercise rights under the Policy so
long as the Insured is living. These rights include the
power to select the Beneficiary and the Death Benefit
Option. The Owner generally also has the right to request
policy loans, make partial surrenders or surrender the
Policy. The Owner may also name a new owner, assign the
Policy or agree not to exercise all of the Owner's rights
under the Policy.
If the Owner predeceases the Insured, the Owner's rights in
the Policy will belong to the Owner's estate, unless
otherwise specified to LLANY.
BENEFICIARY
The person (or persons) named in the application as
Beneficiary is the Beneficiary under the Policy, the
person(s) designated by the Owner or the Applicant to
receive the Death Benefit Proceeds payable upon the death of
the Insured. Multiple Beneficiaries will be paid in equal
shares, unless otherwise specified to LLANY.
Except when LLANY has acknowledged an assignment of the
Policy or an agreement not to change the Beneficiary, the
Owner may change the Beneficiary at any time while the
Insured is living. Any request for a change in the
Beneficiary must be in a written form satisfactory to LLANY
and submitted to LLANY. Unless the Owner has reserved the
right to change the Beneficiary, such a request must be
signed by both the Owner and the Beneficiary. When LLANY has
recorded the change of Beneficiary, it will be effective as
of the date of signature or, if there is no such date, the
date recorded. No change of Beneficiary will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded.
If any Beneficiary dies before the Insured, the
Beneficiary's potential interest shall pass to any surviving
Beneficiaries, unless otherwise specified to LLANY. If no
named Beneficiary survives the Insured, any Death Benefit
Proceeds will be paid to the Owner or the Owner's executor,
administrator or assignee.
THE POLICY
The Date of Issue is the date on which LLANY begins life
insurance coverage under the Policy. On issuance, a life
insurance contract (Policy) will be delivered to the Owner.
The Owner should promptly review the Policy to confirm that
it sets forth the features specified in the application. The
ownership and other options set forth in the Policy are
registered, and may be transferred, solely on LLANY's books
and records. Mere
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possession of the Policy does not imply ownership rights. If
the Owner loses the Policy, LLANY will issue a replacement
on request. LLANY may impose a Policy replacement fee.
The Policy Anniversary is the day of the year the Policy was
issued, or the next Valuation Day if that day is not a
Valuation Day or is non-existent for that year. The Policy
Year is each twelve month period, beginning on the Date of
Issue, during which the Policy is in effect.
POLICY SPECIFICATIONS
The Policy includes a Policy Specifications page, with
supporting schedules, stating Policy information including
the identity of the Owner, the Date of Issue, the Initial
Specified Amount, the Death Benefit Option selected, the
Insured, the Issue Age, the Beneficiary, the initial Premium
Payment, the Surrender Charges, Expense Charges and Fees,
Guaranteed Maximum Cost of Insurance Rates, and the No Lapse
Premium.
PREMIUM FEATURES
The Policy permits flexible premium payments, meaning that
the Owner may select the frequency and the amount of Premium
Payments. After the Initial Premium Payment is made there is
no minimum premium required, unless to maintain the No Lapse
Provision. (See LAPSE AND REINSTATEMENT No Lapse Provision).
The initial Premium Payment is due on the Effective Date and
must be equal to or exceed the amount necessary to provide
for two Monthly Deductions.
PLANNED PREMIUMS; ADDITIONAL PREMIUMS
Planned Premiums are the amount of premium (as shown in the
Policy Specifications) the Applicant chooses to pay LLANY on
a scheduled basis. This is the amount for which LLANY sends
a premium reminder notice. Planned Premiums may be billed
annually, semiannually, or quarterly. Pre-authorized
automatic Premium Payments can also be arranged at any time.
Unless specifically otherwise directed, any payment received
(other than any Premium Payment necessary to prevent, or
cure, Policy Lapse) will be applied first to reduce Policy
Indebtedness. There is no premium load on such payments to
the extent applied to reduce indebtedness.
Any subsequent Premium Payments (Additional Premiums) must
be sent directly to the Administrative Office. Additional
Premiums will be credited only when actually received by
LLANY.
LIMITS ON RIGHT TO MAKE PAYMENTS OF ADDITIONAL AND PLANNED
PREMIUMS
The Owner may increase Planned Premiums, or pay Additional
Premiums, subject to the following limitations and LLANY's
right to limit the amount or frequency of Additional
Premiums.
LLANY may require evidence of insurability if any payment of
Additional Premium (including Planned Premium) would
increase the difference between the Death Benefit and the
Accumulation Value. If LLANY is unwilling to accept the
risk, the increase in premium will be refunded without
interest and without participation of such amounts in any
underlying investment.
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LLANY may also decline any Additional Premium (including
Planned Premium) or a portion thereof that would result in
total Premium Payments exceeding the maximum limitation for
life insurance under federal tax laws. The excess amount
would be returned.
PREMIUM LOAD; NET PREMIUM PAYMENT
LLANY deducts 5% from each Premium Payment. This amount,
sometimes referred to as premium load, covers certain
Policy-related state tax and federal income tax liabilities
and a portion of the sales expenses incurred by LLANY. The
Premium Payment, net of the premium load, is called the Net
Premium Payment.
RIGHT-TO-EXAMINE PERIOD
The Owner may return the Policy to LLANY for cancellation as
follows.
If the Owner mails or delivers the Policy to the
Administrative Office on or before 10 days after delivery of
the Policy (60 days for Policies issued in replacement of
other insurance) (Right-to-Examine Period), LLANY will
refund to the Owner all Premium Payments.
Any Premium Payments received by LLANY before the end of the
Right-to-Examine Period will be held in the Money Market
Account, and will be allocated to the Sub-Accounts
designated by the Owner at the end of the Right-to-Examine
Period. If the Policy is returned for cancellation within
the Right-to-Examine Period, we will return any Premium
Payments within seven days, although refund of a Premium
Payment made by check may be delayed until the check clears.
TRANSFERS AND ALLOCATION AMONG ACCOUNTS
ALLOCATION OF NET PREMIUM PAYMENTS
The allocation of Net Premium Payments among the Fixed and
Variable Sub-Accounts may be set forth in the application.
An Owner may change the allocation of future Net Premium
Payments at any time. In any allocation, the amount
allocated to any Sub-Account must be in whole percentages
and result in a Sub-Account Value of at least $100 or a
Fixed Account Value of $2,500. LLANY, at its sole
discretion, may waive minimum balance requirements on the
Sub-Accounts.
TRANSFERS
The Owner may make transfers among the Sub-Accounts, on the
terms set forth below, at any time before the Insured
reaches Age 100. The Owner should carefully consider current
market conditions and each Sub-Account's investment policies
and related risks before allocating money to the
Sub-Accounts.
Transfer of amounts from one Variable Sub-Account to another
or from the Variable Sub-Accounts to the Fixed Account are
possible at any time. Within 30 days after each anniversary
of the Date of Issue, the Owner may transfer up to 20% of
the Fixed Account Value (as of the preceding anniversary of
the Date of Issue) to one or more Variable Sub-Accounts. The
cumulative amount of transfers from the Fixed Account within
any such 30 day period cannot exceed 20% of the Fixed
Account Value on the most recent Policy Anniversary. Up to
12 transfer requests (a request may involve more than a
single transfer) may be made in any Policy Year without
charge, and any value remaining in a Sub-Account after a
transfer must be at least $100. LLANY reserves the
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right to impose a minimum transfer amount of $100, and to
impose a charge for each transfer request in excess of 12
requests in any Policy Year. LLANY may further limit
transfers from the Fixed Account at any time.
Transfers must be made in proper written form, unless the
Owner has given written authorization to LLANY to accept
telephone transactions. Contact our Administrative Office
for authorization forms and information on permitted
telephone transactions. Written transfer requests or
adequately authenticated telephone transfer requests
received at the Administrative Office by the close of the
New York Stock Exchange (usually 4:00 PM ET) on a Valuation
Day will be effective as of that day. Otherwise, requests
will be effective as of the next Valuation Day.
Any transfer among the Variable Sub-Accounts or to the Fixed
Account will result in the crediting and cancellation of
Accumulation Units based on the Accumulation Unit values
next determined after the Administrative Office receives a
request in proper written form or adequately authenticated
telephone transfer requests. Any transfer made which causes
the remaining value of Accumulation Units for a Variable
Sub-Account or the Fixed Account to be less than $100 may
result in those remaining Accumulation Units being canceled
and their aggregate value reallocated proportionately among
the other Variable Sub-Accounts and the Fixed Account to
which Policy values are then allocated.
OPTIONAL SUB-ACCOUNT ALLOCATION PROGRAMS
The Owner may elect to participate in programs providing for
Dollar Cost Averaging or Automatic Rebalancing, currently
without charge, but may participate in only one program at
any time. LLANY reserves the right to impose a charge.
DOLLAR COST AVERAGING
Dollar Cost Averaging systematically transfers specified
dollar amounts from the Money Market Sub-Account. Transfer
allocations may be made to one or more of the Sub-Accounts
(not the Fixed Account) on a monthly or quarterly basis.
These transfers do not count against the free transfers
available. By making allocations on a regularly scheduled
basis, instead of on a lump sum basis, an Owner may reduce
exposure to market volatility. Dollar Cost Averaging will
not assure a profit or protect against a declining market.
If the Owner elects Dollar Cost Averaging, the value in the
Money Market Sub-Account must be at least $1,000 initially.
The minimum amount that may be allocated is $50 monthly.
An election for Dollar Cost Averaging is effective after the
Administrative Office receives a request from the Owner in
proper written form or by telephone, if adequately
authenticated. An election is effective within ten business
days, but only if there is sufficient value in the Money
Market Sub-Account. LLANY may, in its sole discretion, waive
Dollar Cost Averaging minimum deposit and transfer
requirements.
Dollar Cost Averaging terminates automatically: (1) if the
number of designated transfers has been completed; (2) if
the value in the Money Market Sub-Account is insufficient to
complete the next transfer; (3) within one week after the
Administrative Office receives a request for termination in
proper written form. or (4) if the Policy is surrendered.
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AUTOMATIC REBALANCING
Automatic Rebalancing periodically restores to a
pre-determined level the percentage of Policy value
allocated to each Variable Sub-Account (e.g. 20% Money
Market, 50% Growth, 30% Utilities). The Fixed Account is not
subject to rebalancing. The pre-determined level is the
allocation initially selected on the application, until you
change it. If Automatic Rebalancing is elected, all Net
Premium Payments allocated to the Variable Sub-Accounts will
be subject to Automatic Rebalancing.
The Owner may select Automatic Rebalancing on a quarterly,
semi-annual or annual basis. Automatic Rebalancing may be
elected, terminated or the allocation may be changed at any
time, effective within ten business days upon receipt by the
Administrative Office of a request in proper written form or
by telephone if adequately authenticated.
POLICY VALUES
The Accumulation Value is the sum of the Fixed Account
Value, Variable Account Value and the Loan Account Value.
The Accumulation Value of the Policy depends on the
performance of the underlying investments. Policy values are
used to pay for Policy fees and expenses, including the Cost
of Insurance. Premium Payments to meet your objectives will
vary based on the investment performance of the underlying
investments. A market downturn, affecting the Variable
Sub-Accounts upon which the Accumulation Value of a
particular Policy depends, may require Additional Premium
Payments beyond those expected (unless the No Lapse
Provision requirements have been satisfied) to maintain the
level of coverage or to avoid lapse of the Policy. We
strongly suggest you review periodic statements to see if
Additional Premium Payments must be made to avoid lapse of
the Policy.
We will tell you at least annually the Accumulation Value,
the number of Accumulation Units credited to the Policy,
current Accumulation Unit values, Variable Sub-Account
values, the Fixed Account Value and the Loan Account Value.
ACCUMULATION VALUE
The portion of a Premium Payment, after deduction for 5.0%
for the premium load, is the Net Premium Payment. It is the
Net Premium Payment that is available for allocation to the
Fixed Account or Variable Sub-Accounts.
We credit each Net Premium Payment to the Policy as of the
end of the Valuation Period in which it is received at the
Administrative Office. The Valuation Period is the time
between Valuation Days, and a Valuation Day is every day on
which the New York Stock Exchange is open and trading
unrestricted. Accumulation Units are valued on every
Valuation Day.
The Accumulation Value of a Policy is determined by: (1)
multiplying the total number of Variable Accumulation Units
credited to the Policy for each Variable Sub-Account by its
appropriate current Variable Accumulation Unit Value; (2) if
a combination of Variable Sub-Accounts is elected, totaling
the resulting values; and (3) adding any values attributable
to the Fixed Account and the Loan Account. The Accumulation
Value will be affected by Monthly Deductions.
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VARIABLE ACCOUNT VALUE
The Variable Account Value is the portion of the
Accumulation Value that is attributable to the Variable
Account.
VARIABLE ACCUMULATION UNIT VALUE
All or a part of a Net Premium Payment allocated to a
Variable Sub-Account is converted into Variable Accumulation
Units by dividing the amount allocated by the value of the
Variable Accumulation Unit for the Variable Sub-Account next
calculated after it is received at the Administrative
Office. The Variable Accumulation Unit value for each
Variable Sub-Account was initially established at $10.00.
The Variable Accumulation Unit Value for each Variable
Sub-Account would thereafter increase or decrease from one
Valuation Period to the next. Allocations to Variable
Sub-Accounts are made only as of the end of a Valuation Day.
VARIABLE ACCUMULATION UNITS
A Variable Accumulation Unit is a unit of measure used in
the calculation of the value of each Variable Sub-Account.
The Variable Accumulation Unit value will be as determined
for the Valuation Period during which a Premium Payment or
request for transfer is received by LLANY. The Variable
Accumulation Unit value for a Variable Sub-Account for any
later Valuation Period is determined as follows:
1. The total value of Fund shares held in the Variable
Sub-Account is calculated by multiplying the number of
Fund shares owned by the Variable Sub-Account at the
beginning of the Valuation Period by the net asset
value per share of the Fund at the end of the
Valuation Period, and adding any dividend or other
distribution of the Fund if an ex-dividend date occurs
during the Valuation Period; minus
2. The liabilities of the Variable Sub-Account at the end
of the Valuation Period; such liabilities include
daily charges imposed on the Variable Sub-Account, and
may include a charge or credit with respect to any
taxes paid or reserved for by LLANY that LLANY
determines result from the operations of the Variable
Account; and
3. The result of (2) is divided by the number of Variable
Accumulation Units outstanding at the beginning of the
Valuation Period.
The daily charge imposed on a Variable Sub-Account for any
Valuation Period is equal to the daily mortality and expense
risk charge multiplied by the number of calendar days in the
Valuation Period. The amount of Monthly Deduction allocated
to each Variable Sub-Account will result in the cancellation
of Variable Accumulation Units that have an aggregate value
on the date of such deduction equal to the total amount by
which the Variable Sub-Account is reduced.
The number of Variable Accumulation Units credited to a
Policy will not be changed by any subsequent change in the
value of a Variable Accumulation Unit. Such value may vary
from Valuation Period to Valuation Period to reflect the
investment experience of the Fund used in a particular
Variable Sub-Account and fees and charges under the Policy.
FIXED ACCOUNT AND LOAN ACCOUNT VALUE
The Fixed Account Value and the Loan Account Value reflect
amounts allocated to LLANY's General Account through payment
of premiums or through transfers from the Variable Account.
LLANY guarantees the Fixed Account Value.
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NET ACCUMULATION VALUE
The Net Accumulation Value is the Accumulation Value less
the Loan Account Value. The Net Accumulation Value
represents the net value of the Policy and is the basis for
calculating the Surrender Value.
FUNDS
Each of the Variable Sub-Accounts is invested solely in the
shares of one of the Funds available under the Policies.
Each of the Funds is a series of one of sixteen
Massachusetts or Delaware business trusts or Maryland
corporations. Each such trust or corporation is registered
as an open-end management investment company under the 1940
Act. All of the Funds except for the Delaware Group REIT
Series and the Delaware Group Emerging Market Series are
diversified under the 1940 Act.
Listed below are the Fund Groups, their investment advisers
and distributors, and the Funds within each that are
available under the Policies:
AIM VARIABLE INSURANCE FUNDS, INC., managed by AIM Advisors,
Inc., and distributed by AIM Distributors Inc., 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST, managed and distributed by Baron
Capital Inc., 767 Fifth Avenue, New York, NY 10153
Baron Capital Asset Fund
BT INSURANCE FUNDS TRUST, managed by Bankers Trust Company,
130 Liberty Street (One Bankers Trust Plaza), New York, NY
10006 and distributed by First Data Distributors, Inc., 4400
Computer Drive, Westborough, MA 01581
BT EAFE-Registered Trademark- Equity Index Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND, INC., managed by Delaware
Management Company, Inc., One Commerce Square, Philadelphia,
PA 19103 and for International and Emerging Markets,
Delaware International Advisors, Ltd., 80 Cheapside, London,
England ECV2 6EE, and distributed by Delaware Distributors,
L.P., 1818 Market Street, Philadelphia, PA 19103
Delaware Group Delchester Series
Delaware Group Devon Series
Delaware Group Emerging Markets Series
Delaware Group REIT Series
Delaware Group Small Cap Value Series
Delaware Group Trend Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, AND VARIABLE
INSURANCE PRODUCTS FUND III, managed by Fidelity Management
& Research Company and distributed by Fidelity Distributors
Corporation, 82 Devonshire Street, Boston, MA 02103
Fidelity VIP II Contrafund Portfolio -- Service Class
Fidelity VIP III Growth Opportunities Portfolio --
Service Class
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JANUS ASPEN SERIES, managed by Janus Capital, 100 Fillmore
St. Denver, CO 80206-4928, and self-distributed.
Janus Balanced Portfolio
Janus Worldwide Growth Portfolio
LINCOLN NATIONAL FUNDS, managed by Lincoln Investment
Management, Inc., 200 East Berry Street, Fort Wayne IN
46802, and distributed by Lincoln Financial Advisors, Inc.,
350 Church Street, Hartford, CT 06103. Sub-advisors are also
noted.
LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc. (Sub-advised by Janus
Capital)
LN Equity-Income Fund, Inc. (Sub-advised by Fidelity
Management Trust Co.)
LN Global Asset Allocation Fund, Inc. (Sub-advised by
Putnam Investment Management, Inc.)
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc. (Sub-advised by Vantage
Investment Advisors)
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST, managed
by Massachusetts Financial Services Company and distributed
by MFS Fund Distributors, Inc., 500 Boylston Street, Boston,
MA 02116
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST, managed and
distributed by N&B Management Incorporated, 605 Third
Avenue, 2nd Floor, New York, NY 10158-0006
N&B AMT Mid-Cap Growth Portfolio
N&B AMT Partners Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND, managed by
Templeton Investment Counsel, Inc. and its Templeton and
Franklin affiliates and distributed by Franklin/ Templeton
Distributors, Inc., 100 Fountain Parkway, St. Petersburg, FL
33716-1205
Templeton International Fund -- Class 2
Templeton Stock Fund -- Class 2
The investment advisory fees charged the Funds by their
advisers are shown on page 21 of this Prospectus.
Below is a brief description of the investment objective and
program of each Fund. There can be no assurance that any of
the stated investment objectives will be achieved.
AIM V.I. GROWTH FUND (Large Cap Stocks): Seeks growth of
capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM
to have strong earnings momentum. Current income will not be
a criterion of investment selection, and any such income
should be considered incidental.
AIM V.I. INTERNATIONAL EQUITY FUND (Large Cap Stocks): Seeks
to provide long term growth of capital by investing in a
diversified portfolio of international equity securities the
issuers of which are considered by AIM to have strong
earnings momentum. Any income realized by the Fund will be
incidental and will not be an important criterion in the
selection of portfolio securities.
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AIM V.I. VALUE FUND (Large Cap Stocks): Seeks to achieve
long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the
current or projected earnings of the companies issuing the
securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to
the equity markets generally. Income is a secondary
objective and would be satisfied principally from the
interest (interest and dividends) generated by the common
stocks, convertible bonds and convertible preferred stocks
that make up the Fund's portfolio.
BARON CAPITAL ASSET FUND (Mid Cap Stocks): Seeks capital
appreciation through investments in securities of small
sized companies with market capitalizations of approximately
$100 million to $1 billion, and medium sized companies with
market capitalizations of $1 billion to $2 billion, with
undervalued assets or favorable growth prospects.
BT EAFE-REGISTERED TRADEMARK- FUND (Large Cap Stocks --
International): Seeks to replicate as closely as possible
(before the deduction of Expenses) the total return of the
Europe, Australia, Far East Index (the
EAFE-Registered Trademark- Index) , a
capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United
States.
BT EQUITY 500 INDEX FUND (Large Cap Stocks): Seeks to
replicate as closely as possible the performance of the
Standard & Poor's 500 Composite Stock Price Index, before
the deduction of Fund expenses.
BT SMALL CAP INDEX FUND (Small Cap Stocks): Seeks to
replicate as closely as possible (before the deduction of
Expenses) the total return of the Russell 2000 Small Stock
Index (the "Russell 2000"), an index consisting of
approximately 2,000 small-capitalization common stocks.
DELAWARE GROUP DELCHESTER SERIES (High Yield Bonds): Seeks
as high a current income as possible by investing in rated
and unrated corporate bonds (including high yield bonds
commonly known as junk bonds), U. S. government securities
and commercial paper. An investment in this Series may
involve greater risks than an investment in a portfolio
comprised primarily of investment grade bonds.
DELAWARE GROUP DEVON SERIES (Large Cap Stocks): Seeks
current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on
common stocks that the investment manager believes have the
potential for above-average dividend increases over time.
Under normal circumstances, the Series will invest at least
65% of its total assets in dividend paying common stocks.
DELAWARE GROUP EMERGING MARKETS SERIES (Specialty): Seeks to
achieve long-term capital appreciation by investing
primarily in equity securities of issuers located or
operating in emerging counties. The Series is an
international fund. As such, under normal market conditions,
at least 65% of the Series' assets will be invested in
equity securities of issuers organized or having a majority
of their assets or deriving a majority of their operating
income in at least three countries that are considered to be
emerging or developing.
DELAWARE GROUP REIT SERIES (Specialty): Seeks to achieve
maximum long-term total return. Capital appreciation is a
secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in
the real estate industry.
DELAWARE GROUP SMALL CAP VALUE SERIES ( Small Cap Stocks):
Seeks capital appreciation by investing primarily in small
cap common stocks whose market value appears low
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relative to their underlying value or future earnings and
growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose
value is not yet recognized by the market.
DELAWARE GROUP TREND SERIES (Small Cap Stocks): Seeks
long-term capital appreciation by investing primarily in
small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These
securities will have been judged to be responsive to changes
in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective.
FIDELITY VIP II CONTRAFUND PORTFOLIO -- SERVICE CLASS (Large
Cap Stocks): Seeks capital appreciation by investing
primarily in securities of companies whose value the advisor
believes is not fully recognized by the public.
FIDELITY VIP III GROWTH OPPORTUNITIES PORTFOLIO -- SERVICE
CLASS (Large Cap Stocks): Seeks capital growth by investing
primarily in common stocks and securities convertible into
common stocks.
JANUS BALANCED PORTFOLIO (Large Cap Stocks): Seeks long term
growth of capital, balanced by current income. The Portfolio
normally invests 40-60% of its assets in securities selected
primarily for their growth potential and 40-60% of its
assets in securities selected primarily for their income
potential.
JANUS WORLDWIDE GROWTH PORTFOLIO (Large Cap Stocks): Seeks
long-term growth of capital in a manner consistent with the
preservation of capital by investing primarily in common
stocks of foreign and domestic insurers.
LINCOLN NATIONAL BOND FUND (Long-Term Bonds): Seeks maximum
current income consistent with prudent investment strategy.
The fund invests primarily in medium-and long-term corporate
and government bonds.
LINCOLN NATIONAL CAPITAL APPRECIATION FUND (Large Cap
Stocks): Seeks long-term growth of capital in a manner
consistent with preservation of capital. The fund invests in
a large number of companies of all sizes if the companies
are competing well and if their products and services are in
high demand. It may also buy some money market securities
and bonds, including junk (high risk) bonds.
LINCOLN NATIONAL EQUITY-INCOME FUND (Large Cap Stocks):
Seeks to achieve reasonable income by investing primarily in
income-producing equity securities. The fund invests mostly
in high-yielding bonds (including junk bonds)
LINCOLN NATIONAL GLOBAL ASSET ALLOCATION FUND (Large Cap
Stocks): Seeks long-term total return consistent with
preservation of capital. The fund allocates its assets among
several categories of equity and fixed-income securities,
both of U.S. and foreign insurers.
LINCOLN NATIONAL MONEY MARKET FUND (Money Market): Seeks
maximum current income consistent with the preservation of
capital. The fund invests in short term obligations issued
by U.S. corporations, the U.S. government, and
federally-chartered banks and U.S. branches of foreign
banks.
LINCOLN NATIONAL SOCIAL AWARENESS FUND (Specialty): Seeks to
achieve long-term capital appreciation, by investing in
stocks of established companies which adhere to certain
specific social criteria.
MFS EMERGING GROWTH SERIES (Large Cap Stocks): Seeks
long-term growth of capital by investing primarily in common
stocks of companies management believes to be early in their
life cycle but which have the potential to become major
enterprises.
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MFS TOTAL RETURN SERIES (Balanced or Total Return): Seeks
primarily to obtain above-average income (compared to a
portfolio invested entirely in equity securities) consistent
with the prudent employment of capital, and secondarily to
provide a reasonable opportunity for growth of capital and
income.
MFS UTILITIES SERIES (Specialty): Seeks capital growth and
current income (income above that available from a portfolio
invested entirely in equity securities) by investing, under
normal circumstances, at least 65% of its assets in equity
and debt securities of utility companies.
N&B AMT MID-CAP GROWTH PORTFOLIO (Mid Cap Stocks): Seeks out
capital appreciation by investing in equity securities of
medium sized companies.
N&B AMT PARTNERS PORTFOLIO (Large Cap Stocks): Seeks capital
growth by investing in common stocks and other equity
securities of medium to large capitalization established
companies.
TEMPLETON INTERNATIONAL FUND -- CLASS 2 (Large Cap Stocks):
Seeks long-term capital growth through a flexible policy of
investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized
will be incidental.
TEMPLETON STOCK FUND -- CLASS 2 (Large Cap Stocks): Seeks
capital growth through a policy of investing primarily in
common and preferred stocks issued by companies, large and
small, in various nations throughout the world, including
the United States.
The Delaware Group Delchester Series Delaware Group Emerging
Markets Series, Delaware Group Small Cap Value Series, Janus
Balanced, Lincoln National Bond Fund, Lincoln National
Equity-Income Fund, Lincoln National Global Asset Allocation
Fund, MFS Emerging Growth Series, MFS Total Return Series,
and MFS Utilities Series may invest in non-investment grade,
high-yield, high-risk debt securities (commonly referred to
as "junk bonds"), as detailed in the individual Fund
Prospectuses.
There is no assurance that the investment objective of any
of the Funds will be met. You assume all of the investment
performance risk for the Variable Sub-Accounts you select.
There is investment performance risk in each of the Variable
Sub-Accounts, although the amount of such risk varies
significantly among the Variable Sub-Accounts. Owners should
read each Fund's prospectus carefully and understand the
risks before making or changing investment choices.
Additional Funds may, from time to time, be made available
as underlying investments with prior approval of the New
York Insurance Department. The right to select among Funds
will be limited by the terms and conditions imposed by LLANY
(See ALLOCATION OF NET PREMIUM PAYMENTS).
SUBSTITUTION OF SECURITIES
If the shares of any Fund should no longer be available for
investment by the Variable Account or if, in the judgment of
LLANY, further investment in such shares should cease to be
appropriate in view of the purpose of the Variable Account
or in view of legal, regulatory or federal income tax
restrictions, LLANY may substitute shares of another Fund.
There will be no substitution of securities in any Variable
Sub-Account without prior approval of the Commission.
VOTING RIGHTS
LLANY will vote the shares of each Fund held in the Variable
Account at special meetings of the shareholders of the
particular Fund in accordance with instructions received by
the Administrative Office in proper written form from
persons having a
19
<PAGE>
voting interest in the Variable Account. LLANY will vote
shares for which it has not received instructions in the
same proportion as it votes shares for which it has received
instructions. The Funds do not hold regular meetings of
shareholders.
The number of shares which a person has a right to vote will
be determined as of a date to be chosen by the appropriate
Fund not more than sixty (60) days prior to the meeting of
the particular Fund. Voting instructions will be solicited
by written communication at least fourteen (14) days prior
to the meeting.
FUND PARTICIPATION AGREEMENTS
LLANY has entered into agreements with the various Funds and
their advisers or distributors under which LLANY makes the
Funds available under the Policies and performs certain
administrative services. In some cases, the advisers or
distributors may compensate LLANY at annual rates of between
.10% and .25% of assets in a particular Fund attributable to
the Policies.
CHARGES AND FEES
LLANY deducts charges in connection with the Policy to
compensate it for providing the insurance benefit set forth
in the Policy, administering the Policy, assuming certain
risks in connection with the Policy and for incurring
expenses associated with the distribution of the Policy.
The nature and amount of these charges are as follows:
DEDUCTIONS MADE MONTHLY
We make various expense deductions monthly. The Monthly
Deduction, including the Cost of Insurance Charge and
charges for supplemental riders or benefits, if any, is made
from the Net Accumulation Value.
The Monthly Deductions are deducted proportionately from the
Net Accumulation Value of each underlying investment subject
to the charge. For Variable Sub-Accounts, Variable
Accumulation Units are canceled and the value of the
canceled Units withdrawn in the same proportion as their
respective values have to the Net Accumulation Value. The
Monthly Deductions are made on the Monthly Anniversary Day
starting on the Date of Issue. The Monthly Anniversary Day
is the same day of each month thereafter, or if there is no
such date in a given month, then the first Valuation Day of
the next month. If the day that would otherwise be a Monthly
Anniversary Day is not a Valuation Day, then the Monthly
Anniversary Day is the next Valuation Day.
If the Net Accumulation Value is insufficient to cover the
current Monthly Deduction, you have a 61-day period (Grace
Period) to make a payment sufficient to cover that
deduction. (See LAPSE AND REINSTATEMENT Lapse of a Policy).
MONTHLY DEDUCTION
There is a flat dollar Monthly Deduction of $15 until the
first Policy Anniversary and, currently, $5 thereafter
(guaranteed not to exceed $10 after the first Policy Year).
These charges compensate LLANY for administrative expenses
associated with Policy issue and ongoing Policy maintenance
including premium billing and collection, policy value
calculation, confirmations, periodic reports and other
similar matters.
20
<PAGE>
COST OF INSURANCE CHARGE
The Cost of Insurance is the portion of the Monthly
Deduction designed to compensate LLANY for the anticipated
cost of paying Death Benefits in excess of the Accumulation
Value, not including riders, supplemental benefits or
monthly expense charges.
The Cost of Insurance charge depends on the Age, policy
duration, underwriting category and gender (in accordance
with state law) of the Insured and the current Net Amount at
Risk. The rate on which the Monthly Deduction for the Cost
of Insurance is based will generally increase as the Insured
ages, although the Cost of Insurance charge could decline if
the Net Amount at Risk drops relatively faster than the Cost
of Insurance Rate increases.
The Cost of Insurance charge is determined by dividing the
Death Benefit at the previous Monthly Anniversary Day by
1.0032737 (the monthly equivalent of an annual rate of 4%),
subtracting the Accumulation Value at the previous Monthly
Anniversary Day, and multiplying the result (the Net Amount
at Risk) by the applicable Cost of Insurance Rate as
determined by LLANY. The Guaranteed Maximum Cost of
Insurance Rates are in Appendix 3.
MORTALITY AND EXPENSE RISK CHARGE
LLANY deducts a daily charge as a percentage of the assets
of the Separate Account as a mortality and expense risk
charge. The mortality risk assumed is that insureds may live
for a shorter period than estimated, and therefore, a
greater amount of death benefit will be payable. The expense
risk assumed is that expenses incurred in issuing and
administering the policies will be greater than estimated.
The mortality and expense risk charge is at an annual rate
of 0.75% in Policy Years 1-10, 0.35% in years 11-20 and
0.20% in year 21 and beyond.
21
<PAGE>
FUND EXPENSES
The investment adviser for each of the Funds deducts a daily
charge as a percent of the net assets in each Fund. The
charge reflects asset management fees of the investment
adviser (Management Fees), and other expenses incurred by
the funds (including 12b-1 fees for Class 2 shares and Other
Expenses). The charge has the effect of reducing the
investment results credited to the Sub-Accounts.
<TABLE>
<CAPTION>
FUND PORTFOLIO ANNUAL EXPENSES
--------------------------------------------------
MANAGEMENT 12b-1 OTHER
FUND FEES FEES EXPENSES TOTAL
- ------------------------------------------------- ------------- ----- ----------- ---------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund (1)......................... 0.65% -- 0.08% 0.73%
AIM V.I. International Equity Fund (1)........... 0.75% -- 0.18% 0.93%
AIM V.I. Value Fund (1).......................... 0.62% -- 0.08% 0.70%
Baron Capital Asset Fund (2)..................... 1.00% 0.25% 0.25% 1.50%
BT EAFE Index Fund (3)........................... 0.45% -- 0.20% 0.65%
BT Equity 500 Index Fund (3)..................... 0.20% -- 0.10% 0.30%
BT Small Cap Index Fund (3)...................... 0.35% -- 0.10% 0.45%
Delaware Group Delchester Series (4)............. 0.60% -- 0.10% 0.70%
Delaware Group Devon Series (4)(5)............... 0.54% -- 0.26% 0.80%
Delaware Group Emerging Markets Series (4)(5).... 0.30% -- 1.20% 1.50%
Delaware Group REIT Series (4)................... 0.75% -- 0.10% 0.85%
Delaware Group Small Cap Value Series (4)(5)..... 0.60% -- 0.25% 0.85%
Delaware Group Trend Series (4)(5)............... 0.62% 0.23% 0.85%
Fidelity VIPII Contrafund Portfolio -- Service
Class (6)...................................... 0.60% 0.10% 0.11% 0.81%
Fidelity VIPIII Growth Opportunities Portfolio --
Service Class (6).............................. 0.60% 0.10% 0.14% 0.84%
Janus Balanced Portfolio (7)..................... 0.76% -- 0.07% 0.83%
Janus Worldwide Growth Portfolio (7)............. 0.66% -- 0.08% 0.74%
LN Bond Fund..................................... 0.46% -- 0.07% 0.53%
LN Capital Appreciation Fund (8)................. 0.75% -- 0.09% 0.84%
LN Equity Income Fund (8)........................ 0.75% -- 0.07% 0.82%
LN Global Asset Allocation Fund.................. 0.72% -- 0.17% 0.89%
LN Money Market Fund............................. 0.48% -- 0.11% 0.59%
LN Social Awareness Fund......................... 0.36% -- 0.05% 0.41%
MFS Emerging Growth Series (9)................... 0.75% -- 0.12% 0.87%
MFS Total Return Series (9)(10).................. 0.75% -- 0.25% 1.00%
MFS Utilities Series (9)(10)..................... 0.75% -- 0.25% 1.00%
AMT MidCap Growth Portfolio (11)................. 0.55% -- 0.30% 0.85%
AMT Partners Portfolio (11)...................... 0.80% -- 0.06% 0.86%
Templeton International Fund -- Class 2 (12)..... 0.69% 0.25% 0.19% 1.13%
Templeton Stock Fund -- Classs 2 (12)............ 0.69% 0.25% 0.19% 1.13%
</TABLE>
---------------------------------------------------
(1) AIM Advisors, Inc. ("AIM") may from time to time
voluntarily waive or reduce its respective fees.
Effective May 1, 1998, the Funds reimburse AIM in an
amount up to 0.25% of the average net asset value of
each Fund, for expenses incurred in providing, or
assuring that participating insurance companies
provide, certain administrative services, as described
in the accompanying prospectus for the Funds. Currently
, the fee only applies to the average net asset value
of each Fund in excess of the net asset value of each
Fund as calculated on April 30, 1998, and AIM will not
seek reimbursement of the
22
<PAGE>
cost of any service in excess of the amount charged by
a participating insurance company for providing the
services above. The amount of reimbursements that will
be paid by each Fund under this arrangement for the
year ending December 31, 1998 cannot be predicted.
(2) BAMCO, Inc. will reduce its fee to the extent required
to limit Baron Capital Asset Fund's total operating
expenses to 1.5% for the first $250 million in assets
in the Fund, 1.35% for the Fund assets over $250
million and up to $500 million, and 1.25% for Fund
assets over $500 million. Without the expense
limitations, the Fund estimates that actual expenses
would be 1.6%,
(3) Under the Advisory Agreement with the Advisor, the
Funds will pay advisory fees at the annual percentage
rate of .20% of the average daily net assets of the
EAFE Index Fund, the Equity 500 Index Fund and the
Small Cap Index Fund. These fees are accrued daily and
paid monthly. The Advisor has voluntarily undertaken to
waive the fees and to reimburse the Fund for certain
expenses so that the EAFE Index Fund, the Equity 500
Index Fund and the Small Cap Index Fund total operating
expenses will not exceed 0.65%, .30%., and 0.45%
respectively. Such expense reimbursements may be
terminated at the discretion of the Advisor. If this
reimbursement were not in place, the total operating
expenses for the year ended December 31, 1997 would
have been 2.75%, 2.78% and 3.27% respectively.
(4) The investment adviser for the Delchester Series, Devon
Series, REIT Series, Small Cap Value Series, Social
Awareness Series and Trend Series is Delaware
Management Company, Inc. ("Delaware Management"). The
investment adviser for the Emerging Markets Series is
Delaware International Advisers Ltd. ("Delaware
International"). Effective May 1, 1998 through April
30, 1999, the investment advisers for the Series of
DGPF have agreed voluntarily to waive their management
fees and reimburse each Series for expenses to the
extent that total expenses will not exceed 1.50% for
the Emerging Markets Series, 0.85% for the REIT Series,
Small Cap Value Series, Social Awareness Series and
Trend Series, and 0.80% for the Delchester Series and
Devon Series.
(5) For the fiscal year ended December 31, 1997, before
waiver and/or reimbursement by the investment adviser,
total Series expenses as a percentage of average daily
net assets were 0.91% for the Devon Series, 2.45% for
the Emerging Market Series, 0.90% for Small Cap Value
Series, 1.40% for the Social Awareness Series, and
0.88% for Trend Series. The declaration of a voluntary
expense limitation does not bind the investment
advisers to declare future expense limitations with
respect to these Funds.
(6) A portion of the brokerage commissions that certain
funds paid was used to reduce funds expenses. In
addition, certain funds have entered into arrangements
with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to
reduce custodian and transfer agent expenses. Including
these reductions, Total Fund Portfolio Annual Expenses
would have been 0.78% for the VIP II Contrafund
Portfolio and 0.83% for the VIP III Growth
Opportunities Portfolio.
(7) Management Fees for the Balanced and Worldwide Growth
Portfolios reflect a reduced fee schedule effective
July 1, 1997. The Management Fee for each of these
Portfolios reflects the new rate applied to the net
assets as of December 31, 1997. Other expenses are
based on gross expenses of the shares before expense
offset arrangements for the fiscal year ended December
31, 1997. The information for each Portfolio is net of
fee waivers or reductions from Janus Capital. Fee
reductions for the Balanced and Worldwide Growth
Portfolios reduce the management fee to the level of
the corresponding Janus retail fund. Other waivers, if
applicable, are first applied against the management
fee and then against other expenses. Without such
waivers or reductions, the Management Fee, Other
Expenses and Total Fund Expenses for the Balanced
Portfolio would have been 0.77%, 0.06% and 0.83% and
for the Worldwide Growth Portfolio would have been
0.72%, 0.09% and 0.81%. Janus Capital may modify or
terminate the waivers or reductions at any time upon at
least 90 days' notice to the Fund's Board of Trustees.
(8) The management fee for the Capital Appreciation Fund
has been decreased from 0.80% to 0.75% effective May 1,
1998, and for the Equity-Income fund it has been
decreased from 0.95% to 0.75% effective January 1,
1998. The expense information in this table has been
restated to reflect current fees.
(9) Each Series has an expense offset arrangement which
reduces the Series' custodian fee based upon the amount
of cash maintained by the Series with its custodian and
dividend disbursing agent, and may enter into other
such arrangements and directed brokerage arrangements
(which would also have the effect of reducing the
Series' expenses). Any such fee reductions are not
reflected under "Other Expenses".
(10) The Massachusetts Financial Services Company Adviser
has agreed to bear expenses for each Series, subject
to reimbursement by each Series, such that the MFS
Total Return Series and the MFS Utilities Series'
"Other Expenses" shall not exceed 0.25% of the average
daily net assets of the Series during the
23
<PAGE>
current fiscal year. Otherwise, "Other Expenses" for
the Total Return Series and Utilities Series would be
0.27% and 0.45% respectively, and "Total Fund
Portfolio Annual Expenses" would be 1.02% and 1.20%
respectively, for these Series. See "Information
Concerning Shares of Each Series Expenses."
(11) N&B Management has voluntarily undertaken to limit the
Portfolios' expenses by reimbursing each Portfolio for
its Total Operating Expenses and its pro rata share of
its corresponding Series' Total Operating Expenses,
excluding the compensation of N&B Management (except
Mid-Cap Growth Portfolio), taxes, interest,
extraordinary expenses, brokerage commissions and
transaction costs, that exceed, in the aggregate, 1%
per annum of the Portfolio's average daily net asset
value. This undertaking is subject to termination on
60 days' prior written notice to the appropriate
Portfolio. The Mid-Cap Growth Portfolio has in turn
agreed to repay through December 31, 1999, expenses
borne by N&B Management so long as the Portfolio's
annual operating expenses during that period do not
exceed the expense limitations.
(12) Class 2 of the Fund has a distribution plan or "Rule
12b-1 plan" as described under "Distribution Plan" in
the Prospectus. Because Class 2 shares were not
offered until May 1, 1997, figures (other than 12b-1
fees) are estimates for 1998 based on the historical
expenses of the Fund's Class 1 shares for the fiscal
year ended December 31, 1997. Management Fees and
Total Operating Expenses have been restated to reflect
the management fee schedule approved by shareholders
and effective May 1, 1997. Actual Management Fees and
Total Operating Expenses before May 1, 1997 were
lower. See the section "Management Fees" under
"Portfolio Management" in the Prospectus.
SURRENDER CHARGES
A generally declining Surrender Charge may apply if the
Policy is totally surrendered or lapses during the first
fifteen years following the Date of Issue or the first
fifteen years following an increase in Specified Amount. The
Surrender Charge varies by Age of the Insured, the number of
years since the Date of Issue, and Specified Amount. The
length of the Surrender Charge period varies based on the
Age of the Insured on the date of issue or date of increase
in Specified Amount as follows:
<TABLE>
<CAPTION>
SURRENDER CHARGE
AGE PERIOD
- --------- ---------------------
<S> <C>
0-50 15 years
51 14 years
52 13 years
53 12 years
54 11 years
55+ 10 years
</TABLE>
The charge is in part a deferred sales charge and in part a
recovery of certain first year administrative costs and is
retained by LLANY. The maximum Surrender Charge is included
in each Policy and is in compliance with each state's
nonforfeiture law. Examples of the Surrender Charge can be
seen in Appendix 2.
The Surrender Charge under a Policy is proportional to the
face amount of the Policy. Expressed as a percentage of face
amount, it is higher for older than for younger issue ages.
The Surrender Charge cannot exceed Policy value. All
Surrender Charges decline to zero over the 15 years
following issuance of the Policy. See, for example, the
illustrations in Appendix 4 for issue ages 45 and 55.
If the Specified Amount is increased, a new Surrender Charge
will be applicable, in addition to any existing Surrender
Charge. The Surrender Charge applicable to the increase
would be equal to the Surrender Charge on a new Policy whose
Specified Amount was equal to the amount of the increase.
Supplemental Policy Specifications will be sent to the Owner
upon an increase in Specified Amount reflecting the maximum
additional Surrender Charge in the Table of Surrender
Charges. The minimum allowable increase in Specified Amount
is $1,000. LLANY may change this at any time.
If the Specified Amount is decreased while the Surrender
Charge applies, the Surrender Charge will remain the same.
24
<PAGE>
No Surrender Charge is imposed on a partial surrender, but
an administrative fee of $25 (not to exceed 2% of the amount
surrendered) is imposed, allocated pro-rata among the
Sub-Accounts from which the partial surrender proceeds are
taken.
Any surrender may result in tax implications. (SEE TAX
MATTERS)
Based on its actuarial determination, LLANY does not
anticipate that the Surrender Charge, together with the
portion of the premium load attributable to sales expense,
will cover all sales and administrative expenses which LLANY
will incur in connection with the Policy. Any such
shortfall, including but not limited to payment of sales and
distribution expenses, would be available for recovery from
the general account of LLANY, which supports insurance and
annuity obligations.
TRANSACTION FEE FOR EXCESS TRANSFERS
LLANY reserves the right to impose a charge for each
transfer request in excess of 12 in any Policy Year. A
single transfer request may consist of multiple
transactions.
DEATH BENEFITS
The Death Benefit proceeds is the amount payable to the
Beneficiary upon the death of the Insured, in accordance
with the Death Benefit Option selected. Prior to payment of
the Death Benefit, any loaned amounts must be repaid along
with loan interest and overdue deductions. These amounts due
will be deducted from the proceeds prior to payment of the
Death Benefit.
The applicant must select the Specified Amount of the Death
Benefit, which may not be less than $100,000, and the Death
Benefit Option. The two Death Benefit Options are described
below. The applicant must consider a number of factors in
selecting the Specified Amount, including the amount of
proceeds required when the Insured dies and the Owner's
ability to make Premium Payments. The ability of the Owner
to support the Policy, particularly in later years, is an
important factor in selecting between the Death Benefit
Options, because the greater the Net Amount at Risk at any
time, the more that will be deducted each month from the
value of the Policy to pay the Cost of Insurance.
DEATH BENEFIT OPTIONS
Two different Death Benefit Options are available under the
Policy. The Death Benefit proceeds payable under the Policy
is the greater of (a) the Corridor Death Benefit or (b) the
amount determined under the Death Benefit Option in effect
on the date of the Insured's Death, less (in each case) any
indebtedness under the Policy. In the case of Death Benefit
Option 1, the Specified Amount is reduced by the amount of
any partial surrender. The Corridor Death Benefit is the
applicable percentage (the Corridor Percentage) of the
Accumulation Value (rather than by reference to the
Specified Amount) required to maintain the Policy as a "life
insurance contract" for Federal income tax purposes. The
Corridor Percentage is 250% through the time the insured
reaches Age 40 and decreases in accordance with the table in
Appendix 3 to 100% when the Insured reaches Age 95.
Death Benefit Option 1 provides Death Benefit Proceeds equal
to the Specified Amount (a minimum of $100,000). If Option 1
is selected, the Policy pays level Death Benefit Proceeds
unless the Minimum Death Benefit exceeds the Specified
Amount. (See DEATH BENEFITS, Federal Income Tax Definition
of Life Insurance).
Death Benefit Option 2 provides Death Benefit Proceeds equal
to the sum of the Specified Amount plus the Net Accumulation
Value as of the Valuation Day immediately
25
<PAGE>
after the Insured's death. If Option 2 is selected, the
Death Benefit Proceeds increase or decrease over time,
depending on the amount of premium paid and the investment
performance of the underlying Sub-Accounts.
If for any reason the applicant fails to affirmatively elect
a particular Death Benefit Option, Death Benefit Option 1
shall apply until changed as provided below.
Owners who prefer insurance coverage that generally does not
vary in amount and generally has lower Cost of Insurance
Charges should elect Option 1. Owners who prefer to have
favorable investment experience reflected in increased
insurance coverage should select Option 2. Under Option 1,
any Surrender Value at the time of the Insured's Death will
revert to LLANY.
CHANGES IN DEATH BENEFIT OPTIONS AND SPECIFIED AMOUNT
All requests for changes between Death Benefit Options and
changes in the Specified Amount must be submitted in proper
written form to the Administrative Office. The minimum
increase in Specified Amount currently permitted is $1,000.
If requested, a supplemental application and evidence of
insurability must also be submitted to LLANY.
In a change from Death Benefit Option 1 to Death Benefit
Option 2, the Specified Amount shall be reduced so it
thereafter equals (a) the amount payable under the Death
Benefit Option in effect immediately before the change,
minus (b) the Accumulation Value immediately before the
change. In a change from Death Benefit Option 2 to Death
Benefit Option 1, the Specified Amount shall be increased so
that it thereafter equals the amount payable under the Death
Benefit Option in effect immediately before the change.
Any reductions in Specified Amount will be made against the
initial Specified Amount and any later increase in the
Specified Amount on a last in, first out basis. Any increase
in the Specified Amount will increase the amount of the
Surrender Charge applicable to the Policy.
LLANY may at its discretion decline any request for a change
between Death Benefit Options or increase in the Specified
Amount. LLANY may at its discretion decline any request for
change of the Death Benefit Option or reduction of the
Specified Amount if, after the change, the Specified Amount
would be less than the minimum Specified Amount or would
reduce the Specified Amount below the level required to
maintain the Policy as life insurance for purposes of
Federal income tax law.
Any change is effective on the first Monthly Anniversary Day
on or after the date of approval of the request by LLANY,
unless the Monthly Deduction Amount would increase as a
result of the change. In that case, the change is effective
on the first Monthly Anniversary Day on which the
Accumulation Value is equal to or greater than the Monthly
Deduction Amount, as increased.
FEDERAL INCOME TAX DEFINITION OF LIFE INSURANCE
The amount of the Death Benefit must satisfy certain
requirements under the Code if the policy is to qualify as
insurance for federal income tax purposes. The amount of the
Death Benefit Proceeds required to be paid under the Code to
maintain the Policy as life insurance under each of the
Death Benefit Options (see INSURANCE COVERAGE PROVISIONS,
Death Benefit) is equal to the product of the Accumulation
Value and the applicable Corridor Percentage. A table of
Corridor Percentages is in Appendix 3.
26
<PAGE>
NOTICE OF DEATH OF INSURED
Due Proof of Death must be furnished to LLANY at the
Administrative Office as soon as reasonably practical after
the death of the Insured, the person whose life is insured
under the Policy. Due Proof of Death must be in proper
written form and includes a certified copy of an official
death certificate, a certified copy of a decree of a court
of competent jurisdiction as to the finding of death, or any
other proof of death satisfactory to LLANY.
PAYMENT OF DEATH BENEFIT PROCEEDS
The Death Benefit Proceeds under the Policy will ordinarily
be paid within seven days, if in a lump sum, or in
accordance with any Settlement Option selected by the Owner
or the Beneficiary, after receipt at the Administrative
Office of Due Proof of Death of the Insured. The amount of
the Death Benefit Proceeds under Option 2 will be determined
as of the date of the Insured's death. Payment of the Death
Benefit Proceeds may be delayed if the Policy is contested
or if Variable Account values cannot be determined.
SETTLEMENT OPTIONS
There are several ways in which the Beneficiary may receive
the Death Benefit Proceeds or the Owner may elect to receive
payment upon the surrender of the Policy.
The Owner may elect or change a Settlement Option while the
insured is alive; if the Owner has not irrevocably selected
a Settlement Option, the Beneficiary may within 90 days
after the Insured dies. If no Settlement Option is selected,
the Death Benefit Proceeds will be paid in a lump sum.
If the Policy is assigned as collateral security, LLANY will
pay any amount due the assignee in one lump sum. Any
remaining Death Benefit Proceeds will be paid as elected.
A request to elect, change, or revoke a Settlement Option
must be received in proper written form by the
Administrative Office before payment of the lump sum or
under any Settlement Option. The first payment under the
Settlement Option selected will become payable on the date
proceeds are settled under the option. Payments after the
first payment will be made on the first day of each month.
Once payments have begun, the Policy cannot be surrendered
and neither the payee nor the Settlement Option may be
changed.
There are at least four Settlement Options:
The first Settlement Option is an annuity for the
lifetime of the payee.
The second Settlement Option is an annuity for the
lifetime of the payee, with monthly payments guaranteed
for 60, 120, 180, or 240 months.
Under the third Settlement Option, LLANY makes monthly
payments for a stated number of years, at least five but
no more than thirty.
Under the fourth Settlement Option, LLANY pays at least
3% interest annually on the sum left on deposit, and pays
the amount on deposit on the payee's death.
Any other Settlement Option offered by LLANY at the time of
election may also be selected.
27
<PAGE>
POLICY LIQUIDITY
The accumulated value of the Policy is available for loans
or withdrawals. Subject to certain limitations, the Owner
may borrow against the Surrender Value of the Policy, may
make a partial surrender of some of the Surrender Value of
the Policy and may fully surrender the Policy for its
Surrender Value.
POLICY LOANS
The Owner may at any time borrow in the aggregate up to 100%
of the Surrender Value at the time a Policy Loan is made.
LLANY may, however, limit the amount of the loan so that the
total Policy indebtedness will not exceed 90% of the amount
of the Accumulation Value less any Surrender Charge that
would be imposed on a full surrender. The Owner must execute
a loan agreement and assign the Policy to LLANY free of any
other assignments. The Loan Account is the account in which
Policy indebtness (outstanding loans and interest) accrues
once transferred out of the Fixed or Variable Sub-Accounts.
Interest on Policy Loans accrues at an annual rate of 8%,
and is payable to LLANY (for its account) once a year in
arrears on each Policy Anniversary, or earlier upon full
surrender or other payment of proceeds of a Policy.
The amount of a loan, plus any accrued but unpaid interest,
is added to the outstanding Policy Loan balance. Unless paid
in advance, any loan interest due will be transferred
proportionately from the values in each Fixed and Variable
Sub-Account, and treated as an additional Policy Loan, and
added to the Loan Account Value.
LLANY credits interest to the Loan Account Value of 7% in
Policy Years 1-10 and 8% thereafter, so the net cost of a
Policy Loan is 1% in years 1-10 and 0% thereafter.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, transfers from each for loans and
loan interest will be made in proportion to the assets in
each Sub-Account at that time, unless LLANY is instructed
otherwise in proper written form at the Administrative
Office. Repayments on the loan and interest credited on the
Loan Account Value will be allocated according to the most
recent Premium Payment allocation at the time of the
repayment.
28
<PAGE>
A Policy Loan, whether or not repaid, affects the proceeds
payable upon the Death and the Accumulation Value. The
longer a Policy Loan is outstanding, the greater the effect
is likely to be. While an outstanding Policy Loan reduces
the amount of assets invested, depending on the investment
results of the Sub-Accounts, the effect could be favorable
or unfavorable.
If at any time the total indebtedness against the Policy,
including interest accrued but not due, equals or exceeds
the then current Accumulation Value less Surrender Charges,
the Policy will terminate without value subject to the
conditions in the Grace Period Provision, unless the No
Lapse Provision is in effect. (SEE LAPSE AND REINSTATEMENT,
Lapse of a Policy)
If a Policy lapses while a loan is outstanding, adverse tax
consequences may result.
PARTIAL SURRENDER
You may make a partial surrender at any time while the
Insured is alive by request to the Administrative Office in
proper written form or by telephone, if you have authorized
telephone transactions. A $25 transaction fee (not to exceed
2% of the amount surrendered) is charged for each partial
surrender. Total partial surrenders may not exceed 90% of
the Surrender Value of the Policy. Each partial surrender
may not be less than $500. Partial surrenders are subject to
other limitations as described below.
Partial surrenders may reduce the Specified Amount and, in
each case, reduce the Death Benefit Proceeds. To the extent
that a requested partial surrender would cause the Specified
Amount to be less than $100,000, the partial surrender will
not be permitted by LLANY. In addition, if following a
partial surrender and the corresponding decrease in the
Specified Amount, the Policy would not comply with the
maximum premium limitations required by federal tax law, the
surrender may be limited to the extent necessary to meet the
federal tax law requirements.
The effect of partial surrenders on the Death Benefit
Proceeds depends on the Death Benefit Option elected under
the Policy. If Death Benefit Option 1 has been elected, a
partial surrender would reduce the Accumulation Value and
the Specified Amount. The reduction in the Specified Amount,
which would reduce any past increases on a last in, first
out basis, reduces the amount of the Death Benefit Proceeds.
If Death Benefit Option 2 has been elected, a partial
surrender would reduce the Accumulation Value, but would not
reduce the Specified Amount. The reduction in the
Accumulation Value reduces the amount of the Death Benefit
Proceeds.
If the Net Accumulation Value is distributed among more than
one of the Sub-Accounts, surrenders from each will be made
in proportion to the assets in each Sub-Account at the time
of the surrender, unless LLANY is instructed otherwise in
proper written form at the Administrative Office. LLANY may
at its discretion decline any request for a partial
surrender.
SURRENDER OF THE POLICY
You may surrender the Policy at any time. On surrender of
the Policy, LLANY will pay you or your assignee, the
Surrender Value next computed after receipt of the request
in proper written form at the Administrative Office. All
coverage under the Policy will automatically terminate if
the Owner makes a full surrender.
29
<PAGE>
SURRENDER VALUE
The Surrender Value of a Policy is the amount you can
receive in a lump sum by surrendering the Policy. The
Surrender Value is the Net Accumulation Value less the
Surrender Charge (SEE CHARGES AND FEES, Surrender Charge).
All or part of the Surrender Value may be applied to one or
more of the Settlement Options. Surrender Values are
illustrated in Appendix 4.
DEFERRAL OF PAYMENT AND TRANSFERS
Payment of loans or of the Surrender Value from any of the
Variable Sub-Accounts will be made within seven days.
Payment or transfer from the Fixed Account may be deferred
up to six months at LLANY's option. If LLANY exercises its
right to defer any payment from the Fixed Account, interest
will accrue and be paid as required by law from the date the
recipient would otherwise have been entitled to receive the
payment.
ASSIGNMENT; CHANGE OF OWNERSHIP
While the Insured is living, you may assign your rights in
the Policy, including the right to change the beneficiary
designation. The assignment must be in proper written form,
signed by you and recorded at the Administrative Office. No
assignment will affect, or prejudice LLANY as to, any
payment made or action taken by LLANY before it was
recorded. LLANY is not responsible for any assignment not
submitted for recording, nor is LLANY responsible for the
sufficiency or validity of any assignment. Any assignment is
subject to any indebtedness owed to LLANY at the time the
assignment is recorded and any interest accrued on such
indebtedness after recordation of any assignment.
Once recorded, the assignment remains effective until
released by the assignee in proper written form. So long as
an effective assignment remains outstanding, you will not be
permitted to take any action with respect to the Policy
without the consent of the assignee in proper written form.
So long as the Insured is living, you may name a new Owner
by recording a change in ownership in proper written form at
the Administrative Office. On recordation, the change will
be effective as of the date of execution of the document of
transfer or, if there is no such date, the date of
recordation. No such change of ownership will affect, or
prejudice LLANY as to, any payment made or action taken by
LLANY before it was recorded. LLANY may require that the
Policy be submitted to it for endorsement before making a
change.
LAPSE AND REINSTATEMENT
LAPSE OF A POLICY
The No Lapse Premium is the cumulative premium required to
have been paid by each Monthly Anniversary Day to prevent
the Policy from lapsing. Except as provided by the No Lapse
Provision, if at any time the Net Accumulation Value is
insufficient to pay the Monthly Deduction, the Policy is
subject to lapse and automatic termination of all coverage
under the Policy. The Net Accumulation Value may be
insufficient (1) because it has been exhausted by earlier
deductions, (2) due to poor investment performance, (3) due
to partial surrenders, (4) due to indebtedness for Policy
Loans, or (5) because of some combination of the foregoing
factors. If LLANY has not received a Premium Payment or
payment of indebtedness on Policy Loans necessary so that
the Net Accumulation Value is sufficient to pay the Monthly
Deduction Amount on a Monthly Anniversary Day, LLANY will
send a written notice to the Owner and any assignee of
30
<PAGE>
record. The notice will state the amount of the Premium
Payment or payment of indebtedness on Policy Loans necessary
such that the Net Accumulation Value is at least equal to
two times the Monthly Deduction Amount. If the minimum
required amount set forth in the notice is not paid to LLANY
on or before the day that is the later of (a) 31 days after
the date of mailing of the notice, and (b) 61 days after the
date of the Monthly Anniversary Day with respect to which
such notice was sent (together, the Grace Period), then the
policy shall terminate and all coverage under the policy
shall lapse without value.
NO LAPSE PROVISION
If this Policy has a No Lapse Premium shown on the
specifications, this policy will not lapse if, at each
Monthly Anniversary Day, the sum of all Premium Payments
less any policy loans (including any accrued loan interest)
and partial surrenders is at least equal to the sum of the
No Lapse Premiums (as indicated in the Policy
Specifications) due since the Date of Issue of the Policy. A
Grace Period will be allotted after each Monthly Anniversary
Day on which insufficient premiums have been paid (see
preceding paragraph). The payment of sufficient additional
premiums during the Grace Period will keep the No Lapse
Provision in force.
The No Lapse Provision will terminate if you fail to meet
the premium requirements, if there is an increase in
Specified Amount or if you change the Death Benefit Option.
Once the No Lapse Provision terminates, it cannot be
reinstated.
REINSTATEMENT OF A LAPSED POLICY
After the Policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace
Period, it may be reinstated provided (a) it has not been
surrendered, (b) there is an application for reinstatement
in proper written form, (c) evidence of insurability of the
insured is furnished to LLANY and it agrees to accept the
risk, (d) LLANY receives a payment sufficient to keep the
Policy in force for at least two months, and (e) any accrued
loan interest is paid. The effective date of the reinstated
Policy shall be the Monthly Anniversary Day after the date
on which LLANY approves the application for reinstatement.
Surrender Charges will be reinstated as of the Policy Year
in which the Policy lapsed.
If the Policy is reinstated, such reinstatement is effective
on the Monthly Anniversary Day following LLANY approval. The
Accumulation Value at reinstatement will be the Net Premium
Payment then made less all Monthly Deductions due.
If the Surrender Value is not sufficient to cover the full
Surrender Charge at the time of lapse, the remaining portion
of the Surrender Charge will also be reinstated at the time
of Policy reinstatement.
COMMUNICATIONS WITH LLANY
PROPER WRITTEN FORM
Whenever this Prospectus refers to a communication "in
proper written form," it means a written document, in form
and substance reasonably satisfactory to LLANY, received at
the Administrative Office.
31
<PAGE>
OTHER POLICY PROVISIONS
ISSUANCE
A Policy may only be issued upon receipt of satisfactory
evidence of insurability, and generally only when the
Insured is at least Age 18 and at most Age 80.
DATE OF COVERAGE
The date of coverage will be the Date of Issue, provided the
Insured is alive and prior to any change in the health and
insurability of the Insured as represented in the
application.
RIGHT TO EXCHANGE THE POLICY
The Owner may, within the first two Policy Years, exchange
the Policy for a permanent life insurance policy then being
offered by LLANY. The benefits for the new policy will not
vary with the investment experience of the Variable Account.
The exchange must be elected within 24 months from the Date
of Issue. No evidence of insurability will be required.
The Owner, the Insured and the Beneficiary under the new
policy will be the same as those under the exchanged Policy
on the date of the exchange. The Accumulation Value under
the new Policy will be equal to the Accumulation Value under
the old Policy on the date the exchange request is received.
The new policy will have a Death Benefit on the exchange
date not more than the Death Benefit of the original Policy
immediately prior to the exchange date. If the Accumulation
Value is insufficient to support the Death Benefit, the
Owner will be required to make additional Premium Payments
in order to effect the exchange. The new Policy will have a
Date of Issue and Issue Age as of the date of exchange. The
initial Specified Amount and any increases in Specified
Amount will have the same rate class as those of the
original Policy. Any indebtedness may be transferred to the
new policy.
The exchange may be subject to an equitable adjustment in
rates and values to reflect variances, if any, in the rates
and values between the two Policies. After adjustment, if
any excess is owed the Owner, LLANY will pay the excess to
the Owner in cash. The exchange may be subject to federal
income tax withholding.
INCONTESTABILITY
LLANY will not contest payment of the Death Benefit Proceeds
based on the initial Specified Amount after the Policy has
been in force during the Insured's lifetime for two years
from the Date of Issue. For any increase in Specified Amount
requiring evidence of insurability, LLANY will not contest
payment of the Death Benefit Proceeds based on such an
increase after it has been in force for two years from its
effective date.
MISSTATEMENT OF AGE OR GENDER
If the Age or gender of the Insured has been misstated, the
affected benefits will be adjusted. The amount of the Death
Benefit Proceeds will be 1. multiplied by 2. and then the
result added to 3. where:
1. is the Net Amount at Risk at the time of the Insured's
Death;
32
<PAGE>
2. is the ratio of the monthly Cost of Insurance applied in
the Policy month of death to the monthly Cost of
Insurance that should have been applied at the true Age
and gender in the Policy month of death; and
3. is the Accumulation Value at the time of the Insured's
Death.
SUICIDE
If the Insured dies by suicide, while sane or insane, within
two years from the Date of Issue, LLANY will pay no more
than the sum of the premiums paid, less any indebtedness and
the amount of any partial surrenders. If the Insured dies by
suicide, while sane or insane, within two years from the
date an application is accepted for an increase in the
Specified Amount, LLANY will pay no more than a refund of
the monthly charges for the cost of such additional benefit.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends
are payable. These Policies do not share in the profits or
surplus earnings of LLANY.
RIDERS
A Waiver of Monthly Deduction Rider may be added to the
Policy. Under this Rider, LLANY will maintain the Death
Benefit by paying covered monthly deductions during periods
of disability. Rider availability may vary by state.
TAX ISSUES
Section 7702 of the Code provides that if certain tests are
met, a Policy will be treated as a life insurance policy for
federal tax purposes. LLANY will monitor compliance with
these tests. The Policy should thus receive the same federal
income tax treatment as fixed benefit life insurance.
TAX TREATMENT OF DEATH BENEFIT
The death proceeds payable under a Policy are excludable
from gross income of the Beneficiary under Section 101 of
the Code.
FEDERAL INCOME TAX CONSIDERATIONS
Section 7702A of the Code defines modified endowment
contracts as those policies issued or materially changed on
or after June 21, 1988 on which the total premiums paid
during the first seven years exceed the amount that would
have been paid if the policy provided for paid up benefits
after seven level annual premiums. The Code provides for
taxation of surrenders, partial surrenders, loans,
collateral assignments and other pre-death distributions
from modified endowment contracts in the same way annuities
are taxed. Modified endowment contract distributions are
defined by the Code as amounts not received as an annuity
and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into
the policy. A 10% tax penalty generally applies to the
taxable portion of such distributions unless the Owner is
over 59 1/2 years of Age or disabled.
The Policies offered by this Prospectus may or may not be
issued as modified endowment contracts. LLANY will monitor
premiums paid and will notify the Owner when the Policy is
in jeopardy of becoming a modified endowment contract. If a
Policy is not a modified endowment contract, a cash
distribution during the first 15 years after
33
<PAGE>
a Policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the
Owner pursuant to Section 7702(f)(7) of the Code. The Owner
should carefully consider this potential effect and seek
further information before initiating any changes in the
terms of the Policy. Under certain conditions, a Policy may
become a modified endowment contract as a result of a
material change or a reduction in benefits as defined by
Section 7702A(c) of the Code. LLANY will monitor compliance
with these tests.
In addition to meeting the tests required under Section 7702
and Section 7702A, Section 817(h) of the Code requires that
the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations issued by the
Secretary of the Treasury set the standards for measuring
the adequacy of this diversification. A variable life
insurance policy that is not adequately diversified under
these regulations would not be treated as life insurance
under Section 7702 of the Code. To be adequately
diversified, each Variable Sub-Account must meet certain
tests. LLANY believes the Variable Account investments meet
the applicable diversification standards.
Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of funds, transfers
between funds, exchanges of funds or changes in investment
objectives of funds such that the Policy would no longer
qualify as life insurance under Section 7702 of the Code,
LLANY reserves the right to take steps required to remain in
compliance.
LLANY will monitor compliance with these regulations and, to
the extent necessary, will change the objectives or assets
of the Variable Sub-Account investments to remain in
compliance. LLANY also reserves the right to make changes in
this Policy or to make distributions from the Policy to the
extent it deems necessary, in its sole discretion, to
continue to qualify this Policy as life insurance.
A total surrender or termination of the Policy by lapse may
have adverse tax consequences. If the amount received by the
Owner plus total Policy indebtedness exceeds the premiums
paid into the Policy, the excess will generally be treated
as taxable income, whether or not the Policy is a modified
endowment contract.
Federal estate and state and local estate, inheritance and
other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Owner or
Beneficiary.
TAXATION OF LLANY
LLANY is taxed as a life insurance company under the Code.
Since the Variable Account is not a separate entity from
LLANY and its operations form a part of LLANY, it will not
be taxed separately as a "regulated investment company"
under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Separate Account
are reinvested and taken into account in determining the
value of Variable Accumulation Units.
LLANY does not initially expect to incur any Federal income
tax liability that would be chargeable to the Variable
Account. Based upon these expectations, no charge is
currently being made against the Variable Account for
federal income taxes. If, however, LLANY determines that on
a separate company basis such taxes may be incurred, it
reserves the right to assess a charge for such taxes against
the Variable Account.
LLANY may also incur state and local taxes in addition to
premium taxes. At present, these taxes are not significant.
If they increase, however, additional charges for such taxes
may be made.
34
<PAGE>
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as
tax advice. Counsel and other competent advisers should be
consulted for more complete information. This discussion is
based on LLANY's understanding of Federal income tax laws as
they are currently interpreted by the Internal Revenue
Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations.
FAIR VALUE OF THE POLICY
It is sometimes necessary for tax and other reasons to
determine the "fair value" of the Policy. The fair value of
the Policy is measured differently for different purposes.
It is not necessarily the same as the Accumulation Value or
the Net Accumulation Value, although the amount of the Net
Accumulation Value will typically be important in valuing
the Policy for this purpose. For some but not all purposes,
the fair value of the Policy may be the Surrender Value of
the Policy. The fair value of the Policy may be impacted by
developments other than the performance of the underlying
investments. For example, without regard to any other
factor, it increases as the Insured grows older. Moreover,
on the death of the Insured, it tends to increase
significantly. The Owner should consult with his or her
advisors for guidance as to the appropriate methodology for
determining the fair value of the Policy for a particular
purpose.
DIRECTORS AND OFFICERS OF LLANY
The following persons are Directors and Officers of LLANY.
Except as indicated below, the address of each is 120
Madison Street, Suite 1700, Syracuse, New York 13202 and
each has been employed by LLANY or its affiliates for more
than five years.
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------
<S> <C>
ROLAND C. BAKER President [1/95-present], First
DIRECTOR Penn-Pacific Life Insurance Co. Formerly:
1801 S. Meyers Road Chairman and CEO [7/88-1/95], Baker,
Oakbrook Terrace, IL 60181 Rakish, Shipley & Politzer, Inc.
J. PATRICK BARRETT Chairman and Chief Executive Officer,
DIRECTOR CARPAT Investments
4605 Watergap
Manlius, NY 13104
DAVID N. BECKER Vice President and Chief Actuarial
SECOND VICE PRESIDENT AND Officer, The Lincoln National Life
APPOINTED ACTUARY Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46802
THOMAS D. BELL, JR. President and Chief Executive Officer
DIRECTOR [4/95-present], Burson-Marstellar.
230 Park Avenue, South Formerly: Vice Chairman [3/94-5/95],
New York, NY 10003 Gulfstream Aerospace Corp.; Vice Chairman
and Chief Executive Officer [6/89-3/94],
Burson-Marstellar
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------
<S> <C>
JON A. BOSCIA President, Lincoln National Corp.
DIRECTOR [1/98-present], Formerly: President and
1300 South Clinton Street Chief Executive Officer [10/96-1/98], and
Fort Wayne, IN 46802 Chief Operating Officer [5/94-10/96], The
Lincoln National Life Insurance Co.
Formerly: President [7/91-5/94] Lincoln
Investment Management Inc.
JOHN H. GOTTA Senior Vice President and General Manager
SECOND VICE PRESIDENT [1/98-present], The Lincoln National Life
350 Church Street Insurance Co. Formerly: Senior Vice
Hartford, CT 06103 President, Connecticut General Life
Insurance Company [3/96-12/97]; Vice
President, Connecticut Mutual Life
Insurance Company [8/94-3/96]; Vice
President, Connecticut General Life
Insurance Company [3/93-8/94]
PHILIP L. HOLSTEIN President and Treasurer, Lincoln Life &
PRESIDENT AND DIRECTOR Annuity Company of New York [7/96-Present]
Formerly: President, [1/82-7/96] The
Holstein Company, Inc.
HARRY L. KAVETAS Executive Vice President and Chief
DIRECTOR Financial Officer [2/94-present], Eastman
343 State Street Kodak Company. Formerly: Vice President
Rochester, NY 14650-0235 [9/61-12/93], IBM Corporation
BARBARA S. KOWALCZYK Senior Vice President, Corporation
DIRECTOR Planning [5/94-present], Lincoln National
200 East Berry Street Corp.; Formerly: Senior Vice President
Fort Wayne, IN 46802 [7/92-5/94], Lincoln Investment Management
Co.
MARGEURITE L. LACHMAN Managing Director, Schroder Real Estate
DIRECTOR Associates
437 Madison Avenue, 18th
Floor
New York, NY 10022
LOUIS G. MARCOCCIA Senior Vice President, Business, Finance
DIRECTOR and Administrative Services, Syracuse
Skytop Office Building University
Skytop Road
Syracuse, NY 13244-5300
TROY D. PANNING Second Vice President and Chief Financial
SECOND VICE PRESIDENT AND Officer
CHIEF FINANCIAL OFFICER [11/96-present], Lincoln Life & Annuity
Company of New York; Formerly: Accountant
[9/90-11/96], Ernst & Young LLP
JOHN M. PIETRUSKI Chairman of Board, Texas Biotechnology
DIRECTOR Corp.
One Penn Plaza
Suite 3408
New York, NY 10119
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND
POSITION(S)
WITH REGISTRANT PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- -----------------------------------------------------------------------
<S> <C>
LAWRENCE T. ROWLAND President [97-present] Lincoln
DIRECTOR Reinsurance, Formerly: Senior Vice
One Reinsurance Place President (96), Vice President [94-95]
1700 Magnavox Way Lincoln Reinsurance.
Fort Wayne, IN 46804
GABRIEL L. SHAHEEN President, Chief Executive Officer and
DIRECTOR Director [1/98-present], The Lincoln
1300 South Clinton Street National Life Insurance Co. Formerly:
Fort Wayne, IN 46802 Managing Director, Lincoln National (UK)
PLC [12/96-1/98]; President, Lincoln
National Reinsurance Company [7/94-12/96];
Senior Vice President, Lincoln National
Life Reinsurance Company [1/93-7/95]
ROBERT O. SHEPPARD, ESQ. Assistant Vice President, Lincoln Life &
ASSISTANT VICE PRESIDENT Annuity Company of New York
[7/97-present]; Second Vice President,
Unity Mutual Life Insurance Company
[2/86-7/97]
RICHARD C. VAUGHAN Executive Vice President and Chief
DIRECTOR Financial Officer [1/95-present] Formerly:
200 East Berry Street Senior Vice President [5/92-1/95], Lincoln
Fort Wayne, IN 46802 National Corp.
C. SUZANNE WOMACK Secretary, Lincoln Life & Annuity Company
SECRETARY of New York [7/96-present]; Second Vice
200 East Berry Street President and Secretary, Lincoln National
Fort Wayne, IN 46802 Corporation [5/97-present]; Second Vice
President and Secretary, The Lincoln
National Life Insurance Company
[5/97-present]; Secretary, Lincoln
Financial Advisors Corporation
[6/87-present].
</TABLE>
DISTRIBUTION OF POLICIES
LLANY intends to offer the Policy in New York. Lincoln
Financial Advisors Corporation ("LFA"), the principal
underwriter for the Policies, is registered with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers ("NASD"). The
principal business address of LFA is 350 Church Street,
Hartford, CT 06103.
The Policy will be sold by individuals, who in addition to
being licensed as life insurance agents for LLANY, are also
registered representatives of LFA. These representatives may
receive commission and service fees up to 95% of the first
year premium, plus up to 10% of all other premiums paid. In
lieu of premium-based commission, LLANY may pay equivalent
amounts based on Accumulation Value. The selling office
receives additional compensation on the first year premium
and all additional premiums. In some situations, the selling
office may elect to share its commission with the registered
representative. Selling representatives are also eligible
for bonuses and non-cash compensation if certain production
levels are reached. All compensation is paid from LLANY's
resources, which include sales charges made under this
Policy.
37
<PAGE>
CHANGES OF INVESTMENT POLICY
LLANY may materially change the investment policy of the
Variable Account. LLANY must inform the Owners and obtain
all necessary regulatory approvals. Any change must be
submitted to the various state insurance departments which
shall disapprove it if deemed detrimental to the interests
of the Owners or if it renders LLANY's operations hazardous
to the public. If an Owner objects, the Policy may be
converted to a substantially comparable fixed benefit life
insurance policy offered by LLANY on the life of the
Insured. The Owner has the later of 60 days from the date of
the investment policy change or 60 days from being informed
of such change to make this conversion. LLANY will not
require evidence of insurability for this conversion.
The new policy will not be affected by the investment
experience of any separate account. The new policy will be
for an amount of insurance not exceeding the Death Benefit
of the Policy converted on the date of such conversion.
OTHER CONTRACTS ISSUED BY LLANY
LLANY from time to time offers other variable annuity
contracts and variable life insurance policies with benefits
which vary in accordance with the investment experience of a
separate account of LLANY.
STATE REGULATION
LLANY is subject to the laws of New York governing insurance
companies and to regulation by the New York Insurance
Department. An annual statement in a prescribed form is
filed with the New York Insurance Department each year
covering the operation of LLANY for the preceding year and
its financial condition as of the end of such year.
Regulation by the Insurance Department includes periodic
examination to determine LLANY's contract liabilities and
reserves so that the Insurance Department may certify the
items are correct. LLANY's books and accounts are subject to
review by the Insurance Department at all times and a full
examination of its operations is conducted periodically by
the New York Department of Insurance. Such regulation does
not, however, involve any supervision of management or
investment practices or policies.
A blanket bond with a per event limit of $25 million and an
annual policy aggregate limit of $50 million covers all of
the officers and employees of the Company.
REPORTS TO OWNERS
LLANY maintains Policy records and will mail to each Owner,
at the last known address of record, an annual statement
showing the amount of the current Death Benefit, the
Accumulation Value, and Surrender Value, premiums paid and
monthly charges deducted since the last report, the amounts
invested in each Sub-Account and any Loan Account Value.
Owners will also be sent annual reports containing financial
statements for the Variable Account and annual and
semi-annual reports of the Funds as required by the 1940
Act.
In addition, Owners will receive statements of significant
transactions, such as changes in Specified Amount, changes
in Death Benefit Option, transfers among Sub-Accounts,
Premium Payments, loans, loan repayments, reinstatement and
termination.
ADVERTISING
LLANY is also ranked and rated by independent financial
rating services, including Moody's, Standard & Poor's, Duff
& Phelps and A.M. Best Company. The purpose of these ratings
is to reflect the financial strength or claims-paying
ability of LLANY. The
38
<PAGE>
ratings are not intended to reflect the investment
experience or financial strength of the Separate Account.
LLANY may advertise these ratings from time to time. In
addition, LLANY may include in certain advertisements,
endorsements in the form of a list of organizations,
individuals or other parties which recommend LLANY or the
Policies. Furthermore, LLANY may occasionally include in
advertisements comparisons of currently taxable and tax
deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles
and general economic conditions.
PREPARING FOR YEAR 2000
Many existing computer programs use only two digits to
identify a year in the date field. These programs were
designed and developed without considering the impact of the
upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results
by or at the year 2000. The year 2000 issue affects
virtually all companies and organizations.
LLANY, as part of its year 2000 updating process, and in
conjunction with its parent company The Lincoln National
Life Insurance Company, is responsible for the updating of
its Account M-related computer systems. An affiliate of
LLANY, Delaware Service Company (Delaware), provides
substantially all of the necessary accounting and valuation
services for Account M. Delaware, for its part, is
responsible for updating all of its internal computer
systems, including those which service Account M, to
accommodate the year 2000. LLANY, Lincoln Life and Delaware
(the "Companies") have each been redirecting a large portion
of their internal information technology efforts and
contracting with outside consultants as part of this
updating process. Meanwhile, they have been coordinating
with each other as part of the the process.
The year 2000 issue is pervasive and complex and affects
virtually every aspect of the businesses of the Companies.
The computer systems of the Companies and their interfaces
with the computer systems of vendors, suppliers, customers
and other business partners are particularly vulnerable. The
inability to properly recognize date-sensitive electronic
information and to transfer data between systems could cause
errors or even complete failure of systems, which would
result in a temporary inability to process transactions
correctly and engage in normal business activities for
Account M. The Companies respectively are redirecting
significant portions of their internal information
technology efforts and are contracting, as needed, with
outside consultants to help update their systems to
accommodate the year 2000. The Companies have respectively
initiated formal discussions with other critical parties
that interface with their systems to gain an understanding
of the progress by those parties in addressing year 2000
issues. While the Companies are making substantial efforts
to address their own systems and the systems with which they
interface, it is not possible to provide assurance that
operational problems will not occur. The Companies presently
believe that, assuming the modification of existing computer
systems, updates by vendors and conversion to new software
and hardware, the year 2000 issue will not pose significant
operations problems for their respective computer systems.
In addition, the Companies are incorporating potential
issues surrounding year 2000 into their contingency planning
process, in the event that, despite these substantial
efforts, there are unresolved year 2000 problems. If the
remediation efforts noted above are not completed timely or
properly, the year 2000 issue could have a material adverse
impact on the operation of the businesses of the Companies.
The cost of addressing year 2000 issues and the timeliness
of completion is being monitored by management of the
respective Companies. Nevertheless, there can be no
guarantee either by LLANY, Lincoln Life or by Delaware that
estimated costs will be
39
<PAGE>
achieved, and actual results could differ significantly from
those anticipated. Specific factors that might cause such
differences include, but are not limited to, the
availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer
problems, and other uncertainties.
EXPERTS
Actuarial matters included in this prospectus have been
examined by Vaughn W. Robbins, FSA as stated in the Opinion
filed as an Exhibit to the Registration Statement.
Legal matters in connection with the Policies described
herein are being passed upon by Robert O. Sheppard, Esq., as
stated in the Opinion filed as an Exhibit to the
Registration Statement.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, with respect to the Policies offered hereby. This
Prospectus does not contain all the information set forth in
the Registration Statement and amendments thereto and
exhibits filed as a part thereof, to all of which reference
is hereby made for further information concerning the
Variable Account, LLANY, and the Policies offered hereby.
Statements contained in this Prospectus as to the content of
Policies and other legal instruments are summaries. For a
complete statement of the terms thereof, reference is made
to such instruments as filed.
40
<PAGE>
APPENDIX 1
GUARANTEED MAXIMUM COST OF INSURANCE RATES
The Guaranteed Maximum Cost of Insurance Rates, per $1,000
of Net Amount at Risk, for standard risks are set forth in
the following Table based on the 1980 Commissioners Standard
Ordinary Mortality Tables, Age Nearest Birthday (1980 CSO);
or for unisex rates, on the 1980 CSO-B Table.
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
0 0.34845 0.24089 0.32677
1 0.08917 0.07251 0.08667
2 0.08251 0.06750 0.07917
3 0.08167 0.06584 0.07834
4 0.07917 0.06417 0.07584
5 0.07501 0.06334 0.07251
6 0.07167 0.06084 0.06917
7 0.06667 0.06000 0.06584
8 0.06334 0.05834 0.06250
9 0.06167 0.05750 0.06084
10 0.06084 0.05667 0.06000
11 0.06417 0.05750 0.06250
12 0.07084 0.06000 0.06917
13 0.08251 0.06250 0.07834
14 0.09584 0.06887 0.09001
15 0.11085 0.07084 0.10334
16 0.12585 0.07601 0.11585
17 0.13919 0.07917 0.12752
18 0.14836 0.08167 0.13502
19 0.15502 0.08501 0.14085
20 0.15836 0.08751 0.14502
21 0.15919 0.08917 0.14585
22 0.15752 0.09084 0.14419
23 0.15502 0.09251 0.14252
24 0.15189 0.09501 0.14085
25 0.14752 0.09668 0.13752
26 0.11419 0.09918 0.13585
27 0.14252 0.10168 0.13418
28 0.14169 0.10501 0.13418
29 0.14252 0.10635 0.13585
30 0.14419 0.11251 0.13752
31 0.14836 0.11668 0.14169
32 0.15252 0.12085 0.14585
33 0.15919 0.12502 0.15252
34 0.16889 0.13168 0.15919
35 0.17586 0.13752 0.16836
36 0.18670 0.14669 0.17837
37 0.20004 0.15752 0.19170
38 0.21505 0.17003 0.20588
39 0.23255 0.18503 0.22338
40 0.25173 0.20171 0.24173
41 0.27424 0.22005 0.26340
42 0.29675 0.23922 0.28508
43 0.32260 0.25757 0.31010
44 0.34929 0.27674 0.33428
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
45 0.37931 0.29675 0.36263
46 0.41017 0.31677 0.39182
47 0.44353 0.33761 0.42268
48 0.47856 0.36096 0.45437
49 0.51777 0.38598 0.49107
50 0.55948 0.41350 0.53028
51 0.60870 0.44270 0.57533
52 0.66377 0.47523 0.62539
53 0.72636 0.51276 0.68297
54 0.79730 0.55114 0.74722
55 0.87326 0.59118 0.81566
56 0.95591 0.63123 0.88996
57 1.04192 0.66961 0.96593
58 1.13378 0.70633 1.04609
59 1.23236 0.74556 1.13211
60 1.34180 0.78979 1.22817
61 1.46381 0.84488 1.33511
62 1.60173 0.91417 1.45796
63 1.75809 1.00267 1.59922
64 1.93206 1.10539 1.75725
65 2.12283 1.21731 1.92955
66 2.32623 1.33511 2.11195
67 2.54312 1.45461 2.30614
68 2.77350 1.57247 2.50878
69 3.02328 1.69955 2.72909
70 3.30338 1.84590 2.97466
71 3.62140 2.02325 3.25640
72 3.98666 2.24419 3.58279
73 4.40599 2.51548 3.95978
74 4.87280 2.83552 4.38330
75 5.37793 3.19685 4.84334
76 5.91225 3.59370 5.33245
77 6.46824 4.01942 5.84227
78 7.04089 4.47410 6.36948
79 7.64551 4.97042 6.92851
80 8.30507 5.52957 7.54229
81 9.03761 6.17118 8.22883
82 9.86724 6.91414 9.01216
83 10.80381 7.77075 9.90124
84 11.82571 8.72632 10.87533
85 12.91039 9.76952 11.92213
86 14.03509 10.89151 13.01471
87 15.18978 12.08770 14.15507
88 16.36948 13.35774 15.33494
89 17.57781 14.70820 16.56493
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
90 18.82881 16.15259 17.85746
91 20.14619 17.71416 19.23699
92 21.57655 19.43814 20.76665
93 23.20196 21.40786 22.49837
94 25.28174 23.63051 24.70915
<CAPTION>
ATTAINED
AGE MALE FEMALE UNISEX
(NEAREST MONTHLY MONTHLY MONTHLY
BIRTHDAY) RATE RATE RATE
- ----------- --------- --------- ---------
<S> <C> <C> <C>
95 28.27411 27.16158 27.82758
96 33.10577 32.32378 32.78845
97 41.68476 41.21204 41.45783
98 58.01259 57.81394 57.95663
99 90.90909 90.90909 90.90909
</TABLE>
42
<PAGE>
APPENDIX 2
ILLUSTRATION OF SURRENDER CHARGES
The initial Surrender Charge is calculated as (a) times (b),
plus (c), with that result not to exceed (d), where
(a) is 1.25;
(b) is the curtate net level premium for the Specified
Amount of insurance, calculated using the 1980
Commissioners Standard Ordinary mortality table and 4%
interest;
(c) is $10 per $1000 of Specified Amount; and
(d) is $50 per $1000 of Specified Amount.
The Surrender Charge decreases from its initial amount to
zero over a period of at most 15 years. If the insured's Age
at issue is 55 or greater, then the Surrender Charge
decreases to zero over a period of ten years. In general
terms, the initial Surrender Charge is amortized in
proportion to a twenty year life contingent annuity due,
with a further reduction in the final years of the surrender
charge period. In formulas, the Surrender Charge a point in
time "t" years after issue is (a) times (b) times (c), where
(a) is the initial Surrender Charge;
(b) is the ratio of a life contingent annuity due beginning
at time t and ending 20 years after issue, divided by a
life contingent annuity due beginning at issue and
ending 20 years after issue, both calculated using the
1980 Commissioners Standard Ordinary mortality table and
4% interest; and
(c) is a durational factor depending on the issue Age and
policy year "t". Values are shown below for issue Age 50
or less, and for issue Age 55 or more. Values for Ages
51 through 54 fall in between these values.
<TABLE>
<CAPTION>
AGE 50 AGES 55
T OR LESS OR MORE
------------ ----------- -------------
<S> <C> <C>
7 or less 100% 75%
8 100% 50%
9 100% 25%
10 100% 0%
11 80% 0%
12 60% 0%
13 40% 0%
14 20% 0%
15 or more 0% 0%
</TABLE>
EXAMPLE 1: A male, Age 45, purchases a policy with a
Specified Amount of $100,000.
The initial Surrender Charge is computed as follows:
net level premium = 1987.66
$10 per $1000 of Specified Amount = $1000
$50 per $1000 of Specified Amount = $5000
initial Surrender Charge = 1.25 X $1987.66 + 1000 =
$3,484.57, which is less than $5000.
43
<PAGE>
This amount decreased to zero over 15 years as follows:
<TABLE>
<CAPTION>
YEARS INITIAL
AFTER SURRENDER ANNUITY DURATIONAL SURRENDER
ISSUE CHARGE RATIO FACTOR CHARGE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
0 $3,484.57 1.00000 100% 3,484.57
1 $3,484.57 0.96609 100% 3,366.42
2 $3,484.57 0.93101 100% 3,244.18
3 $3,484.57 0.89471 100% 3,117.68
4 $3,484.57 0.85711 100% 2,986.67
5 $3,484.57 0.81818 100% 2,850.99
6 $3,484.57 0.77782 100% 2,710.36
7 $3,484.57 0.73600 100% 2,564.64
8 $3,484.57 0.69265 100% 2,413.59
9 $3,484.57 0.64769 100% 2,256.93
10 $3,484.57 0.60104 100% 2,094.38
11 $3,484.57 0.55257 80% 1,540.37
12 $3,484.57 0.50212 60% 1,049.80
13 $3,484.57 0.44952 40% 626.55
14 $3,484.57 0.39456 20% 274.97
15 $3,484.57 0.33701 0% 0.00
</TABLE>
EXAMPLE 2: A female, Age 55, purchases a policy with a
Specified Amount of $200,000.
The initial Surrender Charge is computed as follows:
net level premium = $4,996.55
$10 per $1000 of Specified Amount = $2,000
$50 per $1000 of Specified Amount = $10,000
initial Surrender Charge = 1.25 X $4996.55 + 2000 =
$8,245.68, which is less than $10,000.
This amount decreased to zero over 10 years as follows:
<TABLE>
<CAPTION>
YEARS INITIAL
AFTER SURRENDER ANNUITY DURATIONAL SURRENDER
ISSUE CHARGE RATIO FACTOR CHARGE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
0 $8,245.68 1.00000 100% 8,245.68
1 $8,245.68 0.96649 100% 7,969.40
2 $8,245.68 0.93185 100% 7,683.73
3 $8,245.68 0.89596 100% 7,387.80
4 $8,245.68 0.85871 100% 7,080.67
5 $8,245.68 0.82003 100% 6,761.74
6 $8,245.68 0.77986 100% 6,430.50
7 $8,245.68 0.73818 75% 4,565.07
8 $8,245.68 0.69496 50% 2,885.22
9 $8,245.68 0.65022 25% 1,340.37
10 $8,245.68 0.60387 0% 0.00
</TABLE>
44
<PAGE>
APPENDIX 3
CORRIDOR PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED AGE OF
THE INSURED CORRIDOR
(NEAREST BIRTHDAY) PERCENTAGE
- ---------------------- -------------
<S> <C>
0-40 250%
41 243%
42 236%
43 229%
44 222%
45 215%
46 209%
47 203%
48 197%
49 191%
50 185%
51 178%
52 171%
53 164%
54 157%
55 150%
56 146%
57 142%
58 138%
59 134%
60 130%
61 128%
62 126%
63 124%
64 122%
65 120%
66 119%
67 118%
68 117%
69 116%
70 115%
71 113%
72 111%
73 109%
74 107%
75-90 105%
91 104%
92 103%
93 102%
94 101%
95-99 100%
</TABLE>
45
<PAGE>
APPENDIX 4
ILLUSTRATIONS OF ACCUMULATION VALUES, SURRENDER VALUES, AND
DEATH BENEFIT PROCEEDS
The illustrations in this Prospectus have been prepared to
help show how values under the Policies change with
investment performance. The illustrations illustrate how
Accumulation Values, Surrender Values and Death Benefit
Proceeds under a Policy would vary over time if the
hypothetical gross investment rates of return were a uniform
annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%,
6%, or 12% over a period of years, but fluctuates above or
below those averages for individual years, the Accumulation
Values, Surrender Values and Death Benefit Proceeds may be
different. The illustrations also assume there are no Policy
Loans or Partial Surrenders, no additional Premium Payments
are made other than shown, no Accumulation Values are
allocated to the Fixed Account, and there are no changes in
the Specified Amount or Death Benefit Option.
The amounts shown for the Accumulation Value, Surrender
Value and Death Benefit Proceeds as of each Policy
Anniversary reflect the fact that charges are made and
expenses applied which lower investment return on the assets
held in the Sub-Accounts. Daily charges are made against the
assets of the Sub-Accounts for assuming mortality and
expense risks. The mortality and expense risk charges are
equivalent to an annual effective rate of 0.75% of the daily
net asset value of the Variable Account in years 1-10, 0.35%
in years 11-20 and 0.20% in years 21 and later. In addition,
the amounts shown also reflect the deduction of Fund
investment advisory fees and other expenses which will vary
depending on which funding vehicle is chosen but which are
assumed for purposes of these illustrations to be equivalent
to an annual effective rate of 0.83% of the daily net asset
value of the Variable Account. This rate reflects an
arithmetic average of total Fund portfolio annual expenses
for the year ending December 31, 1997.
Considering charges for mortality and expense risks and the
assumed Fund expenses, gross annual rates of 0%, 6% and 12%
correspond to net investment experience at annual rates of
-1.55%, 4.45% and 10.45%. for years 1-10, -1.15%, 4.85% and
10.85% in years 11-20, and -1.00%, 5.00% and 11.00% in years
21 and later.
The illustrations also reflect the fact that LLANY makes
monthly charges for providing insurance protection. Current
values reflect current Cost of Insurance charges and
guaranteed values reflect the maximum Cost of Insurance
charges guaranteed in the Policy. The values shown are for
Policies which are issued as preferred and standard.
Policies issued on a substandard basis would result in lower
Accumulation Values and Death Benefit Proceeds than those
illustrated.
The illustrations also reflect the fact that LLANY deducts a
premium load of 5% from each Premium Payment.
The Surrender Values shown in the illustrations reflect the
fact that LLANY will deduct a Surrender Charge from the
Policy's Accumulation Value for any Policy surrendered in
full during the first fifteen Policy Years. Surrender
Charges reflect, in part, age and Specified Amount, and are
shown in the illustrations.
In addition, the illustrations reflect the fact that LLANY
deducts a monthly administrative charge at the beginning of
each Policy Month. This monthly administrative expense
charge is a flat dollar charge of $15 per month in the first
year. Current values reflect a current flat dollar monthly
administrative expense charge of $5 (and guaranteed values,
$10) in subsequent Policy Years.
Upon request, LLANY will furnish a comparable illustration
based on the proposed insured's age, gender classification,
smoking classification, risk classification and premium
payment requested.
46
<PAGE>
MALE AGE 45 NONSMOKER
PREFERRED -- $5,404 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,674 500,000 500,000 500,000 3,454 3,708 3,963 0 0 0
2 11,632 500,000 500,000 500,000 5,997 6,697 7,430 0 0 0
3 17,887 500,000 500,000 500,000 8,319 9,632 11,067 0 0 0
4 24,456 500,000 500,000 500,000 10,413 12,504 14,888 0 0 0
5 31,353 500,000 500,000 500,000 12,260 15,285 18,890 0 1,030 4,635
6 38,594 500,000 500,000 500,000 13,849 17,961 23,082 297 4,409 9,530
7 46,198 500,000 500,000 500,000 15,140 20,484 27,444 2,317 7,661 14,620
8 54,182 500,000 500,000 500,000 16,106 22,816 31,966 4,038 10,748 19,898
9 62,565 500,000 500,000 500,000 16,705 24,905 36,629 5,421 13,620 25,345
10 71,368 500,000 500,000 500,000 16,895 26,693 41,408 6,423 16,222 30,936
15 122,438 500,000 500,000 500,000 11,026 30,207 68,212 11,026 30,207 68,212
20 187,618 0 500,000 500,000 0 16,295 96,994 0 16,295 96,994
25 270,806 0 0 500,000 0 0 121,517 0 0 121,517
30 376,978 0 0 500,000 0 0 123,766 0 0 123,766
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
46
<PAGE>
MALE AGE 45 NONSMOKER
PREFERRED -- $5,404 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,674 500,000 500,000 500,000 3,454 2,708 3,963 0 0 0
2 11,632 500,000 500,000 500,000 6,885 7,613 8,373 0 0 0
3 17,887 500,000 500,000 500,000 10,159 11,584 13,133 0 0 0
4 24,456 500,000 500,000 500,000 13,304 15,653 18,309 0 719 3,376
5 31,353 500,000 500,000 500,000 16,348 19,850 23,974 2,093 5,595 9,719
6 38,594 500,000 500,000 500,000 19,316 24,207 30,208 5,764 10,655 16,656
7 46,198 500,000 500,000 500,000 22,186 28,710 37,048 9,363 15,886 24,225
8 54,182 500,000 500,000 500,000 24,848 33,251 44,446 12,780 21,183 32,378
9 62,565 500,000 500,000 500,000 27,466 37,997 52,630 16,181 26,713 41,345
10 71,368 500,000 500,000 500,000 29,973 42,892 61,618 19,501 32,420 51,146
15 122,438 500,000 500,000 500,000 40,390 69,871 123,118 40,390 69,871 123,118
20 187,618 500,000 500,000 500,000 47,076 101,270 225,111 47,076 101,270 225,111
25 270,806 500,000 500,000 500,000 50,282 139,907 402,392 50,282 139,907 402,392
30 376,978 500,000 500,000 756,077 43,768 183,037 706,614 43,768 183,037 706,614
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
47
<PAGE>
MALE AGE 55 NONSMOKER
PREFERRED -- $9,194 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,654 500,000 500,000 500,000 5,882 6,315 6,750 0 0 0
2 19,790 500,000 500,000 500,000 8,795 9,946 11,154 0 0 0
3 30,433 500,000 500,000 500,000 11,198 13,268 15,545 0 0 0
4 41,609 500,000 500,000 500,000 13,064 16,236 19,893 0 0 0
5 53,343 500,000 500,000 500,000 14,359 18,796 24,164 0 0 3,762
6 65,664 500,000 500,000 500,000 15,025 20,867 28,294 0 1,464 8,891
7 78,601 500,000 500,000 500,000 14,991 22,351 32,205 1,209 8,570 18,423
8 92,184 500,000 500,000 500,000 14,164 23,124 35,786 5,506 14,465 27,128
9 106,447 500,000 500,000 500,000 12,434 23,034 38,904 8,377 18,978 34,847
10 121,423 500,000 500,000 500,000 9,686 21,923 41,408 9,686 21,923 41,408
15 208,313 0 0 500,000 0 0 39,669 0 0 39,669
20 319,209 0 0 0 0 0 0 0 0 0
25 460,743 0 0 0 0 0 0 0 0 0
30 641,381 0 0 0 0 0 0 0 0 0
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
48
<PAGE>
MALE AGE 55 NONSMOKER
PREFERRED -- $9,194 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9,654 500,000 500,000 500,000 5,882 6,315 6,750 0 0 0
2 19,790 500,000 500,000 500,000 11,502 12,736 14,026 0 0 0
3 30,433 500,000 500,000 500,000 16,771 19,175 21,790 0 0 0
4 41,609 500,000 500,000 500,000 21,786 25,729 30,197 415 4,358 8,826
5 53,343 500,000 500,000 500,000 26,505 32,361 39,275 6,104 11,960 18,874
6 65,664 500,000 500,000 500,000 31,064 39,213 49,244 11,661 19,810 29,841
7 78,601 500,000 500,000 500,000 35,491 46,325 60,232 21,709 32,543 46,450
8 92,184 500,000 500,000 500,000 39,767 53,691 72,337 31,109 45,032 63,679
9 106,447 500,000 500,000 500,000 43,736 61,170 85,536 39,680 57,113 81,480
10 121,423 500,000 500,000 500,000 47,327 68,699 99,894 47,327 68,699 99,894
15 208,313 500,000 500,000 500,000 61,186 109,986 199,456 61,186 109,986 199,456
20 319,209 500,000 500,000 500,000 64,100 154,876 368,516 64,100 154,876 368,516
25 460,743 500,000 500,000 704,592 45,947 200,052 671,040 45,947 200,052 671,040
30 641,381 0 500,000 1,236,509 0 246,733 1,177,627 0 246,733 1,177,627
</TABLE>
Amounts are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
49
<PAGE>
FEMALE AGE 45 NONSMOKER
PREFERRED -- $4,335 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,552 500,000 500,000 500,000 2,796 3,001 3,206 0 0 0
2 9,332 500,000 500,000 500,000 4,891 5,456 6,047 0 0 0
3 14,350 500,000 500,000 500,000 6,839 7,903 9,064 0 0 0
4 19,620 500,000 500,000 500,000 8,628 10,327 12,263 0 0 0
5 25,153 500,000 500,000 500,000 10,252 12,720 15,656 0 517 3,452
6 30,962 500,000 500,000 500,000 11,698 15,066 19,249 93 3,461 7,644
7 37,063 500,000 500,000 500,000 12,960 17,354 23,058 1,978 6,372 12,075
8 43,468 500,000 500,000 500,000 14,022 19,565 27,088 3,686 9,228 16,752
9 50,193 500,000 500,000 500,000 14,858 21,665 31,338 5,193 12,001 21,673
10 57,255 500,000 500,000 500,000 15,465 23,648 35,831 6,499 14,682 26,865
15 98,226 500,000 500,000 500,000 15,434 32,227 64,405 15,434 32,227 64,405
20 150,517 500,000 500,000 500,000 7,841 35,269 105,620 7,841 35,269 105,620
25 217,255 0 500,000 500,000 0 22,729 164,434 0 22,729 164,434
30 302,431 0 0 500,000 0 0 252,867 0 0 252,867
</TABLE>
Amount are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
50
<PAGE>
FEMALE AGE 45 NONSMOKER
PREFERRED -- $4,335 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,552 500,000 500,000 500,000 2,796 3,001 3,206 0 0 0
2 9,332 500,000 500,000 500,000 5,624 6,212 6,826 0 0 0
3 14,350 500,000 500,000 500,000 8,371 9,528 10,784 0 0 0
4 19,620 500,000 500,000 500,000 11,038 12,953 15,116 0 173 2,336
5 25,153 500,000 500,000 500,000 13,628 16,494 19,864 1,425 4,290 7,661
6 30,962 500,000 500,000 500,000 16,096 20,109 25,024 4,491 8,504 13,419
7 37,063 500,000 500,000 500,000 18,444 23,804 30,642 7,461 12,821 19,659
8 43,468 500,000 500,000 500,000 20,676 27,584 36,770 10,340 17,248 26,434
9 50,193 500,000 500,000 500,000 22,841 31,504 43,514 13,176 21,839 33,849
10 57,255 500,000 500,000 500,000 24,940 35,569 50,939 15,974 26,603 41,973
15 98,226 500,000 500,000 500,000 34,651 58,979 102,672 34,651 58,979 102,672
20 150,517 500,000 500,000 500,000 42,039 87,006 188,481 42,039 87,006 188,481
25 217,255 500,000 500,000 500,000 47,667 122,356 336,209 47,687 122,356 336,209
30 302,431 500,000 500,000 630,779 48,846 164,697 589,513 48,846 164,697 589,513
</TABLE>
Amount are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
51
<PAGE>
FEMALE AGE 55 NONSMOKER
PREFERRED -- $7,200 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
GUARANTEED BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,560 500,000 500,000 500,000 4,762 5,106 5,451 0 0 0
2 15,498 500,000 500,000 500,000 7,691 8,626 9,605 0 0 0
3 23,833 500,000 500,000 500,000 10,374 12,098 13,987 0 0 0
4 32,585 500,000 500,000 500,000 12,824 15,535 18,638 0 0 936
5 41,774 500,000 500,000 500,000 15,031 18,922 23,578 0 2,017 6,673
6 51,423 500,000 500,000 500,000 16,970 22,230 28,814 893 6,154 12,737
7 61,555 500,000 500,000 500,000 18,582 25,397 34,322 7,170 13,984 22,909
8 72,192 500,000 500,000 500,000 19,792 28,336 40,058 12,629 21,173 32,894
9 83,362 500,000 500,000 500,000 20,494 30,930 45,948 17,143 27,579 42,597
10 95,090 500,000 500,000 500,000 20,610 33,083 51,942 20,610 33,083 51,942
15 163,136 500,000 500,000 500,000 11,595 36,044 85,173 11,595 36,044 85,173
20 249,982 0 500,000 500,000 0 12,871 119,531 0 12,871 119,531
25 360,822 0 0 500,000 0 0 133,534 0 0 133,534
30 502,285 0 0 500,000 0 0 63,912 0 0 63,912
</TABLE>
Amount are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
52
<PAGE>
FEMALE AGE 55 NONSMOKER
PREFERRED -- $7,200 ANNUAL PREMIUM
FACE AMOUNT $500,000
DEATH BENEFIT OPTION 1
CURRENT BASIS
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
END OF AT DEATH BENEFIT TOTAL ACCUMULATION VALUE SURRENDER VALUE
POLICY 5% INTEREST ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
YEAR PER YEAR GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12%
- ------ ----------- -------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 7,560 500,000 500,000 500,000 4,762 5,106 5,451 0 0 0
2 15,498 500,000 500,000 500,000 9,392 10,379 11,410 0 0 0
3 23,833 500,000 500,000 500,000 13,795 15,728 17,829 0 0 0
4 32,585 500,000 500,000 500,000 18,036 21,221 24,825 334 3,519 7,123
5 41,774 500,000 500,000 500,000 22,087 26,835 32,431 5,182 9,931 15,526
6 51,423 500,000 500,000 500,000 26,036 32,666 40,804 9,959 16,589 24,728
7 61,555 500,000 500,000 500,000 29,890 38,729 50,038 18,477 27,316 38,625
8 72,192 500,000 500,000 500,000 33,647 45,035 60,222 26,484 37,872 53,059
9 83,362 500,000 500,000 500,000 37,195 51,482 71,351 33,844 48,132 68,000
10 95,090 500,000 500,000 500,000 40,502 58,046 83,501 40,502 58,046 83,501
15 163,136 500,000 500,000 500,000 54,953 95,224 168,079 54,953 95,224 168,079
20 249,982 500,000 500,000 500,000 64,319 139,267 310,762 64,319 139,267 310,762
25 360,822 500,000 500,000 588,874 62,013 188,478 560,833 62,013 188,478 560,833
30 502,285 500,000 500,000 1,033,144 37,190 239,705 983,947 37,190 239,705 983,947
</TABLE>
Amount are in Dollars
If Premiums are paid more frequently than
annually, the Death Benefit Proceeds,
Accumulation Values and Surrender Values would
be less than those illustrated.
Assumes no policy loans or partial surrenders
have been made. Current cost of insurance
rates assumed. Current mortality and expense
risk charges, administrative fees and premium
load assumed.
These investment results are illustrative only
and should not be considered a representation
of past or future investment results. Actual
investment results may be more or less than
those shown and will depend on a number of
factors, including the Policy Owner's
allocations and the Funds' rates of return.
Accumulation Values and Surrender Values for a
Policy would be different from those shown if
the actual investment rates of return averaged
0%, 6% and 12% over a period of years, but
fluctuated above or below those averages for
individual Policy Years. No representations
can be made that these rates of return will in
fact be achieved for any one year or sustained
over a period of time.
The amounts shown in these illustrations
reflect (1) the deduction of mortality and
expense risk charges and (2) assumed Fund
total expenses of 0.83% per year.
53
<PAGE>
Lincoln Life & Annuity Company of New York
SEPARATE ACCOUNT AND COMPANY FINANCIALS TO BE FILED BY AMENDMENT
S-1
<PAGE>
PART II
FEES AND CHARGES REPRESENTATION
Lincoln Life & Annuity Company of New York represents that the fees and
charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Lincoln Life & Annuity Company of New York.
UNDERTAKING
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of Lincoln Life & Annuity
Company of New York (LLANY) provides that LLANY will indemnify
certain persons against expenses, judgments and certain other
specified costs incurred by any such person if he/she is made a party
or is threatened to be made a party to a suit or proceeding because
he/she was a director, officer, or employee of LLANY, as long as
he/she acted in good faith and in a manner he/she reasonably believed
to be in the best interests of, or not opposed to the best interests
of, LLANY. Certain additional conditions apply to indemnification in
criminal proceedings.
In particular, separate conditions govern indemnification of
directors, officers, and employees of LLANY in connection with suits
by, or in the right of, LLANY.
Please refer to Article VII of the By-Laws of LLANY (Exhibit No. 6(b)
hereto) for the full text of the indemnification provisions.
Indemnification is permitted by, and is subject to the requirements
of, New York law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities
Act of 1933.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 28(a) above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
A cross-reference sheet (reconciliation and tie);
The prospectus (Prospectus 2) consisting of 54 pages.
The undertaking to file reports;
The signatures
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of Lincoln Life & Annuity
Company of New York and related documents authorizing establishment
of the Account incorporated herein by reference to Registration
Statement on Form N-8B-2 (File No. 811-08651 filed on February 11,
1998).
(2) Not applicable.
(3) (a) Form of Principal Underwriting Agreement between Lincoln
Financial Advisors Corporation and Lincoln Life & Annuity
Company of New York
(b) Form of Selling Group Agreement.*
(c) Commission Schedule for Variable Life Policies.*
(4) Not applicable.
(5) (a) Forms of Policy and Application.
(1) Policy Form LN 660 NY and Application B10399NY (incorporated
herein by reference to Pre-Effective Amendment No. 1 to this
Registration Statement on Form S-6 (File No. 333-42507) filed on
July 2, 1998.
(2) Proposed Policy Form LN 660 NY and Application B 10399 NY.
<PAGE>
(b) Riders. LR 434 NY LNY and LR 435 NY LNY (incorporated herein by
reference to Pre-Effective Amendment No. 1 to this Registration
Statement on Form S-6 (File No. 333-42507) filed on July 2, 1998.
(6) (a) Articles of Incorporation of Lincoln Life & Annuity Company of
New York are incorporated herein by reference to Registration on
Form N-4 (File No. 333-38007) filed on October 16, 1997.
(b) Bylaws of Lincoln Life & Annuity Company of New York are
incorporated herein by reference to Registration on Form N-4
(File No. 333-38007) filed on October 16, 1997.
(7) Not applicable.
(8) Fund Participation Agreements.
Agreements between Lincoln Life & Annuity Company of New York and:
(a) AIM Variable Insurance Funds, Inc.
(b) Baron Capital Funds Trust.*
(c) BT Insurance Funds Trust.
(d) Delaware Group Premium Fund, Inc.*
(e) Fidelity Variable Insurance Products Fund.
(f) Fidelity Variable Insurance Products Fund II.
(g) Janus Aspen Series.*
(h) Lincoln National Money Market Fund, Inc.
(i) MFS-Registered Trademark- Variable Insurance Trust.
(j) Neuberger & Berman Advisers Management Trust.*
(k) Templeton Variable Products Series Fund.
(l) OCC Accumulation Trust.
(9) Not applicable.
(10) See Exhibit 1(5).
2. See Exhibit 1(5).
3. Opinion and Consent of Robert O. Sheppard, Esq.
4. Not applicable.
5. Not applicable.
6. Opinion and consent of Vaughn W. Robbins, FSA
7. Consent of Ernst & Young LLP, Independent Auditors*
8. Not applicable.
* To be filed by amendment
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Lincoln Life & Annuity Company of New York, has duly caused this Post-Effective
Amendment No. 1 to this Registration Statement on Form S-6 (File Number
333-42507) to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Syracuse and State of New York, on the 24th day of
February, 1999.
LINCOLN LIFE & ANNUITY FLEXIBLE
PREMIUM VARIABLE LIFE ACCOUNT M
(Name of Registrant)
By: /s/ PHILIP L. HOLSTEIN
-----------------------------------
Philip L. Holstein
PRESIDENT, TREASURER AND DIRECTOR
LINCOLN LIFE & ANNUITY COMPANY OF NEW
YORK
(Name of Depositor)
By: /s/ PHILIP L. HOLSTEIN
-----------------------------------
Philip L. Holstein
PRESIDENT, TREASURER AND DIRECTOR
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to its Registration Statement has been signed
below on February 25, 1999 by the following persons, as officers and directors
of the Depositor, in the capacities indicated:
SIGNATURE TITLE
- -------------------------------------------------- -------------------------
/s/ PHILIP L. HOLSTEIN President, Treasurer and
------------------------------------------- Director (Principal
Philip L. Holstein Executive Officer)
/s/ JON A. BOSCIA
------------------------------------------- Director
Jon A. Boscia
/s/ RICHARD C. VAUGHAN
------------------------------------------- Director
Richard C. Vaughan
Second Vice President and
/s/ TROY D. PANNING Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/S/ THOMAS D. BELL, JR.
------------------------------------------- Director
Thomas D. Bell, Jr.
/s/ ROLAND C. BAKER
------------------------------------------- Director
Roland C. Baker
/s/ HARRY L. KAVETAS
------------------------------------------- Director
Harry L. Kavetas
/s/ BARBARA STEURY KOWALCZYK
------------------------------------------- Director
Barbara Steury Kowalczyk
/s/ MARGUERITE LEANNE LACHMAN
------------------------------------------- Director
Marguerite Leanne Lachman
/s/ JOHN M. PIETRUSKI
------------------------------------------- Director
John M. Pietruski
/s/ LAWRENCE T. ROLAND
------------------------------------------- Director
Lawrence T. Roland
<PAGE>
SIGNATURE TITLE
- -------------------------------------------------- -------------------------
/s/ J. PATRICK BARRETT
------------------------------------------- Director
J. Patrick Barrett
/s/ LOUIS G. MARCOCCIA
------------------------------------------- Director
Louis G. Marcoccia
/s/ GABRIEL L. SHAHEEN
------------------------------------------- Director
Gabriel L. Shaheen
by/s/ TROY D. PANNING
------------------------------------
Troy D. Panning
Attorney-in-Fact
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
THIS AGREEMENT is entered into on this 30th day of January, 1999 between
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK ("LLANY"), a life insurance company
organized under the laws of the State of New York, on behalf of itself and the
separate accounts established by LLANY pursuant to New York Insurance law and
set forth in Schedule A hereto (each a "Separate Account" and collectively the
"Separate Accounts"), and LINCOLN FINANCIAL ADVISORS CORPORATION ("LFA"), a
corporation organized under the laws of the State of Indiana. Both LLANY and
LFA are indirect subsidiaries of Lincoln National Corporation.
WITNESSETH:
WHEREAS, LLANY proposes to issue to the public certain variable annuity
contracts and variable life insurance policies ("Contracts") and has, by
resolution of its Board of Directors, authorized the creation of segregated
investment accounts in connection therewith; and
WHEREAS, LLANY has established each Separate Account for the purpose of
issuing the Contracts and has registered each such Separate Account with the
Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, interests in the Separate Account portion of the Contracts to be
issued by LLANY are registered (unless an exemption from registration is
available) with the Commission under the Securities Act of 1933 as amended (the
"1933 Act") for offer and sale to the public, and otherwise are in compliance
with all applicable laws; and
WHEREAS, LFA is a broker-dealer registered under the Securities Exchange
Act of 1934, as amended (the "1934 Act") and a member of the National
Association of Securities Dealers, Inc., and proposes to enter into selling
agreements for the distribution of said Contracts, as well as to sell said
Contracts directly; and
WHEREAS, LLANY desires to obtain the services of LFA as principal
underwriter of the Contracts issued by LLANY through the Separate Accounts;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, LLANY and LFA hereby agree as follows:
DUTIES OF LFA
1. LFA will form a selling group by entering into selling group
agreements with broker-dealers which have as associated individuals persons who
are licensed to sell insurance pursuant to the laws of the state of New York, or
any other state in which LLANY determines to issue Contracts ("Relevant State"),
and appointed by LLANY to distribute the Contracts which
<PAGE>
are issued by LLANY through the Separate Accounts and interests in the
Separate Account portion of which are registered (unless an exemption from
registration is available) with the Commission under the 1933 Act for offer
and sale to the public.
2. LFA will enter into and maintain a selling group agreement on behalf
of itself and LLANY with each broker-dealer (which has as associated persons
individuals who are licensed to sell insurance pursuant to the laws of the state
of New York or any Relevant State and appointed by LLANY to distribute the
Contracts) joining such selling group ("member"). An executed copy of each such
selling group agreement will be provided to LLANY. Any such selling group
agreement will expressly be made subject to this Agreement. Any such selling
group agreement will provide: (i) that each member will distribute the Contracts
only in New York or any Relevant State in which the Contracts may be legally
sold and only through duly licensed registered representatives of the members
who are fully licensed and appointed with LLANY to sell the Contracts in New
York or any Relevant State; (ii) that all applications and initial and
subsequent payments under the Contracts collected by the member will be
forwarded promptly by the member to LLANY or its designee at such address as it
may from time to time designate; and; (iii) that each member will comply with
all applicable federal and state laws, rules and regulations in the sale of the
Contracts.
3. LFA will not distribute any prospectus, sales literature, advertising
material or any other printed matter or material relating to the Contracts or
the mutual funds available as funding options under the Contracts ("Funds") if,
to its knowledge, it misstates any of the foregoing relating to the duties,
obligations or liabilities of LLANY or LFA. LFA will be responsible for filing
sales literature and advertising material, if necessary, with appropriate
federal regulatory authorities, including the NASD Regulation, Inc. and the
National Association of Securities Dealers, Inc. (collectively "NASD").
4 LFA shall not be responsible for (I) taking or transmitting
applications for the Contracts; (ii) examine or inspecting risks or approving,
issuing or delivering Contracts; (iii) receiving, collecting or transmitting
payments; (iv) assisting in the completion of applications for Contracts; and
(v) otherwise offering and selling Contracts directly to the public, except
insofar as LFA shall sell Contracts directly through its own associated persons.
5. LFA will advise LLANY immediately upon LFA becoming aware of: (a) any
request by the Commission for amendment of the registration statement relating
to the Contracts or the Funds or for additional information; (b) the issuance by
the Commission of any stop order suspending the effectiveness of the
registration statement of the Contracts or the Funds or the initiation of any
proceeding for that purpose; (c) the institution of any proceeding,
investigation or hearing involving the offer or sale of the Contracts or the
Funds of which it becomes aware; or (d) the happening of any material event, if
known, which makes untrue any statement made in the registration statement of
the Contracts or the Funds or which requires the making of a change therein in
order to make any statement made therein not misleading.
DUTIES OF LLANY
<PAGE>
6. LLANY or its agent will receive and process applications and premium
payments in accordance with the terms of the Contracts. All applications for
Contracts are subject to acceptance or rejection by LLANY in its sole
discretion. LLANY will inform LFA of any such rejection and the reason
therefor.
7. LLANY will be responsible for filing the Contracts, applications,
forms, sales literature and advertising material, where necessary, with
appropriate insurance regulatory authorities. LLANY will use reasonable efforts
to provide information and marketing assistance to the members, including
preparing and providing members with advertising materials and sales literature,
and providing members with current prospectuses of the Contracts and of the
underlying Funds. LLANY will use reasonable efforts to ensure that members
deliver to customers and prospective customers only the currently effective
prospectuses of the Contracts and the Funds. LFA and LLANY will cooperate in
the development of advertising and sales literature, as each may request the
other. LLANY will deliver to members, and use reasonable efforts to ensure that
members use, only sales literature and advertising material which conforms to
the requirements of federal and state laws and regulations and which has been
authorized by LLANY and LFA.
8. LLANY will furnish to LFA such information with respect to the
Separate Account and Contracts in such form and signed by such of its officers
as LFA may reasonably request, and will warrant that the statements therein
contained when so signed will be true or correct. LLANY will advise LFA
immediately of: (a) any request by the Commission for amendment of the
registration statement relating to the Contracts or any Fund or for additional
information; (b) the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement for the Contracts or of any Fund or
the initiation of any proceeding for that purpose; (c) the institution of any
proceeding, investigation, hearing or other action involving the offer or sale
of the Contracts or the Funds of which it becomes aware; (d) the happening of
any material event, if known, which makes untrue any statement made in the
registration statement for the Contracts or any Fund or which requires the
making of a change therein in order to make any statement made therein not
misleading.
9. LLANY will use reasonable efforts to register for sale an indefinite
amount of securities under the 1933 Act pursuant to Rule 24f-2 under the 1940
Act, and, should it ever be required, under state securities laws and to file
for approval under state insurance laws when necessary. LLANY will maintain the
registration of each Separate Account under the 1940 Act and of its securities
under the 1933 Act.
10. LLANY will pay to members of the selling group such commissions on
behalf of and as agent of LFA, as are from time to time set forth in selling
group agreements. LLANY shall pay such commissions and service fees in
compliance with applicable state insurance laws, applicable federal securities
laws and the rules and regulations of the NASD. Such selling group agreements
shall provide for the return of sales commissions by the members to LLANY if
Contracts are tendered for redemption to LLANY in accordance with the right to
examine or similarly worded provision in the Contracts.
<PAGE>
11. LLANY will bear its expenses of providing services under this
Agreement, including but not limited to, the cost of preparing (including
typesetting costs), printing and mailing of prospectuses of the Contracts to
Contract owners, expenses and fees of registering or qualifying the Contracts or
interests therein and the Separate Account under federal or state laws, and any
expenses incurred by its employees in assisting LFA in performing its duties
hereunder. LLANY will reimburse LFA for its services and for the services of
its salaried employees, and provide reimbursement for its charges and expenses.
WARRANTIES
12. LLANY represents and warrants to LFA that (i) registration statements
(including amendments thereto) under the 1933 Act and under the 1940 Act with
respect to the Contracts and the Separate Accounts have been filed with the
Commission in the form previously delivered to LFA, and copies of any and all
amendments thereto will be forwarded to LFA at the time that they are filed with
the Commission; (ii) the registration statements and any amendments or
supplements thereto which have become effective, conform in all material
respects to the requirements of the 1933 Act and the 1940 Act, and the rules and
regulations of the Commission thereunder, and do not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statement or omission made in reliance upon and in conformity with information
furnished in writing to LLANY by LFA expressly for use therein; (iii) LLANY is
validly existing as a stock life insurance company in good standing under the
laws of the State of New York, with power (corporate or other) to own its
properties and conduct its business as described in the prospectus, and has been
duly qualified for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification; (vi) the Contracts
to be issued through the Separate Accounts have been duly and validly authorized
and, when issued and delivered against payment therefor as provided in the
prospectus and in the Contracts, will be duly and validly issued and conform to
the description of such Contracts contained in the prospectus relating thereto;
(vi) LLANY will only accept applications submitted by and pay commissions to
persons who, to the best of LLANY's knowledge, are appropriately licensed to
offer and sell the Contracts in a manner as to comply with the state insurance
laws; (vi) the performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under any statute, any
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which LLANY is a party or by which LLANY is bound, LLANY's Charter
as a stock life insurance company or By-Laws, or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over LLANY or
any of its properties; and no consent, approval, authorization or order of any
court or governmental agency or body which has not been obtained by the
effective date of this Agreement is required for the consummation by LLANY of
the transactions contemplated by this Agreement; and (vii) there are no material
legal or governmental proceedings pending to which LLANY or any Separate Account
is a party or of which any property of LLANY or any Separate Account is
subject, other than litigation incidental to the
<PAGE>
kind of business conducted by LLANY which, if determined adversely to LLANY,
would not individually or in the aggregate have a material adverse effect on
the financial position, surplus or operations of LLANY.
13. LFA represents and warrants to LLANY that: (i) it is a broker-dealer
duly registered with the Commission pursuant to the Securities Exchange Act
of 1934 and a member in good standing of the National Association of
Securities Dealers, Inc. and is in compliance with the securities laws in
those states in which it conducts business as a broker-dealer; (ii) the
performance of its duties under this Agreement by LFA will not result in a
breach or violation of any of the terms or provisions of or constitute a
default under any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which LFA is a party or by
which LFA is bound, the Certificate of Incorporation or By-Laws of LFA, or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over LFA or its property; and (iii) it will use
reasonable efforts to ensure that no offering, sale or other disposition of
the Contracts will be made until it has been notified by LLANY that the
subject registration statements have been declared effective and the
Contracts have been released for sale by LLANY, and that such offering, sale
or other disposition shall be limited to those jurisdictions that have
approved or otherwise permit the offer and sale of the Contracts by LLANY;
(iv) it will comply in all material respects with the requirements of state
broker-dealer regulations and the 1934 Act as each applies to LFA and shall
conduct its affairs in accordance with the Rules of the NASD; and (v) any
information furnished in writing by LFA to LLANY for use in the registration
statement for the Contracts will not result in the registration's failing to
conform in all respects to the requirements of the 1933 Act and the rules and
regulations thereunder or containing any untrue statement of a material fact
or omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
MISCELLANEOUS
14. LFA shall maintain and preserve for the periods prescribed by law or
other agreement such accounts, books and other documents as are required of it
by applicable law and regulation. The books, records and accounts of LLANY, of
each Separate Account and LFA as to all transactions hereunder shall be
maintained such that they clearly and accurately disclose the nature and details
of such transaction, including such accounting information as is necessary to
support the reasonableness of the amounts to be paid by LLANY.
15. LFA makes no representation or warranty regarding the number of
Contracts to be sold by licensed broker-dealers and insurance agents or the
amount to be paid thereunder. LFA does, however, represent that will actively
engage in its duties under this Agreement on a continuous basis while the
Agreement is in effect.
16. LFA may act as principal underwriter, sponsor, distributor or dealer
for issuers other than LLANY or its affiliates in connection with mutual funds
or insurance products and otherwise.
<PAGE>
17. Nothing in this Agreement shall obligate LLANY to appoint any member
or representative of a member its agent for purposes of the distribution of the
Contracts. Nothing in this Agreement shall be construed as requiring LFA to
effect sales of the Contracts directly to the public or act as an insurance
agent or insurance broker on behalf of LLANY for purposes of state insurance
laws.
18. LFA agrees to indemnify LLANY (or any control person, shareholder,
director, officer or employee of LLANY) for any liability incurred (including
costs relating to defense of any action) arising out of any action) arising out
of any LFA act or omission relating to (i) rendering services under this
Agreement or (ii) the purchase, retention or surrender of a Contract by any
person or entity; provided, however that indemnification will not be provided
hereunder for any such liability that results from the willful misfeasance, bad
faith or gross negligence of LLANY or from the reckless disregard by LLANY of
the duties and obligations arising under this Agreement.
19. LLANY agrees to indemnify LFA (or any control person, shareholder,
director, officer or employee of LFA) for any liability incurred (including
costs relating to defense of any action) arising out of any LLANY act or
omission relating to (i) rendering services under this Agreement or (ii) the
purchase, retention or surrender of a Contract by any person or entity;
provided, however, that indemnification will not be provided hereunder for any
such liability that results from the willful misfeasance, bad faith and gross
negligence of LFA or from the reckless disregard by LFA of the duties and
obligations arising this Agreement.
20. This Agreement will terminate automatically upon its assignment, as
that term is defined in the 1940 Act. The parties understand that there is no
intention to create a joint venture in the subject matter of this Agreement.
Accordingly, the right to terminate this Agreement and to engage in any activity
not inconsistent with this Agreement is absolute. This Agreement will
terminate, without the payment of any penalty by either party:
a. at the option of LLANY upon six months advance written notice to LFA; or
b. at the option of LFA upon six months advance written notice to LLANY; or
c. at the option of LLANY upon institution of formal proceedings against
LFA by regulatory body;
d. at the option of LF A upon the institution of formal proceedings against
LLANY by the Department of Insurance of a state or any other federal or
state regulatory body;
e. as otherwise required by the Investment Company Act of 1940;
f. at the option of either party upon the termination of the Administrative
Service Agreement(s) entered into between the Lincoln National Life
Insurance Company and the UNUM Life Insurance Company of America and/or
affiliates of each.
21. Each notice required by this Agreement shall be given in writing and
delivered by certified mail-return receipt requested.
<PAGE>
22. This agreement shall be subject to the laws of the State of New York
and construed so as to interpret the Contracts as insurance products written
within the business operation of LLANY.
23. This Agreement covers and includes all agreements, oral and written
(expressed or implied) between LLANY and LFA with regard to the marketing and
distribution of the Contracts, and supersedes any and all Agreements between the
parties with respect to the subject matter of this Agreement.
24. This Agreement may be amended from time to time by mutual agreement
and consent of the undersigned parties, provided such amendment is in writing
and duly executed.
25. Schedule A hereto may be amended unilaterally by LLANY from time to
time by written notice to LFA.
This Agreement shall become effective on January 30, 1999
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be
duly executed and attested on the date first stated above.
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
Attest:
By:
- ------------------------------ --------------------------------
LINCOLN FINANCIAL ADVISORS CORPORATION
Attest:
By:
- ------------------------------ --------------------------------
<PAGE>
SCHEDULE A
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
SEPARATE ACCOUNTS
Lincoln Life & Annuity Variable Annuity Account L
(Group Variable Annuity I)
Established 7/24/96
Lincoln Life & Annuity Variable Annuity Account L
(Group Variable Annuity II)
Established 7/24/96
Lincoln Life & Annuity Variable Annuity Account L
(Group Variable Annuity III)
Established 7/24/96
Lincoln Life & Annuity Flexible Premium Variable Life Account J
Established 8/4/97
Lincoln Life & Annuity Flexible Premium Variable Life Account M
Established 11/24/97
LLANY Account Q for Variable Annuities
Established 1/29/98
LLANY Separate Account R for Flexible Premium Variable Life Insurance
Established 1/29/98
LLANY Separate Account S for Flexible Premium Variable Life Insurance
Established 11/2/98
<PAGE>
Insured JOHN DOE Policy Number SPECIMEN
Initial Specified Amount $100,000 Date of Issue May 15, 1999
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
A Stock Company Home Office Location: 120 Madison Street, Suite 1700
Syracuse, New York 13202
Administrator Mailing Address: [LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
350 CHURCH STREET
HARTFORD, CT 06103-1106]
Lincoln Life & Annuity Company of New York ("Lincoln Life") agrees to pay the
Death Benefit Proceeds to the Beneficiary upon receipt of due proof of the death
of the second Insured to die. Such payment shall be made as provided under
GENERAL PROVISIONS, PAYMENT OF PROCEEDS. Lincoln Life further agrees to pay the
surrender value to the Owner on the Coverage Date provided an Insured is then
alive.
RIGHT TO EXAMINE THE POLICY. The policy may be returned to the insurance agent
through whom it was purchased or to Lincoln Life at the administrator mailing
address located above within 10 days after receipt of the policy (60 days after
its receipt for policies issued in replacement of other insurance). During this
period (the "Right-to-Examine Period"), any premium paid will be placed in the
Money Market Fund and, if the policy is so returned, it will be deemed void from
the Date of Issue and Lincoln Life will refund all premium paid. If the policy
is not returned, the premium payment will be processed as set forth in PREMIUM
AND REINSTATEMENT PROVISIONS, ALLOCATION OF NET PREMIUM PAYMENTS.
ANY BENEFITS AND VALUES PROVIDED BY THE POLICY BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
THE DEATH BENEFIT PROCEEDS ON THE DATE OF ISSUE EQUAL THE INITIAL SPECIFIED
AMOUNT OF THE POLICY. THEREAFTER, THE DEATH BENEFIT PROCEEDS MAY VARY UNDER THE
CONDITIONS DESCRIBED UNDER INSURANCE COVERAGE PROVISIONS. THE DURATION OF
COVERAGE IS VARIABLE AND MAY INCREASE OR DECREASE WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT.
The policy is issued and accepted subject to the terms set forth on the
following pages, which are made a part of the policy. In consideration of the
application and the payment of premiums as provided, the policy is executed by
Lincoln Life as of the Date of Issue.
Registrar /s/ Philip L. Holstein
PRESIDENT
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Non-Participating Variable life insurance payable in the event of
death before the Coverage Date.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy or on the Coverage Date,
whichever is earlier.
Flexible premiums payable to the Coverage Date or prior death of the Insured.
Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages as shown in the Policy
Specifications.
LN660 NY
<PAGE>
TABLE OF CONTENTS
Page*
Policy Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
List of Variable Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . .5
Schedule 1: Surrender Charges. . . . . . . . . . . . . . . . . . . . . . . . .7
Schedule 2: Expense Charges and Fees . . . . . . . . . . . . . . . . . . . . .8
Schedule 3: Table of Guaranteed Maximum Cost of Insurance Rates Per $1,000. . .9
Schedule 4: Corridor Percentages Table. . . . . . . . . . . . . . . . . . . .10
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Premium and Reinstatement Provisions . . . . . . . . . . . . . . . . . . . . .13
Ownership, Assignment and Beneficiary Provisions . . . . . . . . . . . . . . .15
Variable Account Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .16
Policy Values Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Transfer Privilege Provision . . . . . . . . . . . . . . . . . . . . . . . . .18
Nonforfeiture and Surrender Value Provisions . . . . . . . . . . . . . . . . .19
Loan Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Insurance Coverage Provisions. . . . . . . . . . . . . . . . . . . . . . . . .21
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Followed by Optional Methods of Settlement and Any Riders
*Pages 4 and 6 are intentionally "blank."
LN660 NY 2
<PAGE>
POLICY SPECIFICATIONS
Policy Number SPECIMEN
Insured JOHN DOE
Specified Amount $100,000 Date of Issue May 15, 1999
Minimum Specified Amount $100,000 Issue Age 35
Monthly Anniversary Day 15 Premium Class STANDARD
LN660 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
BENEFIT AMOUNT: See Initial Specified Amount
DEATH BENEFIT OPTION: Death Benefit Option is 1. (SEE INSURANCE COVERAGE
PROVISIONS).
PREMIUM PAYMENTS: Initial premium paid with application $ 715
Planned Premium $ 715
Additional premium payments may vary by frequency or
amount.
PAYMENT MODE: Annually
NO LAPSE PREMIUM: A payment of at least $ 121.03 is due as of the
Date of Issue and each Monthly Anniversary Day
thereafter to guarantee the policy will not lapse.
(SEE PREMIUM AND REINSTATEMENT PROVISIONS, NO LAPSE
PROVISION.) Such cumulative premium payments are
payable in advance at anytime or in accordance with the
payment mode selected.
NOTE: Unless the No Lapse Provision is in effect, the policy will terminate
before the Coverage Date if the actual premiums paid and investment
experience are insufficient to continue coverage to such a date. The
Coverage Date is the next Monthly Anniversary after the younger
Insured becomes or would have become age 100. Crediting of additional
interest is not guaranteed and, subject to the guaranteed minimum
rate, Lincoln Life has the right to change the amount of interest
credited and the amount of Cost of Insurance or other expense charges
deducted which may require more premium to be paid than was
illustrated, or the Accumulation Values may be less than those
illustrated.
LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS: All allocations of Net Premium
Payments must be made in whole percentages and in aggregate must total 100%.
Premium Payments will be allocated net of the Premium Load specified on page 3A.
LIMITS ON TRANSFERS FROM THE FIXED ACCOUNT: Transfers from the Fixed Account
shall be made only within the 30 day period after an anniversary of the Date of
Issue. The amount of all such transfers in any such 30 day period shall not
exceed the lesser of (a) 25% of the Fixed Account value as of that Policy
Anniversary, or (b) $250,000. (SEE TRANSFER PRIVILEGE PROVISION.)
GUARANTEED MINIMUM INTEREST RATES: The interest rate used to credit interest on
the Fixed Account Value may vary but will never be less than .010746% compounded
daily (4% compounded yearly).
OWNER: The Insureds
BENEFICIARY: Margaret Doe, Daughter, if surviving both Insureds
LN660 NY 3
<PAGE>
POLICY SPECIFICATIONS
PREMIUM LOAD. Lincoln Life will deduct a Premium Load of 5.0% from each premium
payment.
MORTALITY AND EXPENSE RISK CHARGES. The guaranteed mortality and expense risk
("M&E") charge which is referenced on page 8 is a daily rate equivalent to an
annual rate of .75% of a Variable Sub-Account's value during Policy Years 1
through 10, .35% during Policy Years 11 through 20, and .20% during the 21st and
later Policy Years.
MONTHLY ADMINISTRATIVE FEE. The monthly administrative fee, as set forth on
page 8, includes, as of the Date of Issue of the policy, a fee of $15.00 per
month during the first Policy Year (this fee may be changed by Lincoln Life for
subsequent years, but is guaranteed not to exceed $10.00 per month).
3A
LN660 NY
<PAGE>
THIS PAGE INTENTIONALLY BLANK
4
<PAGE>
LIST OF VARIABLE SUB-ACCOUNTS
<TABLE>
<CAPTION>
FUND GROUPS VARIABLE SUB-ACCOUNTS
<S> <C>
[AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST Baron Capital Asset Fund
BT INSURANCE FUNDS TRUST BT EAFE-Registered Trademark- Equity Index Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
DELAWARE GROUP PREMIUM FUND, INC. Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II Contrafund Portfolio - Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III Growth Opportunities Portfolio - Service Class
JANUS ASPEN SERIES Balanced Portfolio
Worldwide Growth Portfolio
LINCOLN NATIONAL LN Bond Fund, Inc.
LN Capital Appreciation Fund, Inc.
LN Equity-Income Fund, Inc.
LN Global Asset Allocation Fund, Inc.
LN Money Market Fund, Inc.
LN Social Awareness Fund, Inc.
MFS-Registed Trademark- VARIABLE INSURANCE TRUST MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST AMT Mid-Cap Growth Portfolio
AMT Partners Portfolio
TEMPLETON VARIABLE PRODUCTS SERIES FUND International Fund - Class 2
Stock Fund - Class 2]
NOTE: NET PREMIUM PAYMENTS MAY ALSO BE ALLOCATED TO THE LINCOLN VUL FIXED ACCOUNT.
SEPARATE ACCOUNT: Lincoln Life & Annuity Flexible Premium Variable Life Account M.
</TABLE>
LN660 NY 5
<PAGE>
THIS PAGE INTENTIONALLY BLANK
6
<PAGE>
SCHEDULE 1: SURRENDER CHARGES
The charge assessed upon full surrender of the policy will be the lesser of the
Surrender Charge shown or the then current Net Accumulation Value. Upon either
a partial surrender or a decrease in Specified Amount, no surrender charge is
applied. An additional surrender charge table will apply to each increase in
Specified Amount permitted by Lincoln Life. The additional table will apply as
of the date of the increase.
<TABLE>
<CAPTION>
Surrender Charge as of
Policy Year Beginning of Policy Year
----------- ------------------------
<S> <C>
1 $ 2,515.50
2 2,430.90
3 2,343.10
4 2,251.90
5 2,157.30
6 2,059.00
7 1,957.00
8 1,851.00
9 1,740.90
10 1,626.60
11 1,507.60
12 1,107.10
13 753.10
14 448.40
15 196.20
16 and thereafter 0.00
</TABLE>
The procedures for full and partial surrenders and the imposition of surrender
charges for full surrenders are described in greater detail in NONFORFEITURE AND
SURRENDER VALUE PROVISIONS.
A transaction fee of the lesser of $25 or 2% of the amount surrendered is
assessed for each partial surrender and will be processed as set forth in
NONFORFEITURE AND SURRENDER VALUE PROVISIONS, PARTIAL SURRENDER.
LN660 NY 7
<PAGE>
SCHEDULE 2: EXPENSE CHARGES AND FEES
PREMIUM LOAD. Lincoln Life will deduct a Premium Load as indicated in the
POLICY SPECIFICATIONS.
MONTHLY ADMINISTRATIVE FEE. A Monthly Deduction is made on each Monthly
Anniversary Day from the Net Accumulation Value. (SEE POLICY VALUES PROVISIONS,
MONTHLY DEDUCTION.) It includes an administrative fee charge, Cost of Insurance
charges and any charges for supplemental riders or optional benefits.
The monthly administrative fee as of the Date of Issue of the policy consists of
a fee of $15.00 per month during the first Policy Year and $5.00 per month
during subsequent Policy Years. This fee may be changed by Lincoln Life after
the first Policy Year based on its expectations of future expenses, but is
guaranteed not to exceed the amount set forth in the POLICY SPECIFICATIONS.
CHARGES AND FEES ASSOCIATED WITH THE VARIABLE SUB-ACCOUNTS. Lincoln Life
imposes a mortality and expense risk ("M&E") charge, which is calculated as a
percentage of the value of the Variable Sub-Accounts. The M&E charge is
deducted from each Variable Sub-Account at the end of each Valuation Period.
This charge is set forth in the POLICY SPECIFICATIONS.
Fund operating expenses may be deducted by each Fund as set forth in its
prospectus.
TRANSFER FEE. A transaction fee of $25 may be applied by Lincoln Life to each
transfer request in excess of 12 made during any Policy Year. A single transfer
request, either In Writing or by telephone, may consist of multiple
transactions.
LN660 NY 8
<PAGE>
SCHEDULE 3: TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(ATTAINED AGE MONTHLY RATES PER $1,000 OF NET AMOUNT AT RISK)
SPECIAL NOTE: The monthly Cost of Insurance Rate charged under the policy
varies based on the sex, attained age (nearest birthday),
duration and premium class of the person insured, but will not
exceed the rates shown in the table below. However, in
determining the Guaranteed Maximum Cost of Insurance Rates, the
Company will add the amount of the Flat Extra Monthly Insurance
Cost, if any, shown in the Policy Specifications to the rates
below. If the person insured is in a rated premium class, the
Guaranteed Maximum Cost of Insurance Rates will be those in the
table multiplied by the Risk Factor, if any, shown in the Policy
Specifications. The rates below are based on the 1980 CSO Tables
(Male or Female as appropriate).
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE MALE FEMALE AGE MALE FEMALE AGE MALE FEMALE
(NEAREST MONTHLY MONTHLY (NEAREST MONTHLY MONTHLY (NEAREST MONTHLY MONTHLY
BIRTHDAY) RATE RATE BIRTHDAY) RATE RATE BIRTHDAY) RATE RATE
- ------------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 0.34845 0.24089 35 0.17586 0.13752 70 3.30338 1.84590
1 0.08917 0.07251 36 0.18670 0.14669 71 3.62140 2.02325
2 0.08251 0.06750 37 0.20004 0.15752 72 3.98666 2.24419
3 0.08167 0.06584 38 0.21505 0.17003 73 4.40599 2.51548
4 0.07917 0.06417 39 0.23255 0.18503 74 4.87280 2.83552
- ------------------------------ ------------------------------ ----------------------------
5 0.07501 0.06334 40 0.25173 0.20171 75 5.37793 3.19685
6 0.07167 0.06084 41 0.27424 0.22005 76 5.91225 3.59370
7 0.06667 0.06000 42 0.29675 0.23922 77 6.46824 4.01942
8 0.06334 0.05834 43 0.32260 0.25757 78 7.04089 4.47410
9 0.06167 0.05750 44 0.34929 0.27674 79 7.64551 4.97042
- ------------------------------ ------------------------------ ----------------------------
10 0.06084 0.05667 45 0.37931 0.29675 80 8.30507 5.52957
11 0.06417 0.05750 46 0.41017 0.31677 81 9.03761 6.17118
12 0.07084 0.06000 47 0.44353 0.33761 82 9.86724 6.91414
13 0.08251 0.06250 48 0.47856 0.36096 83 10.80381 7.77075
14 0.09584 0.06667 49 0.51777 0.38598 84 11.82571 8.72632
- ------------------------------ ------------------------------ ----------------------------
15 0.11085 0.07084 50 0.55948 0.41350 85 12.91039 9.76952
16 0.12585 0.07501 51 0.60870 0.44270 86 14.03509 10.89151
17 0.13919 0.07917 52 0.66377 0.47523 87 15.18978 12.08770
18 0.14836 0.08167 53 0.72636 0.51276 88 16.36948 13.35774
19 0.15502 0.08501 54 0.79730 0.55114 89 17.57781 14.70820
- ------------------------------ ------------------------------ ----------------------------
20 0.15836 0.08751 55 0.87326 0.59118 90 18.82881 16.15259
21 0.15919 0.08917 56 0.95591 0.63123 91 20.14619 17.71416
22 0.15752 0.09084 57 1.04192 0.66961 92 21.57655 19.43814
23 0.15502 0.09251 58 1.13378 0.70633 93 23.20196 21.40786
24 0.15169 0.09501 59 1.23235 0.74556 94 25.28174 23.83051
- ------------------------------ ------------------------------ ----------------------------
25 0.14752 0.09668 60 1.34180 0.78979 95 28.27411 27.16158
26 0.14419 0.09918 61 1.46381 0.84488 96 33.10677 32.32378
27 0.14252 0.10168 62 1.60173 0.91417 97 41.68475 41.21204
28 0.14169 0.10501 63 1.75809 1.00267 98 58.01259 57.81394
29 0.14252 0.10835 64 1.93206 1.10539 99 83.33333 83.33333
- ------------------------------ ------------------------------ ----------------------------
30 0.14419 0.11251 65 2.12283 1.21731
31 0.14836 0.11668 66 2.32623 1.33511
32 0.15252 0.12085 67 2.54312 1.45461
33 0.15919 0.12502 68 2.77350 1.57247
34 0.16669 0.13168 69 3.02328 1.69955
- ------------------------------ ------------------------------
</TABLE>
LN660 9
<PAGE>
SCHEDULE 4: CORRIDOR PERCENTAGES TABLE
As of the Date of Issue of this policy the formula in effect to determine the
amount under item (ii) of INSURANCE COVERAGE PROVISIONS; DEATH BENEFIT PROCEEDS
is based on a percent of the Accumulation Value as determined from the following
table:
<TABLE>
<CAPTION>
INSURED'S CORRIDOR INSURED'S CORRIDOR
ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE
------------ ---------- ------------ ----------
<S> <C> <C> <C>
0-40 250% 70 115%
41 243 71 113
42 236 72 111
43 229 73 109
44 222 74 107
--------- --------- --------- ---------
45 215 75 105
46 209 76 105
47 203 77 105
48 197 78 105
49 191 79 105
--------- --------- --------- ---------
50 185 80 105
51 178 81 105
52 171 82 105
53 164 83 105
54 157 84 105
--------- --------- --------- ---------
55 150 85 105
56 146 86 105
57 142 87 105
58 138 88 105
59 134 89 105
--------- --------- --------- ---------
60 130 90 105
61 128 91 104
62 126 92 103
63 124 93 102
64 122 94 101
--------- --------- --------- ---------
65 120 95 100
66 119 96 100
67 118 97 100
68 117 98 100
69 116 99 100
--------- --------- --------- ---------
</TABLE>
LN660 10
<PAGE>
DEFINITIONS
ACCUMULATION VALUE. The sum of (i) the Fixed Account value, (ii) the Variable
Account value, and (iii) the Loan Account value under the policy.
ADMINISTRATOR MAILING ADDRESS. The Administrator Mailing Address for the policy
is indicated on the front cover.
AGE. The age of the Insured at her or his nearest birthday.
COST OF INSURANCE. SEE POLICY VALUES PROVISIONS, COST OF INSURANCE.
COST OF INSURANCE RATES. This term is defined in SCHEDULE 3.
DATE OF ISSUE. The date from which Policy Years, Policy Anniversaries and Age
are determined. The Date of Issue is shown on the POLICY SPECIFICATIONS.
DEATH BENEFIT PROCEEDS. The amount payable to the Beneficiary upon death of the
Insured in accordance with the Death Benefit Option elected subject to all
policy provisions. The two Death Benefit Options are described in INSURANCE
COVERAGE PROVISIONS, DEATH BENEFIT OPTIONS.
DUE PROOF OF DEATH. A certified copy of an official death certificate, a
certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or any other proof of death satisfactory to Lincoln Life.
FIXED ACCOUNT. The account under which principal is guaranteed and interest is
credited at a rate of not less than 4% per year. (SEE POLICY VALUES PROVISION,
INTEREST CREDITED UNDER FIXED ACCOUNT.) Fixed Account assets are general assets
of Lincoln Life and are held in Lincoln Life's general account.
FUND(s). The Funds in the Variable Sub-Account portfolios to which the Owner
may allocate Net Premium Payments or transfers and in the shares of which such
allocations shall be invested.
FUND GROUP. Each of the open-end management investment companies registered
under the 1940 Act, one or more of the portfolios (funds) of which fund the
Variable Sub-Accounts.
GRACE PERIOD. SEE PREMIUM AND REINSTATEMENT PROVISIONS, GRACE PERIOD.
HOME OFFICE. The term "Home Office" means The Lincoln National Life Insurance
Company.
IN WRITING. With respect to any notice to Lincoln Life, this term means a
written form satisfactory to Lincoln Life and received by it at the
Administrator Mailing Address. With respect to any notice by Lincoln Life to
the Owner, any assignee or other person, this term means written notice by
ordinary mail to such person at the most recent address in Lincoln Life's
records.
LN660 11
<PAGE>
DEFINITIONS (CONTINUED)
LOAN ACCOUNT. The account in which policy indebtedness (outstanding loans and
interest) accrues once it is transferred out of the Fixed and/or Variable
Sub-Accounts. The Loan Account is part of Lincoln Life's general account.
MONTHLY ANNIVERSARY DAY. The Day of the month, as shown in the POLICY
SPECIFICATIONS, when Lincoln Life makes the Monthly Deduction, or the next
Valuation Day if that day is not a Valuation Day or is nonexistent for that
month.
MONTHLY DEDUCTION. The Monthly Deduction is made from the Net Accumulation
Value; this deduction includes the Cost of Insurance, an administrative expense
charge and charges for supplemental riders or benefits, if applicable. (SEE
POLICY VALUES PROVISIONS, MONTHLY DEDUCTION). The first Monthly Deduction is
made as of the Date of Issue. Monthly Deductions occur thereafter on each
Monthly Anniversary Day.
MORTALITY AND EXPENSE RISK (M&E) RATE. A daily rate assessed, by Lincoln Life
as a percentage of the value of the Variable Sub-Accounts for its assumption of
mortality and expense risks. The daily M&E Rate is specified in SCHEDULE 2.
NET ACCUMULATION VALUE. The Accumulation Value less the Loan Account Value.
NET PREMIUM PAYMENT. The portion of a premium payment, after deduction of the
Premium Load as specified in SCHEDULE 2, available for allocation to the Fixed
and/or Variable Sub-Accounts.
1940 ACT. The Investment Company Act of 1940, as amended.
NO LAPSE PREMIUM: The premium required to be paid to guarantee the policy will
not lapse. (SEE PREMIUM AND REINSTATEMENT PROVISIONS, NO LAPSE PROVISION.)
NYSE. New York Stock Exchange.
POLICY ANNIVERSARY. The day of the year the policy was issued, or the next
Valuation Day if that day is not a Valuation Day or is nonexistent for that
year.
POLICY YEAR. Each twelve-month period, beginning on the Date of Issue, during
which the policy is in effect.
RIGHT-TO-EXAMINE PERIOD. SEE RIGHT TO EXAMINE THE POLICY, on the Cover of the
Policy.
SEC. The Securities and Exchange Commission.
SPECIFIED AMOUNT. The Specified Amount is shown in the Policy Specifications or
in subsequent Policy Specifications, if later changed. The Specified Amount is
chosen by the Owner and used in determining the amount of the Death Benefit
Proceeds. It may be increased or decreased as described in INSURANCE COVERAGE
PROVISIONS; CHANGES IN SPECIFIED AMOUNT AND DEATH BENEFIT OPTIONS.
SUB-ACCOUNT. The investment options available under this policy, including
Variable Sub-Accounts and the Fixed Account.
LN660 12
<PAGE>
DEFINITIONS (CONTINUED)
SURRENDER VALUE. SEE NONFORFEITURE AND SURRENDER VALUE PROVISIONS, SURRENDER
VALUE.
VALUATION DAY. Any day on which the NYSE is open for business, except a day
during which trading on the NYSE is restricted or on which an SEC-determined
emergency exists or on which the valuation or disposal of securities is not
reasonably practicable, as determined under applicable law.
VALUATION PERIOD. The period beginning immediately after the close of business
on a Valuation Day and ending at the close of business on the next Valuation
Day.
VARIABLE ACCOUNT. The account consisting of all Variable Sub-Account(s)
invested in shares of the Fund(s). Variable Account assets are separate account
assets of Lincoln Life, the investment performance of which is kept separate
from that of the general assets of Lincoln Life. Variable Account assets are
not chargeable with the general liabilities of Lincoln Life.
VARIABLE ACCUMULATION UNIT. A unit of measure used to calculate the value of a
Variable Sub-Account.
PREMIUM AND REINSTATEMENT PROVISIONS
PREMIUMS. The initial premium must be paid for coverage to be effective (SEE
INSURANCE COVERAGE PROVISIONS, EFFECTIVE DATE OF COVERAGE). Additional premium
may be paid, with the consent of Lincoln Life and subject to the requirements
under ADDITIONAL PREMIUMS, at any time before the Coverage Date. There is no
minimum premium requirement. However, except as provided under the NO LAPSE
PROVISION, the policy will lapse subject to the terms set forth in the GRACE
PERIOD if the Net Accumulation Value is insufficient to pay a Monthly Deduction.
PAYMENT OF PREMIUM. The initial premium is payable at the Administrator Mailing
Address or to an authorized representative of Lincoln Life. All subsequent
premium payments are payable at the Administrator Mailing Address.
PLANNED PREMIUM. If the Owner chooses to make periodic premium payments,
Lincoln Life shall send premium reminder notices In Writing for the amounts and
with the frequency elected by the Owner. Changes in the amounts or frequency of
such payments will be subject to consent of Lincoln Life.
ADDITIONAL PREMIUM. In addition to any planned premium, it is possible to make
additional premium payments of no less than $100 at any time before the Coverage
Date. Lincoln Life reserves the right to limit the amount or frequency of any
such additional premium payments. If a payment of any additional premium would
increase the difference between the Accumulation Value and the Specified Amount,
Lincoln Life may reject the additional premium payment unless satisfactory
evidence of insurability is furnished to Lincoln Life. If a payment of
additional premium would cause the policy to cease to qualify as insurance for
federal income tax purposes, Lincoln Life may reject all or such excess portion
of the additional premium. Any payment received by Lincoln Life shall be
applied to repay any outstanding loans and to that extent shall not be treated
as premium, unless Lincoln Life is specifically instructed otherwise In Writing
by the Owner.
ALLOCATION OF NET PREMIUM PAYMENTS. Net Premium Payments may be allocated to
the Fixed and/or Variable Sub-Accounts under the policy subject to POLICY
SPECIFICATIONS, LIMITS ON ALLOCATION OF NET PREMIUM PAYMENTS. All Net Premium
Payments received before the end of the Right-to-Examine Period shall be
allocated upon the expiration of the Right-to-Examine Period in accordance with
the allocation
LN660 NY 13
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
percentages specified in the application. Subsequent Net Premium Payments shall
be allocated on the same basis as the most recent Net Premium Payment unless
Lincoln Life is otherwise instructed In Writing.
COVERAGE DATE. The Coverage Date is described in the POLICY SPECIFICATIONS.
Payment of the No Lapse Premium shown in the POLICY SPECIFICATIONS may not
continue the policy in force until the Coverage Date unless all the requirements
of the NO LAPSE PROVISION are met. Payment of Planned Premiums in accordance
with the payment mode specified, may not continue the policy in force until the
Coverage Date even if the amount is paid as scheduled. The Coverage Date is not
guaranteed based upon the level of Planned Premiums. The period for which the
policy will continue will depend on:
1. The amount, timing, and frequency of premium payment;
2. Changes in the Specified Amount and Death Benefit options;
3. Interest credits and insurance costs;
4. Changes in deductions for riders, if any; and
5. Partial withdrawals and loans.
NO LAPSE PROVISION. If elected on the application, this policy includes a NO
LAPSE PROVISION. The No Lapse Premium due on or before each Monthly Anniversary
Day is specified in the POLICY SPECIFICATIONS. As long as the sum of all
premium payments less any indebtedness and partial surrenders is at least equal
to the sum of the No Lapse Premiums due since the Date of Issue, the policy will
not lapse even if the Net Accumulation Value is insufficient to meet the Monthly
Deductions.
A period of 61 days will be granted for the No Lapse Provision if on any Monthly
Anniversary Day it is determined that the No Lapse Premium requirement has not
been met. At least 31 days before the end of that period, Lincoln Life will
notify the Owner of the amount of premium necessary to maintain the No Lapse
Provision.
The No Lapse Provision will terminate if (a) the No Lapse Premium requirements
are not met, (b) there is an increase in the Specified Amount, or (c) there is a
change in the Death Benefit Option. Once the No Lapse Provision is terminated,
it cannot be reinstated.
GRACE PERIOD. Except as provided under the NO LAPSE PROVISION, if on any
Monthly Anniversary Day the Net Accumulation Value is insufficient to cover the
current Monthly Deduction, or if the amount of indebtedness exceeds the Net
Accumulation Value, Lincoln Life shall send a notice In Writing to the Owner and
any assignee of record. Such notice shall state the amount which must be paid
to avoid termination. The Net Premium Payment due will be at least equal to (a)
the amount by which the Monthly Deduction Amount exceeds the Net Accumulation
Value, or (b) the amount by which the indebtedness exceeds the Net Accumulation
Value, and (c) enough additional premium to maintain the policy in force for at
least two months.
If the amounts set forth in the notice are not paid to Lincoln Life on or before
the day that is the later of (a) 31 days after the date of mailing of the
notice, and (b) 61 days after the Monthly Anniversary Day with respect to which
such notice applies (together, the "Grace Period"), then the policy shall
terminate. All coverage under the policy will then lapse without value.
LN660 NY 14
<PAGE>
PREMIUM AND REINSTATEMENT PROVISIONS (CONTINUED)
REINSTATEMENT. After the policy has lapsed due to the failure to make a
necessary payment before the end of an applicable Grace Period, the policy
may be reinstated at any time prior to the Coverage Date provided (a) the policy
has not been surrendered, (b) there is an application for reinstatement In
Writing, (c) satisfactory evidence of insurability is furnished to Lincoln Life,
(d) enough premium is paid to keep the policy in force for at least 2 months,
and (e) any accrued loan interest is paid.
The reinstated policy shall be effective as of the Monthly Anniversary Day after
the date on which Lincoln Life approves the application for reinstatement. The
Net Premium Payment and any loan repayment upon reinstatement will be allocated
as set forth under ALLOCATION OF NET PREMIUM PAYMENTS and LOAN PROVISIONS, LOAN
ACCOUNT AND LOAN REPAYMENT. Upon reinstatement, the surrender charges assessed
at the time of lapse will be credited to the Accumulation Value (in proportion
to the then current allocation of Net Premium Payments), and the surrender
charges set forth in SCHEDULE 1 will be reinstated as of the Policy Year in
which the policy lapsed.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
OWNER. The Owner on the Date of Issue will be the person designated in the
POLICY SPECIFICATIONS. If no person is designated as Owner, the Insured will be
the Owner.
RIGHTS OF OWNER. While the Insured is alive and except as provided below and
subject to any applicable state law, the Owner may exercise all rights and
privileges under the policy including the right to: (a) release or surrender
the policy to Lincoln Life, (b) agree with Lincoln Life to any change in or
amendment to the policy, (c) transfer all rights and privileges to another
person, (d) change the Beneficiary, and (e) assign the policy.
The Owner may exercise any rights and privileges under the policy without the
consent, subject to any applicable state law, of any designated Beneficiary if
the Owner has reserved the right to change the Beneficiary. If there is an
assignment of the policy recorded with Lincoln Life, the Owner may exercise the
rights and privileges under the policy only with the consent of the recorded
assignee.
Unless provided otherwise, if the Owner is a person other than the Insured and
dies before the Insured, all of the rights and privileges of the Owner under the
policy shall vest in the Owner's executors, administrators or assigns.
TRANSFER OF OWNERSHIP. The Owner may transfer all rights and privileges of the
Owner. On the date of transfer, the transferee shall become the Owner and shall
have all the rights and privileges of the Owner. The Owner may revoke any
transfer before the date of transfer.
A transfer, or a revocation of transfer, shall be In Writing and shall take
effect the later of the date of transfer specified by the Owner or the date it
is recorded by Lincoln Life, and any payment made or any action taken or allowed
by Lincoln Life before such time in reliance on the recorded ownership of the
policy shall be without prejudice to Lincoln Life.
Unless otherwise directed by the Owner, with the consent of any assignee
recorded with Lincoln Life, a transfer shall not affect the interest of any
Beneficiary designated before the date of transfer.
LN660 NY 15
<PAGE>
VARIABLE ACCOUNT PROVISIONS
ASSIGNMENT. Assignment of the policy shall be In Writing and shall be effective
when Lincoln Life receives it. Lincoln Life shall not be responsible for the
validity or sufficiency of any assignment. An assignment of the policy shall
remain effective only so long as the assignment remains in force. If an
assignment so provides, it shall transfer the interest of any designated
transferee or of any Beneficiary if the Owner has reserved the right to change
the Beneficiary.
BENEFICIARY. The Beneficiary on the Date of Issue shall be the person
designated in the POLICY SPECIFICATIONS. Unless provided otherwise, the
interest of any Beneficiary who dies before the Insured shall vest in the Owner
or the Owner's executors, administrators or assigns.
CHANGE OF BENEFICIARY. The Beneficiary may be changed from time to time.
Unless provided otherwise, the right to change the Beneficiary is reserved to
the Owner. A request for change of Beneficiary shall be In Writing, signed by
the Owner and, if the right to change the Beneficiary has not been reserved to
the Owner, signed by the existing Beneficiary. A change of Beneficiary shall be
effective, retroactive to the date of request, only when the change recorded by
Lincoln Life, and any payment made or any action taken or allowed by Lincoln
Life before such time in reliance on its records as to the identity of the
Beneficiary shall be without prejudice to Lincoln Life.
VARIABLE ACCOUNT AND VARIABLE SUB-ACCOUNTS. Assets invested on a variable basis
are held in the separate account ("Variable Account") which is designated on
page 5 of the policy. The separate account was established by a resolution of
Lincoln Life's Board of Directors as a "separate account" under the insurance
law of the State of Indiana, Lincoln Life's state of domicile, is registered as
a unit investment trust under the 1940 Act and is subject to the law of the
state in which this policy is delivered. The assets of the Variable Account
(except assets in excess of the reserves and other contract liabilities of the
Variable Account) shall not be chargeable with liabilities arising out of any
other business conducted by Lincoln Life and the income, gains or losses from
the Variable Account assets shall be credited or charged against the Variable
Account without regard to the income, gains or losses of Lincoln Life. The
Variable Account assets are owned and controlled exclusively by Lincoln Life,
and Lincoln Life is not a trustee with respect to such assets.
The Variable Account is divided into Variable Sub-Accounts. The assets of each
Variable Sub-Account shall be invested fully and exclusively in shares of the
appropriate Fund for such Variable Sub-Account. The investment performance of
each Variable Sub-Account shall reflect the investment performance of the
appropriate Fund. For each Variable Sub-Account, Lincoln Life shall maintain
Variable Accumulation Units as a measure of the investment performance of the
Fund shares held in such Variable Sub-Account.
Subject to any vote by persons entitled to vote thereon under the 1940 Act,
Lincoln Life may elect to operate the Variable Account as a management company
instead of a unit investment trust under the 1940 Act or, if registration under
the 1940 Act is no longer required, to deregister the Variable Account. In the
event of such a change, Lincoln Life shall endorse the policy to reflect the
change and may take any other necessary or appropriate action required to effect
the change. Any changes in the investment policies of the Variable Account
shall first be approved by the Indiana Insurance Commissioner and approved or
filed, as required, in any other state or other jurisdiction where the policy
was issued.
INVESTMENTS OF THE VARIABLE SUB-ACCOUNTS. All amounts allocated or transferred
to a Variable Sub-Account will be used to purchase shares of the appropriate
Fund. Each Fund Group shall at all times be registered under the 1940 Act as an
open-end management investment company. The Funds available for investment and
for which Variable Sub-Accounts have been established as of the Date of Issue
are listed in the application and on page 5 of the policy. Lincoln Life, after
due consideration of appropriate factors, may
<PAGE>
VARIABLE ACCOUNT PROVISIONS (CONTINUED)
add additional Funds and Fund Groups at any time or may eliminate or substitute
Funds or Fund Groups in accordance with FUND WITHDRAWAL AND SUBSTITUTED
SECURITIES. Any and all distributions made by a Fund will be reinvested in
additional shares of that Fund at net asset value. Deductions by Lincoln Life
from a Variable Sub-Account will be made by redeeming a number of Fund shares at
net asset value equal in total value to the amount to be deducted.
INVESTMENT RISK. Fund share values fluctuate, reflecting the risks of changing
economic conditions and the ability of a Fund Group's investment adviser or
sub-adviser to manage that Fund and anticipate changes in economic conditions.
As to the Variable Account assets, the Owner bears the entire investment risk of
gain or loss.
FUND WITHDRAWAL AND SUBSTITUTED SECURITIES. If a particular Fund ceases to be
available for investment, or Lincoln Life determines that further investment in
the particular Fund is not appropriate in view of the purposes of the Variable
Account (including without limitation that it is not appropriate in light of
legal, regulatory or federal income tax considerations), Lincoln Life may
withdraw the particular Fund as a possible investment in the Variable Account
and may substitute shares of a new or different Fund for shares of the withdrawn
Fund. Lincoln Life shall obtain any necessary regulatory or other approvals.
Lincoln Life may make appropriate endorsements to the policy to the extent
reasonably required to reflect any withdrawal or substitution.
POLICY VALUES PROVISIONS
ACCUMULATION VALUE. The Accumulation Value equals the sum of (i) the Fixed
Account value, (ii) the Variable Account value, and (iii) the Loan Account
value. At any point in time, therefore, the Accumulation Value reflects (a) Net
Premium Payments made, (b) the amount of any partial surrenders, (c) any
increases or decreases as a result of market performance in the Variable
Sub-Accounts, (d) interest credited under the Fixed Account, (e) interest
credited under the Loan Account, and (f) all expenses and fees as specified
under SCHEDULE 2.
FIXED ACCOUNT VALUE. The Fixed Account value, if any, with respect to the
policy, at any point in time, is equal to the sum of the Net Premium Payments
allocated or other amounts (net of any charges) transferred to the Fixed Account
plus interest credited to such account less the portion of the Monthly
Deductions applied to the Fixed Account and less any partial surrenders or
amounts transferred from the Fixed Account.
INTEREST CREDITED UNDER FIXED ACCOUNT. Lincoln Life will credit interest to the
Fixed Account daily. The interest rate applied to the Fixed Account will be the
greater of: (a) a compounded daily rate of 0.010746% (equivalent to a
compounded annual rate of 4%), or (b) a rate determined by Lincoln Life from
time to time. Such rate will be established on a prospective basis and once
credited, such interest will be nonforfeitable.
LOAN ACCOUNT VALUE. The Loan Account value, if any, with respect to the policy,
is the amount of any outstanding loan(s), including accrued interest on the
loan(s). (SEE LOAN PROVISIONS, LOAN ACCOUNT.)
INTEREST RATE CREDITED ON LOAN ACCOUNT VALUE. The annual rate at which interest
is credited on the Loan Account Value will be 7% on and before the 10th Policy
Anniversary and 8% thereafter.
VARIABLE ACCOUNT VALUE. The Variable Account value, if any, with respect to the
policy, for any Valuation Period is equal to the sum of the then stated values
of all Variable Sub-Accounts under the policy. The stated value of each
Variable Sub-Account is determined by multiplying the number of Variable
Accumulation Units, if any, credited or debited to such Variable Sub-Account
with respect to the policy by the Variable Accumulation Unit Value of the
particular Variable Sub-Account for such Valuation Period.
17
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
VARIABLE ACCUMULATION UNIT VALUE. Net Premium Payments, or portions thereof,
allocated, or amounts transferred, to each Variable Sub-Account are converted
into Variable Accumulation Units. The Variable Accumulation Unit value for a
Variable Sub-Account for any Valuation Period after the inception of the
Variable Sub-Account is determined as follows:
1. The total value of Fund shares held in the Variable Sub-Account is
calculated by multiplying the number of Fund shares owned by the Variable
Sub-Account at the beginning of the Valuation Period by the net asset value
per share of the Fund at the end of the Valuation Period and adding any
dividend or other distribution of the Fund earned during the Valuation
Period; minus
2. The liabilities of the Variable Sub-Account at the end of the Valuation
Period; such liabilities include daily charges imposed on the Variable
Sub-Account and may include a charge or credit with respect to any taxes
paid or reserved for by Lincoln Life that Lincoln Life determines result
from the operations of the Variable Account; and
3. The result of (2) is divided by the number of Variable Accumulation Units
for that Variable Sub-Account outstanding at the beginning of the Valuation
Period.
The daily charges imposed on a Variable Sub-Account for any Valuation Period are
equal to the M&E charge multiplied by the number of calendar days in the
Valuation Period.
The accumulation unit value may increase or decrease from Valuation Period to
Valuation Period.
COST OF INSURANCE. The Cost of Insurance is determined monthly. Such cost is
calculated as (1), multiplied by the result of (2) minus (3), where:
(1) is the Cost of Insurance Rate as described in COST OF INSURANCE RATES,
(2) is the Death Benefit at the beginning of the policy month, divided by
1.0032737, and
(3) is the Accumulation Value at the beginning of the policy month prior to the
deduction for the monthly Cost of Insurance.
COST OF INSURANCE RATES. The Cost of Insurance Rates are determined from time
to time by Lincoln Life based on its expectations of future mortality,
investment earnings, persistency and expenses and vary as set forth in SCHEDULE
3. The actuarial formula used to make such determination has been filed with
the insurance supervisory official of the jurisdiction in which the policy is
delivered. Any change in Cost of Insurance Rates will apply to all individuals
of the same class as the Insured. The Cost of Insurance Rates shall not exceed
the amounts described in SCHEDULE 3.
MONTHLY DEDUCTION. Each month, on the Monthly Anniversary Day, Lincoln Life
will deduct the Monthly Deduction by withdrawing the amount from the Fixed and
Variable Sub-Accounts in proportion to which the balances invested in such Fixed
and Variable Sub-Accounts bear to the Net Accumulation Value as of the date on
which the deduction is made, unless otherwise agreed In Writing by Lincoln Life
and the Owner. The Monthly Deduction for a policy month will be calculated as
Charge (1) plus Charge (2) where:
CHARGE (1) is the Cost of Insurance (as described in COST OF INSURANCE) and
the cost of any supplemental riders or optional benefits, and
CHARGE (2) is the Monthly Administrative Fee as described under SCHEDULE 2.
18
<PAGE>
POLICY VALUES PROVISIONS (CONTINUED)
BASIS OF COMPUTATIONS. The Cost of Insurance Rates are guaranteed to be no
greater than that calculated based on the applicable 1980 Commissioners Standard
Ordinary Mortality Table (Age nearest birthday).
All policy values are at least equal to that required by the jurisdiction in
which the policy is delivered. A detailed statement of the method of computing
values has been filed with the insurance supervisory official of that
jurisdiction.
TRANSFER PRIVILEGE PROVISION
TRANSFER PRIVILEGE. At any time while the policy is in force, other than during
the Right-to-Examine Period, the Owner has the right to transfer amounts among
the Fixed and Variable Sub-Accounts then available under the policy. All such
transfers are subject to the following provisions. Transfers may be made In
Writing. Transfer requests must be received at the Administrator Mailing
Address prior to the time of day set forth in the prospectus and provided the
NYSE is open for business, in order to be processed as of the close of business
on the date the request is received; otherwise, the transfer will be processed
on the next business day the NYSE is open for business. A single transfer
request may consist of multiple transactions.
Transfers from the Fixed Account are subject to the POLICY SPECIFICATIONS,
LIMITS ON TRANSFERS. Transfers to the Fixed Account will earn interest as
specified under POLICY VALUES PROVISIONS, INTEREST CREDITED UNDER FIXED ACCOUNT.
Transfers involving Variable Sub-Accounts will reflect the purchase or
cancellation of Variable Accumulation Units having an aggregate value equal to
the dollar amount being transferred to or from a particular Variable
Sub-Account. The purchase or cancellation of such units shall be made using
Variable Accumulation Unit values of the applicable Variable Sub-Account for the
Valuation Period during which the transfer is effective.
Unless otherwise changed by Lincoln Life to be less restrictive, transfers shall
be subject to the following conditions: (a) Up to 12 transfer requests may be
made during any Policy Year without charge, however, for each transfer request
in excess of 12, a transfer fee as set forth in SCHEDULE 2 may be deducted on a
pro-rata basis from the Fixed and/or Variable Sub-Accounts from which the
transfer is being made; (b) The amount being transferred may not be less than
$50 unless the entire value of the Fixed or Variable Sub-Account is being
transferred; (c) The amount being transferred may not exceed Lincoln Life's
maximum amount limit then in effect; (d) Transfers among the Variable
Sub-Accounts or from a Variable Sub-Account to the Fixed Account can be made at
any time; (e) Transfers involving Variable Sub-Account(s) shall be subject to
such additional terms and conditions as may be imposed by the Funds; and (f) Any
value remaining in the Fixed or a Variable Sub-Account following a transfer may
not be less than $100.
If the investment strategy of a Variable Sub-Account were changed, the Owner may
transfer the amount in that Variable Sub-Account to the Fixed Account without a
transfer charge, even if the 12 free transfers have already been used.
Moreover, no transfer charge will be imposed when the Owner, in accordance with
INSURANCE COVERAGE PROVISIONS, RIGHT TO CONVERT and GENERAL PROVISIONS, CHANGE
OF PLAN, exchanges the policy for an equivalent fixed account policy, even if
the 12 free transfers have already been used.
NONFORFEITURE AND SURRENDER VALUE PROVISIONS
SURRENDER. Surrender of the policy is effective on the business day of receipt
by Lincoln Life of the policy and a request for surrender In Writing, provided
that at the time of such receipt the policy is in force and it is prior to the
Coverage Date.
SURRENDER VALUE. The amount payable on surrender of the policy (the "Surrender
Value") shall be the Net Accumulation Value less any Surrender Charges as
determined under the provision of SCHEDULE 1.
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<PAGE>
NONFORFEITURE AND SURRENDER VALUE PROVISIONS (CONTINUED)
The Surrender Value shall be paid by Lincoln Life in a lump sum or as provided
under the OPTIONAL METHODS OF SETTLEMENT rider. Any deferment of payments by
Lincoln Life will be subject to GENERAL PROVISIONS, DEFERMENT OF PAYMENTS.
PARTIAL SURRENDER. A partial surrender may be made from the Policy on any
Valuation Day in accordance with the following as long as the policy is in
force. A partial surrender must be requested In Writing or, if previously
authorized, by telephone. A partial surrender may only be made if the amount of
the partial surrender, excluding the transaction fee as specified in SCHEDULE 1,
is (a) not less than $500; (b) not more than 90% of the Surrender Value of the
policy as of the end of the Valuation Period ending on the Valuation Day on
which the request is accepted by Lincoln Life; and (c) would not cause the
Specified Amount to decline below the Minimum Specified Amount set forth in the
POLICY SPECIFICATIONS. The amount of the partial surrender and the transaction
fee shall be withdrawn from the Fixed and/or Variable Sub-Accounts in proportion
to the balances invested in such Sub-Accounts.
Any surrender results in a withdrawal of funds from all of the Fixed and/or
Variable Sub-Accounts which have balances allocated to them. Any surrender from
a Variable Sub-Account will result in the cancellation of Variable Accumulation
Units which have an aggregate value on the date of the surrender equal to the
total amount by which the Variable Sub-Account is reduced. The cancellation of
such units will be based on the Variable Accumulation Unit value of the Variable
Sub-Account determined at the close of the Valuation Period during which the
surrender is effective.
EFFECT OF PARTIAL SURRENDERS ON ACCUMULATION VALUE AND SPECIFIED AMOUNT. As of
the end of the Valuation Day on which there is a partial surrender, (a) the
Accumulation Value shall be reduced by the sum of (i) the amount of the partial
surrender, plus (ii) the transaction fee specified in SCHEDULE 1; and (b) if
DEATH BENEFIT OPTION 1 is in effect, the Specified Amount shall be reduced by
the amount of the partial surrender.
LOAN PROVISIONS
POLICY LOANS. If the policy has Surrender Value, Lincoln Life will grant a loan
against the policy provided: (a) a proper loan agreement is executed and (b) a
satisfactory assignment of the policy to Lincoln Life is made. The loan may be
for any amount up to 100% of the then current Surrender Value; however, Lincoln
Life reserves the right to limit the amount of such loan so that total
indebtedness will not exceed 90% of an amount equal to the then current
Accumulation Value less the surrender charge(s) as set forth under SCHEDULE 1.
The amount borrowed will be paid within seven days of Lincoln Life's receipt of
such request, except as Lincoln Life may be permitted to defer the payment of
amounts as specified under GENERAL PROVISIONS, DEFERMENT OF PAYMENTS.
The minimum loan amount is $500. Lincoln Life reserves the right to modify this
amount in the future. Lincoln Life will withdraw such loan from the Fixed
and/or Variable Sub-Accounts in proportion to the then current account values,
unless the Owner instructs Lincoln Life otherwise In Writing.
LOAN ACCOUNT. The amount of any loan will be transferred out of the Fixed
and/or Variable Sub-Accounts as described above. Such amount will become part of
the Loan Account Value. The outstanding loan balance at any time includes
accrued interest on the loan.
LOAN REPAYMENT. The outstanding loan balance (i.e. indebtedness) may be repaid
at any time during the lifetime of either Insured, however, the minimum loan
repayment is $100 or the amount of the outstanding indebtedness, if less. The
Loan Account will be reduced by the amount of any loan repayment. Any repayment
of indebtedness, other than loan interest, will be allocated to the Fixed and/or
Variable Sub-Accounts in the same proportion in which Net Premium Payments are
currently allocated, unless the Owner and Lincoln Life agree otherwise In
Writing.
20
<PAGE>
LOAN PROVISIONS (CONTINUED)
INTEREST RATE CHARGED ON LOAN ACCOUNT. Interest charged on the Loan Account
will be at a rate equivalent to 8% per year, payable in arrears.
Interest charged on the Loan Account is payable annually on each Policy
Anniversary or as otherwise agreed In Writing by the Owner and Lincoln Life.
Such loan interest amount, if not paid when due, will be transferred out of the
Fixed and/or Variable Sub-Accounts in proportion to the then current Net
Accumulation Value and into the Loan Account, unless both the Owner and Lincoln
Life agree otherwise.
INDEBTEDNESS. The term "indebtedness" means money which is owed on this policy
due to an outstanding loan and interest accrued thereon. A loan, whether or not
repaid, will have a permanent effect on the Net Accumulation Value and on the
Death Benefit Proceeds. Any indebtedness at time of settlement will reduce the
proceeds payable under the policy. A policy loan reduces the then current Net
Accumulation Value under the policy while repayment of a loan will cause an
increase in the then current Net Accumulation Value. The Owner should consult a
tax advisor prior to taking a loan.
If at any time the total indebtedness against the policy, including interest
accrued but not due, equals or exceeds the then current Accumulation Value less
any applicable surrender charge(s), a notice will be sent at least 31 days
before the end of the grace period to the Owner and to assignees, if any, that
this policy will terminate unless the indebtedness is repaid. The policy will
thereupon terminate without value at the end of the grace period subject to the
conditions in PREMIUM AND REINSTATEMENT PROVISIONS, GRACE PERIOD.
INSURANCE COVERAGE PROVISIONS
EFFECTIVE DATE OF COVERAGE. Coverage will be effective on the date, on or after
the Date of Issue, that the initial premium has been paid (1) while the Insured
is alive and (2) prior to any change in health and insurability as represented
in the application.
For any insurance that has been reinstated, the date of coverage will be the
Monthly Anniversary Day that coincides with or next follows the day the
application for reinstatement is approved by Lincoln Life, provided the Insured
is alive on such day. (SEE PREMIUM AND REINSTATEMENT PROVISIONS,
REINSTATEMENT.)
TERMINATION OF COVERAGE. All coverage under the policy terminates on the first
to occur of the following:
1. Surrender of the policy;
2. Death of the Insured; and
3. The policy matures at its Coverage Date.
4. Failure to pay the amount of premium necessary to avoid termination before
the end of any applicable Grace Period.
No action by Lincoln Life after such a termination of the policy, including any
Monthly Deduction made after termination of coverage, shall constitute a
reinstatement of the policy or waiver of the termination. Any such deduction
will be refunded.
DEATH BENEFIT PROCEEDS. If the Insured dies while the policy is in force,
Lincoln Life shall pay Death Benefit Proceeds equal to the sum of the greater of
(i) the amount determined under the Death Benefit Option in effect at the time
of the Insured's death, or (ii) an amount determined by Lincoln Life equal to
that required by the Internal Revenue Code to maintain the contract as a life
insurance policy (SEE SCHEDULE 4.)
21
<PAGE>
INSURANCE COVERAGE PROVISIONS (CONTINUED)
DEATH BENEFIT OPTIONS. Following are the Death Benefit Options available under
the policy:
DEATH BENEFIT OPTION 1:
THE SPECIFIED AMOUNT. The Specified Amount on the date of death, less any
indebtedness and partial surrenders.
DEATH BENEFIT OPTION 2:
SUM OF THE SPECIFIED AMOUNT AND THE ACCUMULATION VALUE. The sum of the
Specified Amount plus the Net Accumulation Value on the date of death.
Unless DEATH BENEFIT OPTION 2 is elected, the Owner will be deemed to have
elected DEATH BENEFIT OPTION 1.
CHANGES IN SPECIFIED AMOUNT AND DEATH BENEFIT OPTION. Unless provided otherwise,
a change in Specified Amount or Death Benefit Option may be effected any time
while this policy is in force, provided the request for change is In Writing and
filed at the Administrator Mailing Address. All such changes are subject to the
consent of Lincoln Life and the following conditions.
CHANGES IN SPECIFIED AMOUNT:
1. If a decrease in the Specified Amount is requested, the decrease will
become effective on the Monthly Anniversary Day that coincides with or next
follows receipt of the request provided any requirements as determined by
Lincoln Life are met.
In such event, Lincoln Life will reduce the existing Specified Amount
against the most recent increase first, then against the next most recent
increases successively, and finally, against insurance provided under the
original application; however, Lincoln Life reserves the right to limit the
amount of any decrease so that the Specified Amount will not be less than
the Minimum Specified Amount shown in the POLICY SPECIFICATIONS.
2. If an increase in the Specified Amount is requested:
(a) a supplemental application must be submitted and evidence of
insurability of the Insured satisfactory to Lincoln Life must be
furnished; and
(b) any other requirements as determined by Lincoln Life must be met.
If Lincoln Life approves the request, the increase will become effective
upon (i) the Monthly Anniversary Day that coincides with or next follows
the date the request is approved by Lincoln Life and (ii) the deduction
from the Accumulation Value (in proportion to the then current account
values of the Fixed and/or Variable Sub-Accounts) of the first month's Cost
of Insurance for the increase, provided the Insured is alive on such day.
CHANGES IN DEATH BENEFIT OPTION:
1. On a change from DEATH BENEFIT OPTION 1 to DEATH BENEFIT OPTION 2:
The Specified Amount will be reduced by the Accumulation Value as of the
Monthly Anniversary Day that coincides with or next follows date of receipt
of the request for change.
2. On a change from Death BENEFIT OPTION 2 to DEATH BENEFIT OPTION 1:
22
<PAGE>
INSURANCE COVERAGE PROVISIONS (CONTINUED)
The Specified Amount will be increased by the Accumulation Value and the
date of the change will be the Monthly Anniversary Day that coincides with
or next follows the date of receipt of the request for change.
Lincoln Life will not allow a decrease in the amount of insurance below the
minimum amount required to maintain this contract as a life insurance policy
under the Internal Revenue Code.
RIGHT TO CONVERT. The Owner may convert this policy to a substantially
comparable flexible premium adjustable life insurance policy without evidence
of insurability for an amount of insurance not exceeding the death benefit of
the variable life insurance policy on the date of conversion.
PAID-UP INSURANCE OPTION. At any time, the Owner may transfer all of the
Variable Account Value to the Fixed Account and then surrender the policy for
reduced guaranteed nonparticipating paid-up insurance. No monthly
administrative fees would apply to such paid-up insurance. The amount of
paid-up insurance will be that which the surrender value will purchase when
applied as a net single premium at the Insured's then attained age using the
guaranteed interest and mortality basis set forth under the "Basis of
Computations" provision of the policy. The paid-up insurance will not include
any supplementary or additional benefits provided by rider under the original
policy.
GENERAL PROVISIONS
THE POLICY. The policy and the application for the policy constitute the entire
contract between the parties. All statements made in the application shall be
deemed representations and not warranties. No statement may be used in defense
of a claim under the policy unless it is contained in the application and a copy
of the application is attached to the policy when issued.
Only the President, a Vice President, an Assistant Vice President, a Secretary,
a Director or an Assistant Director of Lincoln Life may execute or modify the
policy.
The policy is executed at the Administrator Mailing Address located on the front
cover of the policy.
NON-PARTICIPATION. The policy is not entitled to share in surplus distribution.
NOTICE OF CLAIM. Due Proof of Death must be furnished to Lincoln Life as soon
as reasonably practicable after the death of the Insured. Such notice shall be
given to Lincoln Life In Writing by or on behalf of the Owner.
PAYMENT OF PROCEEDS. Proceeds, as used in this policy, means the amount payable
(a) on the Coverage Date, (b) upon the surrender of this policy before the
Coverage Date, or (c) upon the Insured's death.
The amount payable upon receipt of due proof of death will be the Death Benefit
Proceeds as of the date of death. (SEE INSURANCE COVERAGE PROVISIONS, DEATH
BENEFIT PROCEEDS.) Death Benefit Proceeds are payable at the Administrator
Mailing Address upon the Insured's death subject to the receipt of Due Proof of
Death and will include interest as required by any applicable state law. If the
death occurs during the GRACE PERIOD, Lincoln Life will pay the Death Benefit
Proceeds for the Death Benefit Option in effect immediately prior to the GRACE
PERIOD reduced by any overdue monthly deductions.
If the policy is surrendered before the Coverage Date, the proceeds will be the
Surrender Value described in NONFORFEITURE AND SURRENDER VALUE PROVISIONS. On
the Coverage Date, the proceeds will be the Surrender Value.
23
<PAGE>
GENERAL PROVISIONS (CONTINUED)
The proceeds are subject to the further adjustments described in the following
provisions:
1. Misstatement of Age or Sex;
2. Incontestability; and
3. Suicide.
When settlement is made, Lincoln Life may require return of the policy.
DEFERMENT OF PAYMENTS. Any amounts payable as a result of loans, surrender, or
partial surrenders will be paid within 7 days of Lincoln Life's receipt of such
request. However, payment of amounts from the Variable Sub-Accounts may be
postponed when the NYSE is closed or when the SEC declares an emergency.
Additionally, Lincoln Life reserves the right to defer the payment of such
amounts from the Fixed Account for a period not to exceed 6 months from the date
written request is received by Lincoln Life; during any such deferred period,
the amount payable will bear interest as required by law.
MISSTATEMENT OF AGE OR SEX. If the age or sex of the Insured is misstated,
Lincoln Life will adjust all benefits to the amounts that would have been
purchased for the correct age and sex according to the basis specified in
SCHEDULE 3.
SUICIDE. If the Insured commits suicide within 2 years from the Date of Issue,
the Death Benefit Proceeds will be limited to a refund of premiums paid, less
(a) any indebtedness against the policy and (b) the amount of any partial
surrenders. If the Insured commits suicide within 2 years from the date of any
increase in the Specified Amount, the Death Benefit Proceeds with respect to
such increase will be limited to a refund of the monthly charges for the cost of
such additional insurance and the amount of insurance will be limited to the
amount of Death Benefit Proceeds applicable before such increase was made
provided that the increase became effective at least 2 years from the Date of
Issue of the policy.
INCONTESTABILITY. Except for nonpayment of Monthly Deductions, this policy will
be incontestable after it has been in force during the lifetime of the Insured
for 2 years from its Date of Issue. This means that Lincoln Life will not use
any misstatement in the application to challenge a claim or avoid liability
after that time. Any increase in the Specified Amount effective after the Date
of Issue will be incontestable only after such increase has been in force for 2
years during the lifetime of the Insured.
The basis for contesting an increase in Specified Amount will be limited to
material misrepresentations made in the supplemental application for the
increase. The basis for contesting after reinstatement will be (a) limited for a
period of 2 years from the date of reinstatement and (b) limited to material
misrepresentations made in the reinstatement application.
ANNUAL REPORT. Lincoln Life will send a report to the Owner at least once a year
without charge. The report will show the Accumulation Value as of the reporting
date and the amounts deducted from or added to the Accumulation Value since the
last report. The report will also show (a) the current Death Benefit Proceeds,
(b) the current policy values, (c) premiums paid and all deductions made since
the last report, (d) outstanding policy loans, and (e) any other information
required by the Superintendent of Insurance.
PROJECTION OF BENEFITS AND VALUES. Lincoln Life will provide a projection of
illustrative future Death Benefit Proceeds and values to the Owner at any time
upon written request and payment of a service fee, if any.
CHANGE OF PLAN. This policy may be exchanged for another policy only if Lincoln
Life consents to the exchange and all requirements for the exchange as
determined by Lincoln Life are met.
24
<PAGE>
GENERAL PROVISIONS (CONTINUED)
POLICY CHANGES - APPLICABLE LAW. This policy must qualify initially and
continue to qualify as life insurance under the Internal Revenue Code in order
for the Owner to receive the tax treatment accorded to life insurance under
Federal law. Therefore, to maintain this qualification to the maximum extent
permitted by law, Lincoln Life reserves the right to return any premium payments
that would cause this policy to fail to qualify as life insurance under
applicable tax law as interpreted by Lincoln Life. Further, Lincoln Life
reserves the right to make changes in this policy or to make distributions from
the policy to the extent it deems necessary, in its sole discretion, to continue
to qualify this policy as life insurance. Any such changes will apply uniformly
to all policies that are affected. The Owner will be given advance written
notice of such changes.
25
<PAGE>
OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the policy to which it is attached as of the Date of
Issue. Upon written request, the Company will agree to pay in accordance with
any one of the options shown below all or part of the net proceeds that may be
payable under the policy.
If any income optional settlement provides for instalment payments for a given
age of payee for an amount which would be the same for different periods
certain, the Company will deem that an election has been made for the longest
period certain for such age and amount.
While the Insured is alive, the request, including the designation of the payee,
may be made by the Owner. At the time a Death Benefit becomes payable under the
policy, the request, including the designation of the payee, may then be made by
the Beneficiary. Once Income Payments have begun, the policy cannot be
surrendered and the payee cannot be changed, nor can the settlement option be
changed.
PAYMENT DATES. The first Income Payment under the settlement option selected
will become payable on the date proceeds are settled under the option.
Subsequent payments will be made on the first day of each month in accordance
with the manner of payment selected.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an Income
Payment at least equal to the minimum payment amount in accordance with the
Company's rules then in effect. If at any time payments are less than the
minimum payment amount, the Company has the right to change the frequency to an
interval that will provide the minimum payment amount. If any amount due is
less than the minimum per year, the Company may make other arrangements that are
equitable.
INCOME PAYMENTS. Income Payments will remain constant pursuant to the terms of
the settlement option(s) selected. The amount of each Income Payment shall be
determined in accordance with the terms of the settlement option and the
table(s) set forth in this rider, as applicable. The mortality table used is
the 1983 Individual Annuitant Mortality (IAM) Table "a" and 3% interest. In
determining the settlement amount, the settlement age of the payee will be
reduced by one year when the first installment is payable during the 1990's,
reduced by two years when the first installment is payable during the decade
2000-2009, and so on.
FIRST OPTION: LIFE ANNUITY. An annuity payable monthly to the payee during the
lifetime of the payee, ceasing with the last payment due prior to the death of
the payee.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD. An annuity providing monthly
income to the payee for a fixed period of 60, 120, 180, or 240 months (as
selected), and for as long thereafter as the payee shall live.
THIRD OPTION: ANNUITY CERTAIN. An amount payable monthly for the number of
years selected which may be from 5 to 30 years.
FOURTH OPTION: AS A DEPOSIT AT INTEREST. The Company will retain the proceeds
while the payee is alive and will pay interest annually thereon at a rate of not
less than 3% per year. Upon the payee's death, the amount on deposit will be
paid.
EXCESS INTEREST. At the sole discretion of the Company, excess interest may be
paid or credited from time to time in addition to the payments guaranteed under
any Optional Method of Settlement.
Page 1
<PAGE>
ADDITIONAL OPTIONS. Any proceeds payable under the policy may also be settled
under any other method of settlement offered by the Company at the time of the
request.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
/s/ Philip L. Holstein
President
Page 2
<PAGE>
<TABLE>
<CAPTION>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - MALE
-----------------------------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain Settlement age of Number of instalments certain
payee nearest payee nearest
birthday 60 120 180 240 birthday 60 120 180 240
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age Life Annuity Age Life Annuity
10 $2.87 $2.87 $2.87 $2.87 $2.87 35 $3.44 $3.44 $3.44 $3.43 $3.41
11 2.89 2.89 2.89 2.88 2.88 36 3.48 3.48 3.48 3.46 3.45
12 2.90 2.90 2.90 2.90 2.90 37 3.52 3.52 3.52 3.50 3.48
13 2.92 2.92 2.91 2.91 2.91 38 3.57 3.56 3.56 3.54 3.52
14 2.93 2.93 2.93 2.93 2.92 39 3.61 3.61 3.60 3.58 3.56
15 2.95 2.95 2.95 2.94 2.94 40 3.66 3.65 3.65 3.63 3.60
16 2.96 2.96 2.96 2.96 2.96 41 3.71 3.70 3.69 3.67 3.64
17 2.98 2.98 2.98 2.98 2.97 42 3.76 3.75 3.74 3.72 3.68
18 3.00 3.00 3.00 2.99 2.99 43 3.81 3.81 3.79 3.77 3.73
19 3.02 3.02 3.01 3.01 3.01 44 3.87 3.86 3.85 3.82 3.77
20 3.04 3.04 3.03 3.03 3.03 45 3.93 3.92 3.90 3.87 3.82
21 3.06 3.05 3.05 3.05 3.05 46 3.99 3.98 3.96 3.92 3.87
22 3.08 3.08 3.07 3.07 3.07 47 4.05 4.05 4.02 3.98 3.92
23 3.10 3.10 3.09 3.09 3.09 48 4.12 4.11 4.09 4.04 3.97
24 3.12 3.12 3.12 3.11 3.11 49 4.19 4.18 4.15 4.10 4.03
25 3.14 3.14 3.14 3.14 3.13 50 4.27 4.26 4.22 4.17 4.08
26 3.17 3.17 3.16 3.16 3.15 51 4.34 4.33 4.30 4.23 4.14
27 3.19 3.19 3.19 3.19 3.18 52 4.43 4.41 4.37 4.30 4.20
28 3.22 3.22 3.22 3.21 3.20 53 4.51 4.50 4.45 4.37 4.26
29 3.25 3.25 3.24 3.24 3.23 54 4.60 4.59 4.54 4.45 4.32
30 3.28 3.28 3.27 3.27 3.26 55 4.70 4.68 4.62 4.53 4.39
31 3.31 3.31 3.30 3.30 3.29 56 4.80 4.78 4.72 4.61 4.45
32 3.34 3.34 3.33 3.33 3.32 57 4.91 4.89 4.82 4.69 4.51
33 3.37 3.37 3.37 3.36 3.35 58 5.03 5.00 4.92 4.78 4.58
34 3.41 3.41 3.40 3.39 3.38 59 5.15 5.12 5.03 4.87 4.65
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
60 $5.28 $5.25 $5.14 $4.96 $4.71
61 5.43 5.39 5.27 5.06 4.78
62 5.58 5.53 5.39 5.16 4.84
63 5.74 5.69 5.53 5.26 4.90
64 5.91 5.85 5.66 5.36 4.96
65 6.10 6.03 5.81 5.46 5.02
66 6.30 6.21 5.96 5.56 5.08
67 6.51 6.41 6.12 5.66 5.13
68 6.73 6.62 6.28 5.77 5.18
69 6.97 6.84 6.44 5.86 5.23
70 7.23 7.07 6.61 5.96 5.27
71 7.51 7.32 6.79 6.05 5.31
72 7.80 7.58 6.96 6.14 5.34
73 8.12 7.85 7.14 6.23 5.37
74 8.46 8.14 7.32 6.31 5.40
75 8.82 8.45 7.50 6.38 5.42
76 9.21 8.76 7.67 6.45 5.44
77 9.63 9.10 7.84 6.51 5.45
78 10.08 9.44 8.01 6.57 5.47
79 10.56 9.80 8.17 6.62 5.48
80 11.07 10.17 8.33 6.66 5.49
81 11.62 10.55 8.48 6.70 5.49
82 12.20 10.94 8.61 6.73 5.50
83 12.82 11.33 8.74 6.76 5.50
84 13.47 11.73 8.86 6.79 5.51
85 14.17 12.12 8.97 6.81 5.51
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
OPTIONAL METHODS OF SETTLEMENT (CONTINUED)
LIFE ANNUITY AND LIFE ANNUITY WITH CERTAIN PERIOD TABLE FOR EACH $1,000 APPLIED - FEMALE
-----------------------------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain Settlement age of Number of instalments certain
payee nearest payee nearest
birthday 60 120 180 240 birthday 60 120 180 240
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Age Life Annuity Age Life Annuity
10 $2.80 $2.80 $2.80 $2.80 $2.80 35 $3.26 $3.26 $3.26 $3.25 $3.24
11 2.81 2.81 2.81 2.81 2.81 36 3.29 3.29 3.29 3.28 3.27
12 2.82 2.82 2.82 2.82 2.82 37 3.32 3.32 3.32 3.31 3.30
13 2.83 2.83 2.83 2.83 2.83 38 3.35 3.35 3.35 3.34 3.33
14 2.85 2.85 2.85 2.84 2.84 39 3.39 3.39 3.38 3.38 3.37
15 2.86 2.86 2.86 2.86 2.86 40 3.42 3.42 3.42 3.41 3.40
16 2.87 2.87 2.87 2.87 2.87 41 3.46 3.46 3.46 3.45 3.43
17 2.89 2.89 2.89 2.88 2.88 42 3.50 3.50 3.50 3.49 3.47
18 2.90 2.90 2.90 2.90 2.90 43 3.54 3.54 3.54 3.53 3.51
19 2.92 2.92 2.92 2.91 2.91 44 3.59 3.59 3.58 3.57 3.55
20 2.93 2.93 2.93 2.93 2.93 45 3.64 3.63 3.63 3.61 3.59
21 2.95 2.95 2.95 2.95 2.94 46 3.68 3.68 3.67 3.66 3.63
22 2.96 2.96 2.96 2.96 2.96 47 3.73 3.73 3.72 3.71 3.68
23 2.98 2.98 2.98 2.98 2.98 48 3.79 3.79 3.77 3.76 3.72
24 3.00 3.00 3.00 3.00 2.99 49 3.84 3.84 3.83 3.81 3.77
25 3.02 3.02 3.02 3.02 3.01 50 3.90 3.90 3.89 3.86 3.82
26 3.04 3.04 3.04 3.03 3.03 51 3.97 3.96 3.95 3.92 3.88
27 3.06 3.06 3.06 3.06 3.05 52 4.03 4.03 4.01 3.98 3.93
28 3.08 3.08 3.08 3.08 3.07 53 4.10 4.10 4.08 4.04 3.99
29 3.10 3.10 3.10 3.10 3.09 54 4.18 4.17 4.15 4.11 4.04
30 3.13 3.13 3.12 3.12 3.12 55 4.25 4.25 4.22 4.18 4.11
31 3.15 3.15 3.15 3.14 3.14 56 4.34 4.33 4.30 4.25 4.17
32 3.18 3.18 3.17 3.17 3.16 57 4.42 4.41 4.38 4.32 4.23
33 3.20 3.20 3.20 3.20 3.19 58 4.52 4.51 4.47 4.40 4.30
34 3.23 3.23 3.23 3.22 3.22 59 4.61 4.60 4.56 4.48 4.37
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Settlement age of Number of instalments certain
payee nearest
birthday 60 120 180 240
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Age Life Annuity
60 $4.72 $4.70 $4.66 $4.57 $4.44
61 4.83 4.81 4.76 4.66 4.51
62 4.95 4.93 4.87 4.75 4.58
63 5.08 5.05 4.98 4.85 4.65
64 5.21 5.18 5.10 4.95 4.72
65 5.36 5.32 5.22 5.05 4.79
66 5.51 5.47 5.36 5.16 4.86
67 5.67 5.63 5.50 5.26 4.93
68 5.85 5.80 5.65 5.37 5.00
69 6.04 5.98 5.80 5.49 5.06
70 6.25 6.18 5.97 5.60 5.12
71 6.47 6.39 6.14 5.71 5.18
72 6.71 6.62 6.32 5.83 5.23
73 6.98 6.86 6.50 5.94 5.28
74 7.26 7.12 6.69 6.04 5.32
75 7.57 7.40 6.89 6.14 5.35
76 7.90 7.69 7.09 6.24 5.39
77 8.26 8.01 7.29 6.33 5.41
78 8.65 8.34 7.49 6.41 5.43
79 9.08 8.70 7.69 6.49 5.45
80 9.54 9.07 7.89 6.55 5.47
81 10.03 9.47 8.08 6.61 5.48
82 10.58 9.88 8.26 6.66 5.49
83 11.16 10.31 8.43 6.70 5.49
84 11.80 10.75 8.59 6.74 5.50
85 12.48 11.20 8.74 6.77 5.50
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUITY CERTAIN TABLE FOR EACH $1,000 APPLIED
-----------------------------------------------------------------------------------------------------------------------
Numbers of years Amount of each instalment Number of years Amount of each instalment
during which during which
instalments will be instalments will be
paid Annual Monthly paid Annual Monthly
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 $211.99 $17.91 12 $97.54 $8.24
6 179.22 15.14 13 91.29 7.71
7 155.83 13.16 14 85.95 7.26
8 138.31 11.68 15 81.33 6.87
9 124.69 10.53 16 77.29 6.53
10 113.82 9.61 17 73.74 6.23
11 104.93 8.86 18 70.59 5.96
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Number of years Amount of each instalment
during which
instalments will be
paid Annual Monthly
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
19 $67.78 $5.73
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Non-Participating Variable life insurance payable upon death of the Insured.
Adjustable Death Benefit.
Surrender Value payable upon surrender of the policy.
Flexible premiums payable to when the Insured reaches Age 100.
Investment results reflected in policy benefits.
Premium Payments and Supplementary Coverages as shown in the Policy
Specifications.
<PAGE>
----------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK LINCOLN LIFE-TM-
----------------
VUL/SVUL ADDENDUM TO APPLICATION
THIS VUL/SVUL ADDENDUM IS SUBMITTED AS A SUPPLEMENT TO LIFE INSURANCE
APPLICATION NO.
<TABLE>
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NAME OF PROPOSED INSURED(s):______________________________________________________________________________________________________
First Middle Initial Last
______________________________________________________________________________________________________
First Middle Initial Last
Name of Owner(s):_________________________________________________________________________________________________________________
First Middle Initial Last
_________________________________________________________________________________________________________________
First Middle Initial Last
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1. BROKER/
DEALER Print Name of Broker/Dealer:_____________________________________________________________________________
INFORMATION
Address: ________________________________________________________________________________________________
Telephone:_________________________________ Field Office Code:___________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. INVESTMENT Overall Investment Objective for Sub-Account Selections:
OBJECTIVE / / Aggressive Growth / / Growth & Income (SELECT ONE OBJECTIVE ONLY)
/ / Growth / / Income
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
3. NO LAPSE
PROVISION The No Lapse Provision will only be effective if elected here and if the No Lapse Premium requirement is
/ / YES / / NO met. (This provision may not be available for all products.)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
4. INITIAL FIXED ACCOUNT ________% Transfer(s) from the Fixed Account may only be made during the 30-day
PREMIUM period following each Policy Anniversary and is (are) subject to a maximum annual limit of 20%
PAYMENT of the Fixed Account Value as of that Policy Anniversary. (SEE POLICY SPECIFICATION PAGE)
ALLOCATION
(Allocation to any VARIABLE ACCOUNT - SUB-ACCOUNTS (FUNDS)
one % line must be AIM VARIABLE INSURANCE FUNDS, INC. JANUS ASPEN SERIES
1% or more. Use ____% AIM V.I. Growth Fund ____% Balanced Portfolio
whole percentages ____% AIM V.I. International Equity Fund ____% Worldwide Growth Portfolio
only. Grand Total ____% AIM V.I. Value Fund
of all allocations
made in this LINCOLN NATIONAL
section of the BARON CAPITAL FUNDS TRUST ____% LN Bond Fund, Inc.
application must ____% Baron Capital Asset Fund ____% LN Capital Appreciation Fund, Inc.
equal 100%) ____% LN Equity-Income Fund. Inc.
____% LN Global Asset Allocation Fund, Inc.
BT INSURANCE FUNDS TRUST ____% LN Money Market Fund, Inc.
If DOLLAR COST ____% BT EAFE-Registered Trademark- Equity Index Fund ____% LN Social Awareness Fund, Inc.
AVERAGING ____% BT Equity 500 Index Fund
is elected, an ____% BT Small Cap Index Fund MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
allocation must ____% MFS Emerging Growth Series
be made to the ____% MFS Total Return Series
Money Market DELAWARE GROUP PREMIUM FUND, INC. ____% MFS Utilities Series
Fund and the % ____% Delchester Series
allocated must ____% Devon Series NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
result in an initial ____% Emerging Markets Series ____% AMT Mid-Cap Growth Portfolio
amount of at least ____% REIT Series ____% AMT Partners Portfolio
$1,000 in such ____% Small Cap Value Series
account. Please ____% Trend Series TEMPLETON VARIABLE PRODUCTS SERIES FUND
complete Section 6. ____% International Fund - Class 2
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ____% Stock Fund - Class 2
____% Contrafund Portfolio - Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
____% Growth Opportunities Portfolio - Service Class
NOTE: ALL PAYMENTS AND VALUES PROVIDED BY THE LIFE INSURANCE POLICY WHEN BASED ON THE INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. THE
DEATH BENEFIT PROCEEDS AND THE CASH VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE EXPERIENCE
OF THE VARIABLE ACCOUNT. ALSO, THE DEATH BENEFIT PROCEEDS MAY BE VARIABLE OR FIXED UNDER SPECIFIED
CONDITIONS.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
5. AUTOMATIC / / Quarterly / / Semi-Annual / / Annual
REBALANCING
/ / Yes / / No NOTE: THIS SERVICE IS NOT AVAILABLE IF DOLLAR COST AVERAGING IS SELECTED.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
6. DOLLAR COST SELECT ONE TRANSFER OPTION ($50 MINIMUM PER TRANSFER):
AVERAGING / / $_____________ monthly / / $_____________ quarterly
(FOLLOW Each amount transferred is to be applied to the following Fund(s) in these percentages (USE WHOLE
INSTRUCTIONS IN PERCENTAGES ONLY. TOTAL MUST EQUAL 100%).
SECTION 3 BEFORE
COMPLETING THIS I(We) understand that these transfers will continue until the Fund is exhausted or I(we) terminate the
SECTION) program, whichever occurs earlier. I(We) also understand that I(we) may add to such Fund at any time to
continue this program or may change the periodic amounts.
AIM VARIABLE INSURANCE FUNDS, INC. JANUS ASPEN SERIES
____% AIM V.I. Growth Fund ____% Balanced Portfolio
____% AIM V.I. International Equity Fund ____% Worldwide Growth Portfolio
____% AIM V.I. Value Fund
LINCOLN NATIONAL
BARON CAPITAL FUNDS TRUST ____% LN Bond Fund, Inc.
____% Baron Capital Asset Fund ____% LN Capital Appreciation Fund, Inc.
____% LN Equity-Income Fund. Inc.
____% LN Global Asset Allocation Fund, Inc.
BT INSURANCE FUNDS TRUST ____% LN Money Market Fund, Inc.
____% BT EAFE-Registered Trademark- Equity Index Fund ____% LN Social Awareness Fund, Inc.
____% BT Equity 500 Index Fund
____% BT Small Cap Index Fund
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST
____% MFS Emerging Growth Series
DELAWARE GROUP PREMIUM FUND, INC. ____% MFS Total Return Series
____% Delchester Series ____% MFS Utilities Series
____% Devon Series
____% Emerging Markets Series NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
____% REIT Series ____% AMT Mid-Cap Growth Portfolio
____% Small Cap Value Series ____% AMT Partners Portfolio
____% Trend Series
TEMPLETON VARIABLE PRODUCTS SERIES FUND
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ____% International Fund - Class 2
____% Contrafund Portfolio - Service Class ____% Stock Fund - Class 2
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
____% Growth Opportunities Portfolio - Service Class
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
7. CERTIFICA- I(We) have read the above questions and answers and declare that they are complete and true to the best
TIONS of my (our) knowledge and belief. I(We) agree, a) that this VUL/SVUL Addendum to Application and Life
Insurance Application (Part I pages 1, 2, 3 and 4, and Part II, or Part IIA, if required) shall form a
part of any policy/contract issued, and b) that no Agent/Representative of the Company shall have the
authority to waive a complete answer to any question in this Addendum to Application, make or alter any
contract, or waive any of the Company's other rights or requirements. I(We) further agree that no
insurance shall take effect unless and until the policy/contract has been delivered to and accepted by
me(us) and the initial premium paid during the lifetime of the Proposed Insured(s), and provided the
Proposed Insured(s) remain in the state of health and insurability represented in Parts I and II, or Part
IIA if required, of this Application.
I(We) acknowledge receipt of a current prospectus.
ILLUSTRATIONS OF BENEFITS, INCLUDING DEATH BENEFITS, POLICY VALUES AND CASH SURRENDER VALUES ARE
AVAILABLE UPON REQUEST.
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
8. SIGNATURES
Signed at_________________________________________________________ On________/________/________
CITY / STATE MO. DAY YEAR
____________________________________________________________________________________________________
SIGNATURE OF PROPOSED INSURED(S)
____________________________________________________________________________________________________
SIGNATURE(S) OF OWNER(S) IF OTHER THAN PROPOSED INSURED(S)
____________________________________________________________________________________________________
SIGNATURE OF WITNESS
____________________________________________________________________________________________________
SIGNATURE OF LICENSED AGENT/REGISTERED REPRESENTATIVE
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
LINCOLN FINANCIAL ADVISORS CORPORATION
<PAGE>
TABLE OF CONTENTS
Description Page
- ----------- ----
Section 1. Available Funds............................................... 2
1.1 Availability.................................................. 2
1.2 Addition, Deletion or Modification of Funds................... 2
1.3 No Sales to the General Public................................ 2
Section 2. Processing Transactions....................................... 3
2.1 Timely Pricing and Orders..................................... 3
2.2 Timely Payments............................................... 3
2.3 Applicable Price.............................................. 3
2.4 Dividends and Distributions................................... 4
2.5 Book Entry.................................................... 4
Section 3. Costs and Expenses ........................................... 4
3.1 General....................................................... 4
3.2 Parties To Cooperate.......................................... 4
Section 4. Legal Compliance.............................................. 5
4.1 Tax Laws...................................................... 5
4.2 Insurance and Certain Other Laws.............................. 7
4.3 Securities Laws............................................... 7
4.4 Notice of Certain Proceedings and Other Circumstances......... 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF..... 9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY..... 10
Section 5. Mixed and Shared Funding...................................... 11
5.1 General....................................................... 11
5.2 Disinterested Directors....................................... 12
5.3 Monitoring for Material Irreconcilable Conflicts.............. 12
5.4 Conflict Remedies............................................. 13
5.5 Notice to LIFE COMPANY........................................ 14
5.6 Information Requested by Board of Directors................... 14
5.7 Compliance with SEC Rules..................................... 14
5.8 Other Requirements............................................ 14
Section 6. Termination................................................... 15
6.1 Events of Termination......................................... 15
6.2 Notice Requirement for Termination............................ 16
6.3 Funds To Remain Available..................................... 16
i
<PAGE>
Description Page
- ----------- ----
6.4 Survival of Warranties and Indemnifications................... 16
6.5 Continuance of Agreement for Certain Purposes................. 16
Section 7. Parties To Cooperate Respecting Termination................... 17
Section 8. Assignment.................................................... 17
Section 9. Notices....................................................... 17
Section 10. Voting Procedures............................................. 18
Section 11. Foreign Tax Credits........................................... 18
Section 12. Indemnification............................................... 19
12.1 Of AVIF and AIM by LIFE COMPANY............................... 19
12.2 Of LIFE COMPANY by AVIF and AIM............................... 21
12.3 Effect of Notice.............................................. 23
12.4 Successors.................................................... 23
Section 13. Applicable Law................................................ 23
Section 14. Execution in Counterparts..................................... 24
Section 15. Severability.................................................. 24
Section 16. Rights Cumulative............................................. 24
Section 17. Headings...................................................... 24
Section 18. Confidentiality............................................... 24
Section 19. Trademarks and Fund Names..................................... 25
Section 20. Parties to Cooperate.......................................... 26
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of October, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"),
Lincoln Life & Annuity Company of New York, a New York life insurance company
("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Lincoln Financial
Advisors Corporation ("UNDERWRITER"), an affiliate of LIFE COMPANY and the
principal underwriter of the Accounts and the Contracts (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance policies; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts" or Policies") as
set forth on Schedule A hereto, as the Parties hereto may amend from time to
time, which Contracts, if required by applicable law, will be registered under
the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each
of which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Policies will be registered as securities under the 1933 Act
(or exempt therefrom); and
1
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Policies; and
WHEREAS, LIFE COMPANY is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund or Fund resulting from a
deletion or modification. Schedule A, as amended from time to time, is
incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
2
<PAGE>
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading and (ii) AVIF
calculates the Fund's net asset value.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Policies (collectively, "Policy transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate
3
<PAGE>
Funds next computed after receipt by AVIF or its designated agent of the orders.
For purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent
of AVIF for receipt of orders relating to Policy transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
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Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion
or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.817-5(a)(2), to
the Commissioner of the IRS that such failure was
inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other administrative
or judicial proceeding or contests (including judicial
appeals thereof) with the IRS, any Participant or any other
claimant regarding any claims that could give rise to
liability to AVIF or its affiliates as a result of such a
failure or alleged failure; provided, however, that LIFE
COMPANY will retain control of the conduct of such
conferences discussions, proceedings, contests or appeals;
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(v) any written materials to be submitted by LIFE COMPANY to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such materials
to be submitted to the IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided by LIFE
COMPANY to AVIF (together with any supporting information
or analysis); subject to the confidentiality provisions of
Section 18, at least ten (10) business days or such shorter
period to which the Parties hereto agree prior to the day
on which such proposed materials are to be submitted, and
(b) shall not be submitted by LIFE COMPANY to any such
person without the express written consent of AVIF which
shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE COMPANY) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a failure
or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS
or any Participant that would give rise to a claim against
AVIF or its affiliates (a) compromise or settle any claim,
(b) accept any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which
shall not be unreasonably withheld, provided that LIFE
COMPANY shall not be required, after exhausting all
administrative penalties, to appeal any adverse judicial
decision unless AVIF or its affiliates shall have provided
an opinion of independent counsel to the effect that a
reasonable basis exists for taking such appeal; and
provided further that the costs of any such appeal shall be
borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result
of such failure or alleged failure if LIFE COMPANY fails to
comply with any of the foregoing clauses (i) through (vii),
and such failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or
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compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance policies under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing under the laws of the State of New York
and has full corporate power, authority and legal right to execute, deliver and
perform its duties and comply with its obligations under this Agreement, (ii) it
has legally and validly established and maintains each Account as a segregated
asset account under New York Insurance Law and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all other applicable
federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power, authority and right to execute, deliver and perform its
duties and comply with its obligations under this agreement.
4.3 Securities Laws.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the
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Contracts will be duly authorized for issuance and sold in compliance with all
applicable federal and state laws, including, without limitation, the 1933 Act,
the 1934 Act, the 1940 Act and New York law, (iii) each Account is and will
remain registered under the 1940 Act, to the extent required by the 1940 Act,
(iv) each Account does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, to the extent required,
(v) each Account's 1933 Act registration statement relating to the Contracts (to
the extent required), together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder, (vi) LIFE COMPANY will amend any registration statement for
its Contracts under the 1933 Act and for its Accounts under the 1940 Act from
time to time to the extent required in order to effect the continuous offering
of its Policies or as may otherwise be required by applicable law, and (vii)
each Account Prospectus will at all times comply in all material respects with
the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC
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for any amendment to such registration statement or AVIF Prospectus that may
affect the offering of Shares of AVIF, (iii) the initiation of any proceedings
against AVIF, AIM or the investment adviser to AVIF for that purpose or for any
other purpose relating to the registration or offering of AVIF'S Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Policies issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Policies or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Policies,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts and to one (1)
or more Funds, within twenty (20) calendar days of the filing of such document
with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least ten (10)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with
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the sale of the Policies other than (i) the information or representations
contained in the registration statement, including the AVIF Prospectus contained
therein, relating to Shares, as such registration statement and AVIF Prospectus
may be amended from time to time; or (ii) in reports or proxy materials for
AVIF; or (iii) in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or other
promotional material approved by AVIF, except with the express written
permission of AVIF or AIM.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Participants) ("broker only materials") is
so used, and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to one (1) or more
Funds, within twenty (20) calendar days of the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready copies of all AVIF
prospectuses relating to the Funds and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and other materials required by law to be sent
to Participants who have allocated any Contract value to a Fund. AVIF will
provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Policies, at least ten (10) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to time,
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agree upon. No such material shall be used if LIFE COMPANY or its designated
agent objects to such use within five (5) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. LIFE COMPANY shall receive all such sales literature until such time
as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AIM shall adopt and implement procedures reasonably designed to ensure
that information concerning LIFE COMPANY, and its respective affiliates that is
intended for use only by brokers or agents selling the Policies (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither LIFE COMPANY, nor any of its respective
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance policies,
separate accounts of insurance companies unaffiliated with LIFE COMPANY, and
trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are
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substantially identical to many of the provisions of this Section 5. Sections
5.2 through 5.8 below shall apply pursuant to such an exemptive order granted to
AVIF. AVIF hereby notifies LIFE COMPANY that AVIF has implemented Mixed and
Shared Funding and it may be appropriate to include in the prospectus pursuant
to which a Contract is offered disclosure regarding the potential risks of Mixed
and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
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Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors, upon their request, with all information reasonably necessary for
the Board of Directors to consider any issue raised, including information as to
a decision by LIFE COMPANY to disregard voting instructions of Participants.
LIFE COMPANY's responsibilities in connection with the foregoing shall be
carried out with a view only to the interests of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets in
a different investment medium, including, but not limited to,
another Fund of AVIF, or submitting the question whether such
segregation should be implemented to a vote of all affected
Participants and, as appropriate, segregating the assets of
any particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
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(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
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Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief (i.e., a substitution
order) from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, AIM or the Fund's investment adviser by the NASD, the SEC, or any
state insurance regulator or any other regulatory body regarding AVIF's
obligations under this Agreement or related to the operation or management of
AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on LIFE COMPANY, or the Subaccount corresponding to the Fund with respect to
which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Policies issued by LIFE COMPANY cease to
qualify as annuity contracts or life insurance policies under the Code (other
than by reason of the Fund's
15
<PAGE>
noncompliance with Section 817(h) or Subchapter M of the Code) or if interests
in an Account under the Contracts are not registered, where such registration is
required, and, in all material respects, are not issued or sold in accordance
with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice of Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Policies in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Policies"). Specifically, without limitation, the
owners of the Existing Policies will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Policies. The parties agree that this Section 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.l(g), 6.1(h) or 6.1(i) hereof,
this Agreement shall nevertheless continue in effect as to any Shares of that
Fund that are outstanding as of the date of such termination (the
16
<PAGE>
"Initial Termination Date"). This continuation shall extend to the earlier of
the date as of which an Account owns no Shares of the affected Fund or a date
(the "Final Termination Date") six (6) months following the Initial Termination
Date, except that LIFE COMPANY may, by written notice shorten said six (6) month
period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g),
6.1(h) or 6.1(i).
Section 7 Parties to Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM Variable Insurance Funds, Inc.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Attn: Robert 0. Sheppard, Esq.
17
<PAGE>
Lincoln Financial Advisors Corporation
1300 S Clinton Street
Fort Wayne, IN 46802
Facsimile: (219) 455-1773
Attn: Kelly D. Clevenger
Vice President
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. Notwithstanding the foregoing, LIFE COMPANY
reserves the right to vote shares held in any Account in its own right, to the
extent permitted by law. LIFE COMPANY shall be responsible for assuring that
each of its Accounts holding Shares calculates voting privileges in a manner
consistent with that of other Participating Insurance Companies or in the manner
required by the Mixed and Shared Funding exemptive order obtained by AVIF. AVIF
will notify LIFE COMPANY of any changes of interpretations or amendments to
Mixed and Shared Funding exemptive order it has obtained. AVIF will comply with
all provisions of the 1940 Act requiring voting by shareholders, and in
particular, AVIF either will provide for annual meetings (except insofar as the
SEC may interpret Section 16 of the 1940 Act not to require such meetings) or
will comply with Section 16(c) of the 1940 Act (although AVIF is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
18
<PAGE>
Section 12. Indemnification
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM,
their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY and/or UNDERWRITER) or actions in respect thereof (including, to
the extent reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise; provided, the Account owns shares of the Fund and insofar as such
losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising
for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; provided, that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY and/or UNDERWRITER by or
on behalf of AVIF for use in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts,
or sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY, UNDERWRITER,
or their affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of
LIFE COMPANY, UNDERWRITER, or their respective affiliates or
persons under their control (including, without limitation,
their employees and "persons associated with a member", as
that term is defined in paragraph (q) of Article I of the
NASD's By-Laws), in connection with the sale or distribution
of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any
19
<PAGE>
amendment or supplement to any of the foregoing, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF, AIM or their affiliates by or
on behalf of LIFE COMPANY, UNDERWRITER, or their affiliates
for use in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY and/or
UNDERWRITER to perform the obligations, provide the services
and furnish the materials required of it under the terms of
this Agreement, or any material breach of any representation
and/or warranty made by LIFE COMPANY and/or UNDERWRITER in
this Agreement or arise out of or result from any other
material breach of this Agreement by LIFE COMPANY and/or
UNDERWRITER; or
(v) arise as a result of failure by the Policies issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
policies under the Code, otherwise than by reason of any
Fund's failure to comply with Subchapter M or Section 817(h)
of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify LIFE COMPANY and/or UNDERWRITER of any such action
shall not relieve LIFE COMPANY and/or UNDERWRITER from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this Section 12.1. Except as otherwise provided herein, in
case any such action is brought against an Indemnified Party, LIFE COMPANY
and/or UNDERWRITER shall be entitled to participate, at its own expense, in the
defense of such action and also shall be entitled to assume the defense thereof,
with counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from LIFE COMPANY
and/or UNDERWRITER to such Indemnified Party of LIFE COMPANY's and/or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and/or UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal
20
<PAGE>
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER, or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF'S 1933
Act registration statement, AVIF Prospectus or sales
literature or advertising of AVIF (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER, or
their respective affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales
literature or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for
the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
AVIF, AIM or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM or their affiliates or persons under
their control (including, without limitation, their employees
and "persons associated with a member" as that term is defined
in Section (q) of Article I of the NASD By-Laws), in
connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act
21
<PAGE>
registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY, UNDERWRITER, or their
affiliates by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any
other material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
and/or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability
22
<PAGE>
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
and/or AIM will be entitled to participate, at its own expense, in the defense
of such action and also shall be entitled to assume the defense thereof (which
shall include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF and/or AIM to such Indemnified
Party of AVIF's or AIM's election to assume the defense thereof the Indemnified
Party will cooperate fully with AVIF and AIM shall bear the fees and expenses of
any additional counsel retained by it, and AVIF and AIM will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER, or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by LIFE COMPANY or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act (unless
exempt therefrom); or (iii) the failure by LIFE COMPANY or any Participating
Insurance Company to maintain its variable annuity contracts or life insurance
policies (with respect to which any Fund serves as an underlying funding
vehicle) as annuity contracts or life insurance policies under applicable
provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
23
<PAGE>
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list
24
<PAGE>
or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other trade names, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LIFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance Policies
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that
a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor,
25
<PAGE>
when requesting reconsideration of a prior approval, shall assume the reasonable
expenses of withdrawing and replacing such disapproved materials. The licensee
shall obtain the prior written approval of the licensor for the use of any new
materials developed to replace the disapproved materials, in the manner set
forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD, the IRS and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
--------------------------------
26
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
--------------------------- ----------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
--------------------------- ----------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
LINCOLN LIFE & ANNUITY COMPANY OF NEW
YORK, on behalf of itself and its
separate accounts
Attest: /s/ Kathleen R. Gorman By: /s/ Philip L. Holstein
--------------------------- ----------------------------------
Name: Kathleen R. Gorman Name: Philip L. Holstein
--------------------------- ----------------------------------
Title: Assistant Vice President Title: President
of Operations ----------------------------------
---------------------------
LINCOLN FINANCIAL ADVISORS CORPORATION as
principal underwriter for the separate
accounts of Lincoln Life & Annuity
Company of New York
Attest: /s/ Bonnie Jean Taylor By: /s/ John M. Behrendt
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Name: Bonnie Jean Taylor Name: John M. Behrendt
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Title: Executive Assistant Title: Vice President
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SCHEDULE A
FUNDS AVAILABLE UNDER THE Policies
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Lincoln Life & Annuity Flexible Premium Variable Life Account M
LLANY Separate Account R for Flexible Premium Variable Life Insurance
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Lincoln Life & Annuity Company of New York:
Flexible Premium Variable Life Insurance Policy
LN615 NY LNY
Lincoln Life & Annuity Company of New York
Flexible Premium Variable Life Insurance Policy On the Lives of Two
Insureds
LN650 NY
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SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM _________________________ Fund
o AIM and Design
[LOGO](R)
AIM
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SCHEDULE C
EXPENSE ALLOCATIONS
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Description LIFE COMPANY AIM/AVIF
- --------------------------------------------------------------------------------
Registration
Prepare and file Account registration Fund registration
registration statements(1) statements statements
Payment of fees Account fees Fund Fees
- --------------------------------------------------------------------------------
Prospectuses
Typesetting Account Prospectuses Fund Prospectuses
Printing Account Prospectuses, and Fund Prospectuses
Fund Prospectuses (but distributed to existing
not for existing Participants(2)
Participants)
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SAIs
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
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Supplements (to
Prospectuses or SAIs)
Typesetting and Printing Account Supplements, and Fund Supplements to
Fund Supplements (but not existing Participants(2)
for existing Participants)
- --------------------------------------------------------------------------------
- ----------
(1) Includes all filings and costs necessary to keep registrations current
and effective; including, without limitation, filing Forms N-SAR and Rule 24F-2
Notices as required by law.
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the
ratio of the number of pages of the combined prospectus, report, or other
document, for each Fund listed on Schedule A hereto to the total number of pages
in such combined prospectus, report, or other document; and (b) the ratio of the
number of Participants who invest in all Funds of AVIF to the total number of
Participants.
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- --------------------------------------------------------------------------------
Description LIFE COMPANY AIM/AVIF
- --------------------------------------------------------------------------------
Financial Reports
Typesetting Account Reports Fund Reports to existing
Participants(2)
Printing Account Reports, and Fund
Reports (not to existing
Participants)
- --------------------------------------------------------------------------------
Mailing and Distribution
To Contract owners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAIs,
Supplements and Reports
- --------------------------------------------------------------------------------
Proxies
Typesetting, printing and Account and Fund Proxies Fund Proxies where the
mailing of proxy where the matters matters submitted are
solicitation materials submitted are solely solely Fund-related
and voting instruction Account-related
solicitation materials
and tabulation of Account Proxies even where
proxies to Participants the matters submitted are
solely Fund-related
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Other (Sales-Related)
Contract owner Account-related items and
communication Fund-related items
Distribution Policies
Administration Account (Policies)
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- ----------
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the
ratio of the number of pages of the combined prospectus, report, or other
document, for each Fund listed on Schedule A hereto to the total number of pages
in such combined prospectus, report, or other document; and (b) the ratio of the
number of Participants who invest in all Funds of AVIF to the total number of
Participants.
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FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 1st day of October 1998, by and among BT
Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers Trust
Company ("ADVISER"), a New York banking corporation, and Lincoln Life & Annuity
Company of New York ("LIFE COMPANY"), a life insurance company organized under
the laws of the State of New York.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "40 Act"), as
an open-end, diversified management investment company; and
WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"),
with those Portfolios currently available being listed on Appendix A hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies"); and
WHEREAS, TRUST may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the TRUST to be sold to and held by Variable Contract Separate
Accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
Separate Accounts to offer Variable Contracts and is desirous of having TRUST as
one of the underlying funding vehicles for such Variable Contracts; and
WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of
1940, as amended (the "Advisers Act") and as such is excluded from the
definition of "Investment Adviser" and is not required to register as an
investment adviser pursuant to the Advisers Act; and
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WHEREAS, ADVISER serves as the TRUST's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at such shares' net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and ADVISER agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed on Appendix B for investment
of purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Registration Statement.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile
(or by such other means as TRUST and LIFE COMPANY may agree in writing) of such
order by 9:00 a.m. New York time on the next Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which TRUST calculates its net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem on LIFE COMPANY's request, any full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption, in accordance with the provisions of
this Agreement and TRUST's Registration Statement. (In the event of a conflict
between the provisions of this Agreement and the Trust's Registration Statement,
the provisions of the Registration Statement shall govern.) For purposes of this
Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests
for redemption from the designated Separate Account and receipt by such designee
shall constitute receipt by TRUST; provided that LIFE COMPANY receives the
request for redemption by 4:00 p.m. New York time and TRUST receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE
COMPANY may agree in
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writing) of such request for redemption by 9:00 a.m. New York time on the next
Business Day.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of TRUST. LIFE 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. LIFE COMPANY reserves
the right to change such election. TRUST shall notify LIFE COMPANY or its
designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed on each day for which such incorrect information was
provided to reflect the correct share net asset value. Any material error in the
calculation of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE 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. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined shall
be transmitted to TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account by 2:00 pm on the day the order is transmitted by
LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption
proceeds to LIFE COMPANY by 2:00 pm that day, unless doing so would require
TRUST to dispose of Portfolio securities or otherwise incur additional costs. In
any event, proceeds shall be wired to LIFE COMPANY within the time period
permitted by the '40 Act or the rules, orders or regulations thereunder, and
TRUST shall notify the
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person designated in writing by LIFE COMPANY as the recipient for such notice of
such delay by 3:00 p.m. New York Time on the same Business Day that LIFE COMPANY
transmits the redemption order to TRUST. If LIFE COMPANY's order requests the
application of redemption proceeds from the redemption of shares to the purchase
of shares of another Fund advised by ADVISER, TRUST shall so apply such proceeds
on the same Business Day that LIFE COMPANY transmits such order to TRUST.
1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUST's Portfolios will not be sold directly to the general public.
1.9 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
TRUST if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts.
Shares ordered from Portfolio will be recorded in appropriate book entry titles
for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and validly existing under the laws of the State of New York and
that it has legally and validly established each Separate Account as a
segregated asset account under such laws, and that LINCOLN FINANCIAL ADVISORS
CORPORATION, the principal underwriter for the Variable Contracts, is registered
as a broker-dealer under the Securities Exchange Act of 1934 (the "34 Act").
2.2 LIFE 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.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "33 Act") unless an
exemption from
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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 (including
all applicable blue sky laws and further that the sale of the variable contracts
shall comply in all material respects with applicable state insurance law
suitability requirements).
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance
policies, endowment or annuity contracts under applicable provisions of the
Code, that it will maintain such treatment and that it will notify TRUST
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.
2.5 TRUST represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal laws, and TRUST shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such shares.
TRUST, subject to Section 1.9 above, 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. TRUST 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 TRUST.
2.6 TRUST and ADVISER each 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 1.817-5, and will notify LIFE COMPANY immediately upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will immediately take all reasonable steps to adequately diversify the Portfolio
to achieve compliance.
2.7 TRUST represents and warrants that each Portfolio invested in by the
Separate Account will be treated as a "regulated investment company" under
Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8 ADVISER represents and warrants that it shall perform its obligations
hereunder in compliance in all material respects with all applicable state and
federal laws.
2.9 TRUST and ADVISER each represents and warrants that all officers,
employees and agents of the TRUST having access to securities or funds of any
Portfolio shall be covered by a blanket fidelity bond in such minimum amount as
the SEC may prescribe under Section 17(g) of the '40 act.
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Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance and
transfer of its shares.
3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge, with
as many copies of the current prospectus (or prospectuses), statements of
additional information, annual and semi-annual reports and proxy statements for
the shares of the Portfolios as LIFE COMPANY may reasonably request for
distribution to existing Variable Contract owners whose Variable Contracts are
funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE
COMPANY's expense, with as many copies of the current prospectus (or
prospectuses) for the shares as LIFE COMPANY may reasonably request for
distribution to prospective purchasers of Variable Contracts. If requested by
LIFE COMPANY, TRUST or its designee shall provide such documentation [including
a "camera ready" copy of the current prospectus (or prospectuses) for the
Portfolios used in LIFE COMPANY's Variable Contracts as set in type or, at the
request of LIFE COMPANY, as a diskette in the form sent to the financial
printer] and other assistance as is reasonably necessary in order for the
parties hereto once a year [or more frequently if the prospectus (or
prospectuses), for such Portfolios for the shares is supplemented or amended] to
have the prospectus for the Variable Contracts and the prospectus (or
prospectuses) for the TRUST shares printed together in one document. The
expenses of such printing will be apportioned between LIFE COMPANY and TRUST in
proportion to the number of pages of the Variable Contract and TRUST prospectus,
taking account of other relevant factors affecting the expense of printing, such
as covers, columns, graphs and charts; TRUST shall bear the cost of printing the
TRUST prospectus portion of such document for distribution only to owners of
existing Variable Contracts funded by the TRUST shares and LIFE COMPANY shall
bear the expense of printing the portion of such documents relating to the
Separate Account; provided, however, LIFE COMPANY shall bear all printing
expenses of such combined documents where used for distribution to prospective
purchasers or to owners of existing Variable Contracts not funded by the shares.
In the event that LIFE COMPANY requests that TRUST or its designee provide
TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be
responsible for providing the prospectus (or prospectuses) in the format in
which it is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus (or prospectuses) in such format (e.g. typesetting
expenses), and LIFE
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COMPANY shall bear the expense of adjusting or changing the format to conform
with any of its prospectuses.
3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, proxy statements, exemptive
applications and all amendments or supplements to any of the above that relate
to the Portfolios and any other material constituting sales literature or
advertising under NASD rules, the 40 Act or the 33 Act within 2O days of the
date of such material and annual and semi-annual reports and any amendments or
supplements thereto within 80 days of the date of such report or amendment or
supplement thereto. LIFE COMPANY will provide TRUST with at least one complete
copy of all prospectuses, statements of additional information, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account and any other material constituting
sales literature or advertising under NASD rules, the 40 Act or the 33 Act
within 20 days of the date of such material and annual and semi-annual reports
and any amendments within 80 days of the date of such report or amendment or
supplement thereto.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
ADVISER, each piece of sales literature or other promotional material in which
TRUST or ADVISER is named, at least ten (10) Business Days prior to its intended
use. No such material will be used if TRUST or ADVISER objects to its use in
writing within seven (7) Business Days after receipt of such material.
4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days
prior to its intended use. No such material will be used if LIFE COMPANY objects
to its use in writing within seven (7) Business Days after receipt of such
material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a 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 or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
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4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST or ADVISER.
4.5 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, 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 National Association of Securities Dealers, Inc. ("NASD")
rules, the '40 Act, the '33 Act or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that TRUST has received an order from the SEC
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit TRUST shares to be sold to and held by
Variable Contract separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. The Exemptive Order
requires TRUST and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Article V. The
TRUST will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes substantially the same conditions and
undertakings as are imposed on LIFE COMPANY by this Article V.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts and with participants of Qualified Plans investing in TRUST.
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
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the investments of TRUST are being managed; (e) a difference in voting
instructions given by Variable Contract owners; (f) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract owners and (g) if applicable, a decision by a Qualified Plan to
disregard the voting instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts of which
it becomes aware to the Board. LIFE COMPANY will be responsible for assisting
the Board in carrying out its duties in this regard 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
LIFE COMPANY to inform the Board whenever it has determined to disregard
Variable Contract owner voting instructions. These responsibilities of LIFE
COMPANY will be carried out with a view only to the interests of the Variable
Contract owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Trustees), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
up to and including; (a) withdrawing the assets allocable to some or all of the
Separate Accounts from TRUST or any Portfolio thereof and reinvesting those
assets in a different investment medium, which may include another Portfolio of
TRUST, or another investment company; (b) submitting the question as to whether
such segregation should be implemented to a vote of all affected Variable
Contract 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 Variable Contract 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 LIFE COMPANY's decision to
disregard Variable Contract owner voting instructions, and that decision
represents a minority position or would preclude a majority vote, LIFE COMPANY
may be required, at the election of TRUST, to withdraw the Separate Account's
investment in TRUST, and no charge or penalty will be imposed as a result of
such withdrawal. The responsibility to take such remedial action shall be
carried out with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, 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
TRUST or ADVISER (or any other investment adviser of TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts [if any offer to do so has
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been declined by a vote of a majority of Variable Contract owners materially and
adversely affected by the irreconcilable material conflict.]
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 LIFE COMPANY shall from time to time 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 under this Article V.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as and to the extent the SEC continues to
interpret the '40 Act as requiring pass-through voting privileges for Variable
Contract owners. Accordingly, LIFE COMPANY, where applicable, will vote shares
of the Portfolio held in its 40 Act registered Separate Accounts in a manner
consistent with voting instructions timely received from its Variable Contract
owners. LIFE COMPANY will be responsible for assuring that each of its Separate
Accounts that participates in TRUST calculates voting privileges in a manner
consistent with other Participating Insurance Companies. LIFE COMPANY will vote
shares in a registered Separate Account for which it has not received timely
voting instructions in the same proportion as it votes those shares in that
Separate Account for which it has received voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Exemptive
Order, then TRUST, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless TRUST, ADVISER and each of their Trustees, directors, principals,
officers, employees and agents and each person, if any, who controls TRUST or
ADVISER within the meaning of Section 15 of the '33 Act (collectively, the
"Indemnified Parties") against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY,
which consent shall not be unreasonably withheld) or litigation or threatened
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any
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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 TRUST's shares or the Variable
Contracts and:
(a) 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 or sales literature 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 in
writing to LIFE COMPANY by or on behalf of TRUST for use in the
registration statement or prospectus for the Variable Contracts or
in the Variable Contracts or sales literature (or any amendment or
supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Variable Contracts or TRUST shares;
or
(b) arise out of or result from (i) untrue statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of TRUST not
supplied by LIFE COMPANY, or persons under its control) or (ii)
willful misfeasance, bad faith or gross negligence of LIFE COMPANY
or persons under its control, with respect to the sale or
distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of TRUST or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to TRUST by or on
behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out
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<PAGE>
of or result from any other material breach of this Agreement by
LIFE COMPANY.
7.2 LIFE 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 to the extent that such losses, claims,
damages, liabilities or litigation are attributable to 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.
7.3 LIFE 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 LIFE 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 LIFE COMPANY of any
such claim shall not relieve LIFE 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, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
COMPANY's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and LIFE
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.
7.4 Indemnification by TRUST and ADVISER. TRUST and ADVISER each agree to
indemnify and hold harmless LIFE COMPANY and each of its directors, officers,
employees, and agents and each person, if any, who controls LIFE COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties") against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of TRUST or ADVISER (which
consent shall not be unreasonably withheld) or litigation or threatened
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of TRUST's shares for the Variable Contracts and:
12
<PAGE>
(a) 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 or sales literature of TRUST (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished in
writing to ADVISER or TRUST by or on behalf of LIFE COMPANY for use
in the registration statement or prospectus for TRUST or in sales
literature (or any amendment or supplement to any of the foregoing)
or otherwise for use in connection with the sale of the Variable
Contracts or TRUST shares; or
(b) arise out of or result from (i) untrue statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts not supplied by ADVISER or TRUST or persons under
its control) or (ii) gross negligence, bad faith or willful
misfeasance of TRUST or ADVISER or persons under its control, with
respect to the sale or distribution of the Variable Contracts or
TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature 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 in
writing to LIFE COMPANY for inclusion therein by or on behalf of
TRUST; or
(d) arise as a result of (i) a failure by TRUST or ADVISER to provide
substantially the services and furnish the materials required under
the terms of this Agreement; or (ii) a failure by a Portfolio(s)
invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or (iii)
a failure by a Portfolio(s) invested in by the Separate Account to
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<PAGE>
qualify as a "regulated investment company" under Subchapter M of
the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by TRUST or ADVISER in this
Agreement or arise out of or result from any other material breach
of this Agreement by TRUST or ADVISER.
7.5 TRUST and ADVISER 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 to the extent that such
losses, claims, damages, liabilities or litigation are attributable to 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.
7.6 TRUST and ADVISER 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 TRUST and ADVISER 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 TRUST and ADVISER
of any such claim shall not relieve TRUST and ADVISER 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, TRUST and ADVISER shall be
entitled to participate at their own expense in the defense thereof. TRUST and
ADVISER also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from TRUST or
ADVISER to such party of TRUST's or ADVISER's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and TRUST and/or ADVISER as the case may be
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.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
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<PAGE>
(a) At the option of LIFE COMPANY or TRUST at any time from the date
hereof upon 180 days' written notice, unless a shorter time is
agreed to by the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not reasonably
available to meet the requirements of the Variable Contracts as
determined by LIFE COMPANY. Prompt notice of election to terminate
shall be furnished by LIFE COMPANY, said termination to be effective
ten days after receipt of notice unless TRUST makes available a
sufficient number of shares to reasonably meet the requirements of
the Variable Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against TRUST or ADVISER or any sub-adviser by the SEC,
the NASD, or any other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in LIFE COMPANY's
reasonable judgment, after affording TRUST and ADVISER reasonable
opportunity for consultation with LIFE COMPANY, materially impair
TRUST's ability to meet and perform TRUST's obligations and duties
hereunder, or result in material harm to the Separate Accounts, LIFE
COMPANY, or owners of Variable Contracts. Prompt notice of election
to terminate shall be furnished by LIFE COMPANY with said
termination to be effective upon receipt of notice;
(d) At the option of TRUST or ADVISER, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the NASD, or any other
regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in TRUST's or ADVISER's reasonable judgment
after affording LIFE COMPANY reasonable opportunity for consultation
with TRUST and ADVISER, materially impair LIFE COMPANY's ability to
meet and perform its obligations and duties hereunder. Prompt notice
of election to terminate shall be furnished by TRUST with said
termination to be effective upon receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law
precludes the use of such shares as the underlying investment medium
of Variable Contracts issued or to be issued by LIFE COMPANY.
Termination shall be effective upon such occurrence without notice;
15
<PAGE>
(f) At the option of TRUST if the Variable Contracts cease to qualify as
annuity contracts or life insurance contracts, as applicable, under
the Code, or if TRUST reasonably believes that the Variable
Contracts may fail to so qualify. Termination shall be effective
upon receipt of notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's or ADVISER's breach of
any material provision of this Agreement, which breach has not been
cured to the reasonable satisfaction of LIFE COMPANY within ten days
after written notice of such breach is delivered to TRUST;
(h) At the option of TRUST or ADVISER, upon LIFE COMPANY's material
provision of this Agreement, which breach has not been cured to the
satisfaction of TRUST within ten days notice of such breach is
delivered to LIFE COMPANY;
(i) At the option of TRUST or ADVISER, if the Variable Contracts are not
registered, issued or sold in accordance with applicable federal
and/or state law. Termination shall be effective immediately upon
such occurrence without notice;
(j) At the option of LIFE COMPANY, upon 75 days written notice of a vote
of Variable Contract owners having an interest in a Portfolio and
upon written approval of LIFE COMPANY, to substitute the shares of
another investment company for the corresponding shares of a
Portfolio in accordance with the terms of the Variable Contracts;
(k) In the event this Agreement is assigned without the prior written
consent of LIFE COMPANY, TRUST, and ADVISER, termination shall be
effective immediately upon such occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, TRUST at LIFE COMPANY's option shall continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
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, if TRUST makes additional TRUST shares available, the owners of the
Existing Contracts or LIFE COMPANY, whichever shall have legal
16
<PAGE>
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. If TRUST shares continue to be
made available after such termination, the provisions of this Agreement shall
remain in effect and thereafter either TRUST or LIFE COMPANY may terminate the
Agreement, as so continued pursuant to this Section 8.3, upon sixty (60) days
prior written notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
Article IX. NOTICES
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 TRUST:
BT Insurance Funds Trust
c/o First Data Investor Services Group, Inc.
One Exchange Place
53 State Street, Mail Stop B0S865
Boston, MA 02109
and
c/o BT Alex Brown
One South Street, Mail Stop 1-18-6
Baltimore, MD 21202
Attn: Brian Wixted
If to ADVISER:
Bankers Trust Company
130 Liberty Street, Mail Stop 2355
New York, NY 10006
Attn.: Vinay Mendiratta
17
<PAGE>
If to LIFE COMPANY:
Lincoln Life & Annuity Company of New York
120 Madison Street
Suite 1700
Syracuse, N.Y. 13202
Attn: Robert 0. Sheppard, Esq.
With a copy to:
Lincoln National Life Insurance
1300 S. Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly P. Clevenger
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 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.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 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.
10.4 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.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or
any Portfolio shall be personally liable hereunder. No Portfolio shall be liable
for the liabilities of any other Portfolio. All persons dealing with TRUST or a
Portfolio must look solely to the property of TRUST or that Portfolio,
respectively, for enforcement of any claims against TRUST or that Portfolio. It
is also understood that each of the Portfolios shall be deemed to be
18
<PAGE>
entering into a separate Agreement with LIFE COMPANY so that it is as if each of
the Portfolios had signed a separate Agreement with LIFE COMPANY and that a
single document is being signed simply to facilitate the execution and
administration of the Agreement.
10.6 Each party 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.
10.7 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.
10.8 If the Agreement terminates, the parties agree that Article 7 and
Sections 10.5, 10.6 and 10.7 shall remain in effect after termination.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
ADVISER and the LIFE COMPANY.
10.10 No failure or delay by a party in exercising any right or remedy
under this Agreement will operate as a waiver thereof and no single or partial
exercise of rights shall preclude a further or subsequent exercise. The rights
and remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
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.
BT INSURANCE FUNDS TRUST
By: /s/ Elizabeth Russell
--------------------------------------------
Name: Elizabeth Russell
Title: Secretary
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BANKERS TRUST COMPANY
By: /s/ Irene S. Greenberg
--------------------------------------------
Name: Irene S. Greenberg
Title: Vice President
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
By: /s/ Troy D. Panning
--------------------------------------------
Name:
Title:
20
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Appendix A
BT Insurance Funds Trust Portfolios
Equity 500 Index Fund
<PAGE>
Appendix B
Separate Accounts
1) Lincoln Life & Annuity Flexible Premium Variable Life Account M
2) LLANY Separate Account R for Flexible Premium Variable Life Insurance
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of the 1st day of
September, 1996, by and among LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK,
(hereinafter the "Company"), a New York corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange Commission
(the "SEC") a registration statement on Form N-1A and the SEC has declared
effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC, dated October
15, 1985 (File No. 812-6102), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (hereinafter the "1940
1
<PAGE>
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the
2
<PAGE>
Fund receives notice of such order by 9:30 a.m. Boston 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 net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, 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 net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contact not later than the time such investment companies are made available
to owners of the
3
<PAGE>
Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written continuation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state laws and 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
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 4240 of the New York Insurance Laws and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities
4
<PAGE>
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3 The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort 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 Company represents that the Contracts are currently treated
as life insurance policies or annuity insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Underwriter 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.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 1 2b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 1 2b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective 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.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing 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 the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund
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will reimburse the Company in an amount equal to the product of A and B where A
is the number of such prospectuses distributed to owners of the Contracts, and B
is the Fund's per unit cost of typesetting and printing the Fund's prospectus.
The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
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ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment advisor or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the information or representations contained in the
registration statement or prospectus for the Fund shares, 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 or other promotional
material approved by the Fund or its designee or by the Underwriter, except with
the permission of the Fund or the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter 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 a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 30
days of the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
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<PAGE>
the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and 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 V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
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<PAGE>
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1 Board will monitor the Fund for the existence of any material
conflict between the interests of the contract owners of all separate accounts
investing in the Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (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,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such
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<PAGE>
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the 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 Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1,
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<PAGE>
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including reasonable legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
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 Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts 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
(ii) arise out of or as a result of any untrue 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
willful misfeasance, bad faith, or gross negligence of the Company
or persons under its control, with respect to the sale or
distribution of the 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 a statement or
omission was
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<PAGE>
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) 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, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(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 or to the Fund, whichever is applicable.
8.1(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 the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or
the Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
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<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter 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 or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter 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.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
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<PAGE>
(i) 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 a failure to comply with
the diversification requirements specified in Article VI
of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund 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 and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund 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 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 of any
such claim shall not relieve the Fund 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 will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund'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 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.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
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 Commonwealth of
Massachusetts.
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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
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months
advance written notice delivered to the other parties;
or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio 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 that the Fund may fail
to so qualify; or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the
diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of
the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company and/or its affiliated companies
has suffered a material adverse change in its business,
operations, financial condition or prospects since the
date of this Agreement or is the subject of material
adverse publicity; or
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(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in
its sole judgment exercised in good faith, that either
the Fund or the Underwriter has suffered a material
adverse change in its business, operations, financial
condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
(h) the requisite vote of the Contract owners having an
interest in a Portfolio (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 a Portfolio in accordance
with the terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC,
the insurance commission of any state or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts,
the operation of the Account, the administration of the
Contracts or the purchase of Fund shares, 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
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the
Fund's investment adviser or any sub-adviser, 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 Underwriter 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
Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser 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.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all 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 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. The parties agree that this
Section 10.2 shall
17
<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving rise
to the obligation to indemnify the other party occurred prior to the date of
termination.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail 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:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln Life & Annuity Company of New York
120 Madison Street
17th floor
Syracuse, New York 13202
Attention: Phil Holstein
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
18
<PAGE>
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 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.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
New York Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By: /s/ Phillip L. Holstein
--------------------------------------------------
Name: Phillip L. Holstein
---------------------------------------------
Title: President
--------------------------------------------
VARIABLE INSURANCE PRODUCTS FUND
By: /s/ J. Gary Burkhead
--------------------------------------------------
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Neal Litvack
--------------------------------------------------
Neal Litvack
President
20
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
Lincoln Life & Annuity Variable GAC96-111
Annuity Account L GAC91-101
21
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than
two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
23
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be not received for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually remedied
individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may reasonably request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off" may be done orally, but must
always be followed up in writing.
24
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
25
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of the 1st day of
September, 1996, by and among LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK,
(hereinafter the "Company"), a New York corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange Commission
(the "SEC") a registration statement on Form N-1A and the SEC has declared
effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC, dated
September 17, 1986 (File No. 812-6422), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940
1
<PAGE>
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (HEREINAFTER THE "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the
2
<PAGE>
Fund receives notice of such order by 9:30 a.m. Boston 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 net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, 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 net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contract not later than the time such investment companies are made
available to owners of the
3
<PAGE>
Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state laws and 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
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 4240 of the New York Insurance Laws and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities
4
<PAGE>
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort 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 Company represents that the Contracts are currently treated
as life insurance policies or annuity insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Underwriter 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.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective 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.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of New York and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing 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 the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund
6
<PAGE>
will reimburse the Company in an amount equal to the product of A and B where A
is the number of such prospectuses distributed to owners of the Contracts, and B
is the Fund's per unit cost of typesetting and printing the Fund's prospectus.
The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
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ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter 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 a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 30
days of the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
8
<PAGE>
the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and 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 V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contacts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
9
<PAGE>
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (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, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such
10
<PAGE>
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the 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 Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1,
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<PAGE>
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including reasonable legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
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 Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts 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
(ii) arise out of or as a result of any untrue 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
willful misfeasance, bad faith, or gross negligence of the Company
or persons under its control, with respect to the sale or
distribution of the 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 a statement or
omission was
12
<PAGE>
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) 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, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof
8.1(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 or to
the Fund, whichever is applicable.
8.1(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 the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2. Indemnification by the Underwriter
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may become subject under any statute, 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 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 or sales
literature 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 Underwriter or Fund by or on behalf of
the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of any untrue statements or
representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature for the Contracts not
supplied by the Underwriter or persons under its
control) or willful misfeasance, bad faith, or gross
negligence of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or
distribution of the 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 covering the
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 statement or statements therein
not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by
or on behalf of the Fund; or
(iv) 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 a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement); or
14
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter 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 or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter 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.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
15
<PAGE>
(i) 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 a failure to comply with
the diversification requirements specified in Article VI
of this Agreement) ;or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof
8.3(b). The Fund 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 and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund 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 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 of any
such claim shall not relieve the Fund 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 will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund'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 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.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
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 Commonwealth of
Massachusetts.
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<PAGE>
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
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1.This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio 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 that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
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<PAGE>
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) the requisite vote of the Contact owners having an interest in
a Portfolio (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 a
Portfolio in accordance with the terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account,
the administration of the Contracts or the purchase of Fund
shares, 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
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the Fund's
investment adviser or any sub-adviser, 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
Underwriter 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 Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser 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.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all 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 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. The parties agree that this
Section 10.2 shall
18
<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving rise
to the obligation to indemnify the other party occurred prior to the date of
termination.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail 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:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln Life & Annuity Company of New York
120 Madison Street
17th floor
Syracuse, New York 13202
Attention: Phil Holstein
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
19
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ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 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.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
New York Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By: /s/ Philip L. Holstein
-------------------------------------
Name: Philip L. Holstein
-------------------------------------
Title: President
-------------------------------------
VARIABLE INSURANCE PRODUCTS FUND II
By: /s/ J. Gary Burkhead
-------------------------------------
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Neal Litvack
-------------------------------------
Neal Litvack
President
21
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account
- -------------------------------------- --------------------------
Lincoln Life & Annuity Variable GAC96-111
Annuity Account L GAC91-101
22
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than
two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to Customers
by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be not received for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually remedied
individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated, if the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may reasonably request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off" may be done orally, but must
always be followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
26
<PAGE>
FUND PARTICIPATION AGREEMENT
Between
THE LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK
And
LINCOLN NATIONAL MONEY MARKET FUND, INC.
THIS AGREEMENT, made and entered into this _______ day of ___________,
1998, by and between Lincoln National Money Market Fund, Inc. a corporation
organized under the laws of Maryland (the "Fund"), and LINCOLN LIFE AND ANNUITY
COMPANY OF NEW YORK, a New York insurance corporation (the "Company"), on its
own behalf and on behalf of each separate account of the Company named in
Schedule 1 to this Agreement as in effect at the time this Agreement is executed
and such other separate accounts that may be added to Schedule 1 from time to
time in accordance with the provisions of Article XI of this Agreement (each
such account referred to as the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission
(the "SEC") and the SEC has declared effective a registration statement
(referred to herein as the "Fund Registration Statement" and the prospectus
contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to
herein as the "Fund Prospectus") on Form N-1A to register itself as an open-end
management investment company (File No. 811-3212) under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Fund shares (File No. 2-80743)
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC
to register under the 1933 Act (unless exempt therefrom) certain variable
annuity contracts and/or variable life insurance policies described in Schedule
2 to this Agreement as in effect at the time this Agreement is executed and such
other variable annuity contracts and variable life insurance policies which may
be added to Schedule 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly
authorized by the Company on the date set forth on Schedule 1, sets aside and
invests assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each
Account with the SEC as a unit investment trust under the 1940 Act before any
Contracts are issued by that Account; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company and the Fund agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares which the
Company orders on behalf of the Account, executing such orders on a daily basis
in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the
Company on behalf of the Account at the then applicable net asset value per
share on Business Days as defined in Section 1.4 of this Agreement, and the Fund
shall use its best efforts to calculate and deliver such net asset value by 7:00
p.m., E.S.T., on each such Business Day. Notwithstanding any other provision in
this Agreement to the contrary, the Board of Directors of the Fund (the "Fund
Board") may suspend or terminate the offering of shares, if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Fund Board acting in good faith and in light of its
fiduciary duties under Federal and any applicable state laws, suspension or
termination is necessary and in the best interests of the shareholders (it being
understood that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full
or fractional shares of the Fund held by the Account or the Company, executing
such requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the extent permitted by the 1940 Act, any rules, regulations or orders
thereunder, or the then currently effective Fund Prospectus.
2
<PAGE>
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the
Company shall be the agent of the Fund for the limited purpose
of receiving redemption and purchase requests from the Account
(but not from the general account of the Company), and receipt
on any Business Day by the Company as such limited agent of
the Fund prior to the time prescribed in the current Fund
Prospectus (which as of the date of execution of this
Agreement is 4 p.m., E.S.T.) shall constitute receipt by the
Fund on that same Business Day, provided that the Fund
receives notice of such redemption or purchase request by 9:00
a.m., E.S.T. on the next following Business Day. For purposes
of this Agreement, "Business Day" shall mean any day on which
the New York Stock exchange is open for trading.
(b) The Company shall pay for the shares on the same day
that it places an order with the Fund to purchase those Fund
shares for an Account. Payment for Fund shares will be made by
the Account or the Company in Federal Funds transmitted to the
Fund by wire to be received by 11:00 a.m., E.S.T. on the day
the Fund is properly notified of the purchase order for
shares. The Fund will confirm receipt of each trade and these
confirmations will be received by the Company via Fax or
E-mail by 3:00 p.m. E.S.T. If Federal Funds are not received
on time, such funds will be invested, and shares purchased
thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the
Company by wire on the same day the Fund is notified of the
redemption order of shares, except that the Fund reserves the
right to delay payment of redemption proceeds, but in no event
may such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund shall not bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be
redeemed; the Company alone shall be responsible for such
action.
1.5. Issuance and transfer of Fund shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income dividends or capital gain distributions payable on
any shares. The Company, on its behalf and on behalf of the Account, hereby
elects to receive all such dividends and distributions as are payable on any
shares in the form of additional shares of that Fund. The Company reserves the
right, on its behalf and on behalf of the Account, to revoke this election and
to receive all such dividends in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
3
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 7:00 p.m., E.S.T. each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance with
the then currently effective Fund Prospectus. The Fund shall not be liable for
any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund.
1.8. (a) The Company may withdraw the Account's investment in
the Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) upon a determination by a majority of the Fund
Board, or a majority of disinterested Fund Board members, that
an irreconcilable material conflict exists among the interests
of (x) any Product Owners or (y) the interests of the
Participating Insurance Companies investing in the Fund; (iii)
upon requisite vote of the Contract owners having an interest
in the Fund to substitute the shares of another investment
company for shares in accordance with the terms of the
Contracts; (iv) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general
application; or (v) at the Company's sole discretion, pursuant
to an order of the SEC under Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the
Fund shares may be sold to other insurance companies (subject
to Section 1.9 hereof) and the cash value of the Contracts may
be invested in other investment companies.
(c) The Company shall not, without prior notice to the
Fund (unless otherwise required by applicable law), take any
action to operate the Accounts as management investment
companies under the 1940 Act.
1.9. The Fund agrees that Fund shares will be sold only to
Participating Insurance Companies and their separate accounts. The Fund will not
sell Fund shares to any insurance company or separate account unless an
agreement complying with Article VII of this Agreement is in effect to govern
such sales. No Fund shares will be sold to the general public.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as
4
<PAGE>
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 Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as
a Regulated Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund further represents and warrants that
it will make every effort to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Fund represents and warrants that it will comply with
Section 817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at
the time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees
and expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement. The Fund, however, makes no representation as to whether
any aspect of its operations (including, but not limited to, fees and expenses
and investment policies) otherwise complies with the insurance laws or
regulations of any state. The Company alone shall be responsible for informing
the Fund of any investment restrictions imposed by state insurance law and
applicable to the Fund.
2.7. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
5
<PAGE>
ARTICLE III. Prospectuses and Proxy Statements; Sales Material and Other
Information
3.1. The Fund shall provide the Company with as many copies of the
current Fund Prospectus as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund at its expense shall provide to the
Company a camera-ready copy, and electronic version, of the current Fund
Prospectus suitable for printing and other assistance as is reasonably necessary
in order for the Company to have a new Contracts Prospectus printed together
with the Fund Prospectus in one document. See Article V for a detailed
explanation of the responsibility for the cost of printing and distributing Fund
prospectuses.
3.2. The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund and the Fund
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in
each case in a form suitable for printing, as determined by
the Company. The Fund shall be responsible for the costs of
printing and distributing these materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contract owner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each
piece of sales literature or other promotional material in which the Fund is
named. No such material shall be used, except with the prior written permission
of the Fund. The Fund agrees to respond to any request for approval on a prompt
and timely basis. Failure of the Fund to respond within 10 days of the request
by the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund, except with the prior written permission of the Fund. The Fund agrees
to respond to any request for permission on a prompt and timely basis. If the
Fund does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Fund.
6
<PAGE>
3.6. The Fund shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts Registration Statement or Contracts Prospectus, as such Registration
Statement and Prospectus may be amended or supplemented from time to time, or in
published reports of the Account which are in the public domain or approved in
writing by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the Company. The Company agrees to
respond to any request for permission on a prompt and timely basis. If the
Company fails to respond within 10 days of a request by the Fund, then the Fund
is relieved of the obligation to obtain the prior written permission of the
Company.
3.7. The Fund will provide to the Company at least one complete copy
of all Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy
of all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements,
7
<PAGE>
prospectuses, Statements of Additional Information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article VII,
the Fund shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII,
the Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely fashion
from such Contract owners;
(b) vote Fund shares attributable to Contract owners for which
no instructions have been received in the same proportion as Fund
shares of such Series for which instructions have been received in
timely fashion; and
(c) vote Fund shares held by the Company on its own behalf or
on behalf of the Account that are not attributable to Contract
owners in the same proportion as Fund shares of such Series for
which instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. Fees and Expenses
All expenses incident to performance by the Fund under this
Agreement (including expenses expressly assumed by the Fund pursuant to this
Agreement) shall be paid by the Fund to the extent permitted by law. Except as
may otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing
Fund Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
8
<PAGE>
The Company is responsible for the cost of printing and distributing
Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. Compliance Undertakings
6.1. The Fund undertakes to comply with Subchapter M and Section
817(h) of the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and the Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any
prospectus offering a Contract that is a life insurance contract where it is
reasonably possible that such Contract would be deemed a "modified endowment
contract," as that term is defined in Section 7702A of the Code, will describe
the circumstances under which a Contract could be treated as a modified
endowment contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
ARTICLE VII. Potential Conflicts
7.1. The Company agrees to report to the Board of Directors of the
Fund (the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
9
<PAGE>
7.2. If a majority of the Board, or a majority of disinterested
Board Members, determines that a material irreconcilable conflict exists, the
Board shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the
Company and a reasonable opportunity for the Company to appear
before it and present its case, determines that the Company is
responsible for said conflict, and if the Company agrees with that
determination, the Company shall, at its sole cost and expense, take
whatever steps are necessary to remedy the material irreconcilable
conflict. These steps could include: (i) withdrawing the assets
allocable to some or all of the affected Accounts from the Fund and
reinvesting such assets in a different investment vehicle, or
submitting the question of whether such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any particular group (i.e.,
variable annuity Contract owners, variable life insurance policy
owners, or variable Contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a
change: and (ii) establishing a new registered mutual fund or
management separate account; or (iii) taking such other action as is
necessary to remedy or eliminate the material irreconcilable
conflict.
(b) If the Company disagrees with the Board's determination,
the Company shall file a written protest with the Board, reserving
its right to dispute the determination as between just the Company
and the Fund and to seek reimbursement from the Fund for the
reasonable costs and expenses of resolving the conflict. After
reserving that right the Company, although disagreeing with the
Board that it (the Company) was responsible for the conflict, shall
take the necessary steps, under protest, to remedy the conflict,
substantially in accordance with paragraph (a) just above, for the
protection of Contract owners.
(c) As between the Company and the Fund, if within 45 days
after the Board's determination the Company elects to press the
dispute, it shall so notify the Board in writing. The parties shall
then attempt to resolve the matter amicably through negotiation by
individuals from each party who are authorized to settle the matter.
If the matter has not been amicably resolved within 60 days from the
date of the Company's notice of its intent to press the dispute,
then before either party shall undertake to litigate the dispute it
shall be submitted to non-binding arbitration conducted
expeditiously in accordance with the CPR Rules for Non-Administered
Arbitration of Business Disputes, by a sole arbitrator: provided,
however, that if one party has requested the other party to seek an
amicable resolution and the other party has failed to participate,
the requesting party may initiate arbitration before expiration of
the 60-day period set out just above.
10
<PAGE>
If within 45 days of the commencement of the process to select
an arbitrator the parties cannot agree upon the arbitrator, then he
or she will be selected from the CPR Panels of Neutrals. The
arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort Wayne,
Indiana. The Arbitrator is not empowered to award damages in excess
of compensatory damages.
(d) If the Board shall determine that the Fund or
another was responsible for the conflict, then the Board shall
notify the Company immediately of that determination. The Fund shall
assure the Company that it (the Fund) or that other Participating
Insurance Company as applicable, shall, at its sole cost and
expense, take whatever steps are necessary to eliminate the
conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall
constitute a waiver of any right of action which the Company may
have against other Participating Insurance-Companies for
reimbursement of all or part of the costs and expenses of resolving
the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) the Account's investment in
the Fund, if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict. However, in no event will the
Fund be required to establish a new funding medium for any variable contract,
nor will the Company be required to establish a new funding medium for any
Contract, if in either case an offer to do so has been declined by a vote of a
majority of affected Contract owners.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company. The Company agrees to indemnify
and hold harmless the Fund and each person who controls or is associated with
the Fund (other than another Participating Insurance Company) within the meaning
of such terms under the federal securities laws and any officer, trustee,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid with the prior written consent of the Company in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
11
<PAGE>
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information
furnished in writing to the Company by the Fund (or a person
authorized in writing to do so on behalf of the Fund) for use in the
Contracts Registration Statement, Contracts Prospectus or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution
of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they
were made, if such statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or on
behalf of the Company; or
(d) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments under
the terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis
in accordance with the procedures set forth in Article I; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
12
<PAGE>
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. Indemnification by the Fund. The Fund agrees to indemnify and
hold harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional
material of the Fund, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished
in writing by the Company to the Fund for use in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature for the Fund or otherwise
for use in connection with the sale of the Contracts or Fund shares;
or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the Fund (other
than statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or other
promotional material of the Fund not supplied by the Distributor or
the Fund or persons under their control) or wrongful conduct of the
Fund or persons under its control with respect to the sale or
distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract's
Registration Statement, Contracts Prospectus or sales literature or
other promotional material for the Contracts (or any amendment or
supplement thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances in which they were made, if such statement or omission
was made in reliance upon information furnished in writing by the
Fund to the Company (or a person authorized in writing to do so on
behalf of the Fund); or
13
<PAGE>
(d) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including, but not by way of limitation, a failure,
whether unintentional or in good faith or otherwise: (i) to comply
with the diversification requirements specified in Sections 2.4 and
6.1 in Article VI of this Agreement; and (ii) to provide the Company
with accurate information sufficient for it to calculate its
accumulation and/or annuity unit values in timely fashion as
required by law and by the Contracts Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. Indemnification Procedures. After receipt by a party entitled
to indemnification ("indemnified party") under this Article VIII of notice of
the commencement of any action, if a claim in respect thereof is to be made by
the indemnified party against any person obligated to provide indemnification
under this Article VIII ("indemnifying party"), such indemnified party will
notify the indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the indemnifying
party will not relieve it from any liability under this Article VIII, except to
the extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
the failure to give such notice. The indemnifying party, upon the request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the 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.
14
<PAGE>
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Maryland,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant, and the terms hereof shall be limited, interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of
notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account,
the administration of the Contracts or the purchase of Fund
shares;
(d) at the option of the Company upon institution of
formal proceedings against the Fund, the investment advisor or
any sub-investment advisor, by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory
body; or
(e) upon requisite vote of the Contract owners having an
interest in the Fund (unless otherwise required by applicable
law) and written approval of the Company, to substitute the
shares of another investment company for the corresponding
shares of the Fund in accordance with the terms of the
Contracts; or
15
<PAGE>
(f) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance
with applicable Federal and/or state law; or
(g) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority
of disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of (i) any
Product owners or (ii) the interests of the Participating
Insurance Companies investing in the Fund; or
(h) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M
of the Code, or under any successor or similar provision, or
if the Company reasonably believes, based on an opinion of its
counsel, that the Fund may fail to so qualify; or
(i) at the option of the Company if the Fund fails to
meet the diversification requirements specified in Section
817(h) of the Code and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(k) at the option of the Fund if the Fund shall
determine, in its sole judgment exercised in good faith, that
either (1) the Company shall have suffered a material adverse
change in its business or financial condition: or (2) the
Company shall have been the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that:
(1) the Fund shall have suffered a material adverse change in
its business or financial condition; or (2) the Fund shall
have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Company; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts
or the Accounts to another insurance company pursuant to an
assumption reinsurance agreement) unless the non-assigning
party consents thereto or unless this Agreement is assigned to
an affiliate of the Company or the Fund, as the case may be.
16
<PAGE>
10.2. Notice Requirement. Except as otherwise provided in Section
10.1, no termination of this Agreement shall be effective unless and until the
party terminating this Agreement gives prior written notice to the other party
of its intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a)
of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by
such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement,
such prior written notice shall be given at least ninety (90)
days before the effective date of termination, or sooner if
required by law or regulation.
10.3. Effect of Termination
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund will, at
the option of the Company, continue to make available
additional Fund shares for so long after the termination of
this Agreement as the Company desires, pursuant to the terms
and conditions of this Agreement as provided in paragraph (b)
below, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if
the Company so elects to make additional Fund shares
available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so, shall
be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing
Contracts.
(b) If Fund shares continue to be made available after
such termination, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter
either the Fund or the Company may terminate the Agreement, as
so continued pursuant to this Section 10.3, upon prior written
notice to the other party, such notice to be for a period that
is reasonable under the circumstances but, if given by the
Fund, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII, and the
effect of such Article VII termination shall be governed by
the provisions set forth or incorporated by reference therein.
17
<PAGE>
ARTICLE XI. Applicability to New Accounts and New Contacts
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts
and to add new classes of variable annuity contracts and variable life insurance
policies to be issued by the Company through new or existing Separate Accounts
investing in the Fund. The provisions of this Agreement shall be equally
applicable to each such separate account and each such class of contracts or
policies, unless the context otherwise requires. Any such amendment must be
signed by the parties and must bear an effective date for that amendment.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Lincoln National Money Market Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln Life and Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Attn: Troy Panning
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.
18
<PAGE>
13.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. Prior Agreements
This Fund Participation Agreement, as of its effective date, hereby
supersedes any and all prior agreements to purchase shares between Lincoln Life
and Annuity Company of New York and the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL MONEY MARKET FUND, INC.
Signature: /s/ Kelly D. Clevenger
----------------------------------------------------
Name: Kelly D. Clevenger
-------------------------------------------------------
Title: President
-------------------------------------------------------
LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK
Signature: /s/ Phillip Holstein
----------------------------------------------------
Name: Phillip Holstein
-------------------------------------------------------
Title: President, Treasurer & Director, Lincoln Life and
Annuity Company of New York
-------------------------------------------------------
19
<PAGE>
Schedule 1
Lincoln National Money Market Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of_______________
LLANY Flexible Premium Variable Life Account M
LLANY Account Q Variable Annuity
LLANY Account R for Variable Life
<PAGE>
Schedule 2
Lincoln National Money Market Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of__________________
VUL I
Group Multi Fund
SVUL I
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into as of this 15th day of July 1998, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, a New York corporation
(the "Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended and is the Trust's investment
adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
<PAGE>
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as
a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, Lincoln Financial Advisors Corporation ("LEA"), the underwriter
for the Policies, is registered as a broker-dealer with the SEC under the 1934
Act and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE AND REDEMPTION OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such net
asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts, or
suspend or terminate the offering of the Shares if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board acting in good faith and in light of its fiduciary
duties under federal and any applicable state laws, necessary in the best
interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
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1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to
each Portfolio and shall transmit one net payment for all of the
Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio, but may revoke
that election at any time by notifying the Trust in writing. The Trust
shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon
as reasonably practical after the net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. New York time. In the event that the Trust is
unable to meet the 6:30 p.m. time stated herein, it shall provide
additional time for the Company to place orders for the purchase and
redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect share
net asset value information, the Trust shall make an adjustment to the
number of shares purchased or redeemed for the Accounts to reflect the
correct net asset value per share. Any material error in the calculation
or reporting of net asset value per share, dividend or capital gains
information shall be reported promptly upon discovery to the Company.
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ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. 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 established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies,
and that it will maintain such registration for so long as any Policies
are outstanding. The Company shall amend the registration statements under
the 1933 Act for the Policies and the registration statements under the
1940 Act for the Accounts from time to time as required in order to effect
the continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance policies,
endorsement or annuity contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), that it will
maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the Policies
have ceased to be so treated or that they might not be so treated in the
future.
2.3. The Company represents and warrants that LFA, as the underwriter for
the Policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that, to
the extent it sells the Policies directly, it will sell and distribute
such policies in accordance in all material respects with all applicable
state and federal securities laws, including without limitation the 1933
Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and
that the Trust is and shall remain registered under the 1940 Act. The
Trust shall amend the registration statement for its Shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify
the Shares for sale in accordance with the laws of the various states only
if and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Trust and MFS represent that the Trust and the Underwriter will sell
and distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
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2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of
The Commonwealth of Massachusetts.
2.8. The Company shall submit to the Board such reports, material or data
as the Board may reasonably request from time to time so that it may carry
out fully the obligations imposed upon it by the conditions contained in
the exemptive application pursuant to which the SEC has granted exemptive
relief to permit mixed and shared funding (the "Mixed and Shared Funding
Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to existing
Policy owners whose Policies are funded by such Shares. The Trust or its
designee shall provide the Company, at the Company's expense, with as many
copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of Policies.
If requested by the Company in lieu thereof, the Trust or its designee
shall provide such documentation (including a "camera ready" copy of the
new prospectus as set in type or, at the request of the Company, as a
diskette in the form sent to the financial printer) and other assistance
as is reasonably necessary in order for the parties hereto once each year
(or more frequently if the prospectus for the Shares is supplemented or
amended) to have the prospectus for the Policies and the prospectus for
the Shares printed together in one document; the expenses of such printing
to be apportioned between (a) the Company and (b) the Trust or its
designee in proportion to the number of pages of the Policy and Shares'
prospectuses, taking account of other relevant factors affecting the
expense of printing, such as covers, columns, graphs and charts; the Trust
or its designee to bear the cost of printing the Shares' prospectus
portion of such document for distribution to owners of existing Policies
funded by the Shares and the Company to bear the expenses of printing the
portion of such document relating to the Accounts; provided, however, that
the Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus in
a "camera ready" or diskette format, the Trust shall be responsible for
providing the prospectus in the format in which it or MFS is accustomed to
formatting prospectuses and shall bear the expense of providing the
prospectus in such format (e.g., typesetting expenses), and the Company
shall bear the expense of adjusting or changing the format to conform with
any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense,
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shall print and provide such statement of additional information to the
Company (or a master of such statement suitable for duplication by the
Company) for distribution to any owner of a Policy funded by the Shares.
The Trust or its designee, at the Company's expense, shall print and
provide such statement to the Company (or a master of such statement
suitable for duplication by the Company) for distribution to a prospective
purchaser who requests such statement or to an owner of a Policy not
funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require for
distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares in each separate Account for which no
instructions have been received in the same proportion as the
Shares of such Portfolio in such Account for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with or
oppose or interfere with the solicitation of proxies for the Shares held
for such Policy owners. The Company reserves the right to vote shares held
in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding Shares calculates
voting privileges in the manner required by the Mixed and Shared Funding
Exemptive Order. The Trust and MFS will notify the Company of any changes
of interpretations or amendments to the Mixed and Shared Funding Exemptive
Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least ten (10) Business Days
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prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within five (5)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the
registration statement, prospectus or statement of additional information
for the Shares, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust, MFS
or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS
or any of their affiliates which is intended for use only by brokers or
agents selling the Policies (i.e., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such
broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least ten (10) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such
use within five (5) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4.
is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate (in
the case of the Trust) to the Policies, or (in the case of the Company) to
the Trust or its Shares, within twenty (20) days after the filing of such
document with the SEC or other regulatory authorities. The Company and the
Trust shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates to
the Policies, the Trust or its Shares, and the party that was the subject
of the examination shall provide the other party with a copy of relevant
portions of any "deficiency letter" or other correspondence or written
report regarding any such examination.
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4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly
any change requiring change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS
will cooperate with the Company so as to enable the Company to solicit
proxies from Policy owners or to make changes to its prospectus, statement
of additional information or registration statement, in an orderly
manner. The Trust and MFS will make reasonable efforts to attempt to have
changes affecting Policy prospectuses become effective simultaneously with
the annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures,
or other public media), and sales literature (such as brochures,
circulars, reprints or excerpts or any other advertisement, sales
literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials or
communications distributed or made generally available to some or all
agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any
required exemptive orders or regulatory approvals, the Trust may make
payments to the Company or to the underwriter for the Policies if and in
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expenses initially paid by one party
but allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's
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Shareholder reports to Policy owners. The Company shall bear all expenses
associated with the registration, qualification, and filing of the
Policies under applicable federal securities and state insurance laws; the
cost of preparing, printing and distributing the Policy prospectus and
statement of additional information to other than existing Policy owners;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817(h)(1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision), and will notify the Company if it appears
that any Portfolio will not so qualify.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is
aware to the Board including, but not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions
are disregarded. The Company also agrees that if it is determined by a
majority of the Trustees, or a majority of the disinterested Trustees,
that a material irreconcilable conflict exists, the Company shall, at its
own expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees) take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, which steps
include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such
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assets in a different investment medium and, as appropriate, segregating
the assets attributable to any appropriate group of contract owners that
votes in favor of such segregation, or offering to any of the affected
contract owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any
material irreconcilable conflict. In the event that the Board determines
that any proposed action does not adequately remedy any material
irreconcilable conflict, the Company will withdraw from investment in the
Trust each of the Accounts designated by the disinterested trustees and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that
such withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those contained
in the Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or
the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or expenses (including reasonable
counsel fees) to which any Indemnified Party 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 Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the
Policies (or any amendment or
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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 reasonable reliance
upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or statement
of additional information for the Policies or in the Policies
or sales literature or other promotional material (or any
amendment or supplement to any of the foregoing) or otherwise
for use in connection with the sale of the Policies or Shares;
or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust not supplied by the Company or its designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or
any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Trust by or on behalf of the Company; or
(d) 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; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents
or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, at common law or otherwise,
insofar as such losses, claims,
-11-
<PAGE>
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust (of 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 statement
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 reasonable reliance upon and in conformity with
information furnished to the Trust, MFS, the Underwriter or
their respective designees by or on behalf of the Company for
use in the registration statement, prospectus or statement of
additional information for the Trust or in sales literature or
other promotional material for the Trust (or any amendment or
supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies not supplied by the Trust, MFS, the
Underwriter or any of their respective designees or persons
under their respective control and on which any such entity
has reasonably relied) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, 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 statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of
the Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
-12-
<PAGE>
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant by the Company hereunder or
by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state
law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by the
Company or any Participating Insurance Company to maintain its variable
annuity and/or variable life insurance contracts (with respect to which
any Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, 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.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than under this section. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party.
After notice from the indemnifying party of its intention to assume the
defense of an action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. 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.
-13-
<PAGE>
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 Commonwealth of
Massachusetts.
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 interpreted and construed
in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or MFS by the NASD, the SEC, or
any state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
-14-
<PAGE>
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying investment
media. The Company will give thirty (30) days' prior written
notice to the Trust of the Date of any proposed vote or other
action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations,
financial condition or prospects since the date of this
Agreement; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause. Termination by any party pursuant to any of Section
11.1(b) through Section 11.1(i) shall not take effect until the
terminating party shall have provided written notice to the other party.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional
purchase payments under the Existing Policies.
-15-
<PAGE>
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Lincoln Life & Annuity Company of New York
c/o The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46802-3506
Facsimile No.: (219) 455-1773
Attn: Kelly D. Clevenger
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Attention: Robert 0. Sheppard, Esq.
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or utilize
such names and addresses and other confidential information without the
express written consent of the affected party until such time as it may
come into the public domain.
13.2. 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.
-16-
<PAGE>
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. 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.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. 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.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By: /s/ Philip L. Holstein
------------------------------
Title: President
----------------------------
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
By: /s/ James R. Bordewick, Jr.
------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ James R. Bordewick, Jr.
------------------------------
James R. Bordewick, Jr.
Senior Vice President and
Associate General Counsel
-18-
<PAGE>
As of July 15, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
==================================================================================================
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
==================================================================================================
<S> <C> <C>
Lincoln Life & Annuity Flexible Flexible Premium Variable Life MFS Emerging Growth Series
Premium Variable Life MFS Total Return Series
Account M MFS Utilities Series
LLANY Separate Account R for
Flexible Premium Variable Life
Insurance
- --------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT made as of September 21, 1998, among Templeton Variable
Products Series Fund (the "Trust"), an open-end management investment company
organized as a business trust under Massachusetts law, Franklin Templeton
Distributors, Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and Lincoln Life & Annuity Company of New York, a life
insurance company organized as a corporation under New York law (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November 16,
1993 (File No. 812-8546), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
1
<PAGE>
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised; and has
registered or will register certain variable annuity contracts and variable life
insurance policies, listed on Schedule C attached hereto (the "Contracts"),
under which the portfolios are to be made available as investment vehicles under
the 1933 Act unless such interests under the Contracts in the Accounts are
exempt from registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, is
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties
Agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
agent or receipt of purchase orders and requests for redemption relating to each
Portfolio from each Account, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 9:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
Receipt of a purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust
2
<PAGE>
describing Portfolio purchase procedures on those days on which the Trust
calculates its net asset value pursuant to rules of the SEC, and the Trust shall
use its best efforts to calculate such net asset value on each day on which the
New York Stock Exchange ("NYSE") is open for trading. The Company will transmit
orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the shareholders of
such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than 2:00 p.m. Eastern time on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
Redemption with respect to a Portfolio will normally be paid to the company for
an Account in federal funds transmitted by wire to the Company before 2:00 p.m.
Eastern time on the next Business Day after the receipt of the request for
redemption. Such payment may be delayed if, for example, the Portfolio's cash
position so requires as when portfolio securities must be sold, or if
extraordinary market conditions exist, but in no event shall payment be delayed
for a greater period than is permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Portfolio Shares purchased from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
3
<PAGE>
1.7 The Trust 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 Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time).
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that it will use Trust shares only for the
purposes of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
1.10 The Company agrees that all net amounts available under the Contracts
shall be invested in (i) the Company's general account, (ii) investment
companies currently available as funding vehicles for the Contracts and
appearing on Schedules B and D to this Agreement, or (iii) other investment
companies, provided that the Company shall have given the Trust and the
Underwriter sixty (60) days' advance written notice of its intention to add such
other investment companies.
1.11 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.10 and
Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE II.
Obligations of the Parties; Fees and Expenses
4
<PAGE>
2.1 The Trust shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall
either (a) provide the Company with as many copies of portions of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
pertaining specifically to the Portfolios as the Company shall reasonably
request; or (b) provide the Company with a camera ready copy of such documents
in a form suitable for printing and from which information relating to series of
the Trust other than the Portfolios has been deleted to the extent practicable.
The Trust or the Underwriter shall provide the Company with a copy of its
current statement of additional information, including any amendments or
supplements, in a form suitable for duplication by the Company. Expenses of
furnishing such documents for marketing purposes shall be borne by the Company
and expenses of furnishing such documents for current contract owners invested
in the Trust shall be borne by the Trust or the Underwriter. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.3 The Trust shall bear the costs of preparation, solicitation and
mailing Trust-sponsored proxy materials (or similar materials such as voting
solicitation instructions) to Contract owners, and the Company (at its expense)
shall provide all necessary information for and otherwise fully cooperate with
the proxy distribution process. The Company shall bear the cost of distributing
all other proxy materials (or similar materials such as voting solicitation
instructions). The Company assumes sole responsibility for ensuring that such
materials are delivered to Contract owners in accordance with applicable federal
and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (i) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares held in a separate account for which no instructions have been
received in the same proportion as Trust shares of such Portfolio in that
separate account for which instructions have been received, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares
5
<PAGE>
held in any segregated asset account in its own right, to the extent permitted
by law.
2.5 Except as provided in section 2.7, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
2.6 Except as provided in section 2.7, the Trust or Underwriter shall not
use any designation comprised in whole or in part of the names or marks
"Lincoln" or "Lincoln Life" or "LLANY" or any other Trademark relating to the
Company without prior written consent, and upon termination of this Agreement
for any reason, the Trust or the Underwriter shall cease all use of any such
name or mark as soon as reasonably practicable.
2.7 The Company shall furnish, or cause to be furnished to the Trust or
its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "disclosure documents"), as well as any report, solicitation for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts and
their investment in the Trust prior to its first use with investors. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee each
piece of sales literature or other promotional material in which the Trust or
any Adviser is named, at least 10 Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within seven Business Days after receipt of such material. For purposes of
this paragraph, "sales literature or other promotional material" includes, but
is not limited to, portions of the following that use any Trademark related to
the Trust or Underwriter or refer to the Trust or affiliates of the Trust:
advertisements (such as material published or designed for use in a newspaper,
magazine or their periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or electronic
communication or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts or any other advertisement, sales
literature or published article or electronic communication), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and disclosure documents,
shareholder reports and proxy materials.
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The Trust shall furnish or cause to be furnished, to the Company or its
designee each piece of sales literature or other promotional material (as
defined above) in which the Company's products are promoted is named, at least
10 business Days prior to its use. No such material shall be used if the Company
or the designee reasonably objects to such use within five Business Days after
receipt of such material. In addition, in marketing literature regarding the
Trust, the Trust and the Underwriter may include the Company's name in a list of
insurance companies whose separate accounts invest in the Trust, provided the
company receives a copy of such literature three (3) business days in advance of
first use and does not affirmatively object.
2.8 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.9 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.10 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the accounts
or the Contracts other than information or representations contained in and
accurately derived from disclosure documents for the Contracts (as such
disclosure documents may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales literature or
other promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.11 The Trust shall require all participating Insurance Companies to
calculate voting privileges as set forth in section 2.4 and the Company shall be
responsible for assuring that the Accounts calculate voting privileges in the
manner established by the Trust. The Company will in no way recommend or oppose
or interfere with the solicitation of proxies for Portfolio shares held to fund
the Contracts without the prior written consent of the Trust, which consent may
be withheld in the Trust's sole discretion.
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2.12 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this Agreement except as provided on Schedule E, if attached.
Nevertheless, the Trust or the Underwriter or an affiliate may make payments
(other than pursuant to a Rule 12b-1 Plan) to the Company or its affiliates or
to the Contracts' underwriter in amounts agreed to by the Underwriter in writing
and such payments may be made out of fees otherwise payable to the Underwriter
or its affiliates, profits of the Underwriter or its affiliates, or other
resources available to the Underwriter or its affiliates.
ARTICLE III.
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and validly existing under the laws of its state of incorporation
and that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each
Account, (1) the Company has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with he provisions of the 1940 Act to serve as a segregated asset account for
the Contracts, or (2) if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker-dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with applicable state insurance suitability requirements.
For any unregistered Accounts which are exempt from registration under the
'40 Act in reliance upon Sections 3(c)(1) or 3(c)(7) thereof, the Company
represents and warrants that:
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(a) each Account and sub-account thereof has a principal underwriter
which is registered as a broker-dealer under the Securities Exchange
Act of 1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard to the
voting of all proxies with respect to Trust shares and vote
such proxies only in accordance with such instructions or vote
such shares held by it in the same proportion as the vote of
all other holders of such shares; and
(2) refrain from substituting shares of another security for such
shares unless the SEC has approved such substitution in the
manner provided in Section 26 of the '40 Act.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that (i) the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and that (ii) it has adopted such diversification policies, as
reflected in its registration statement, and has contractually obligated each
Portfolio's investment adviser to comply with Trust policies. The Trust will
notify the Company immediately
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upon having a reasonable basis for believing any Portfolio had ceased to comply
or might not so comply and will in that event immediately take all reasonable
steps to adequately diversify the Portfolio to achieve compliance within the
grace period afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, and it will make
every effort to maintain such qualification 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.
3.8 The Trust and Underwriter each represents and warrants that should it
ever desire to make any payments to finance distribution expenses pursuant to
Rule 12b-1 under the 1940 Act, the Trustees, including a majority who are not
"interested persons" of the Trust under the 1940 Act ("disinterested Trustees"),
will formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Trust currently intends for one or more Classes to make payments
to finance its distribution expenses, including service fees, pursuant to a Plan
adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent that any
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Class of the Trust finances its distribution expenses pursuant to a Plan adopted
under Rule 12b-1, the Trust undertakes to comply with any then current SEC and
SEC staff interpretations concerning Rule 12b-1 or any successor provisions.
ARTICLE IV.
Potential Conflicts
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
participating insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (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, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by the
Trustees that an irreconcilable material conflict exists and of the implications
thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract
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owners and, as appropriate, withdrawal of the assets of any appropriate group
(i.e., annuity contract owners, life insurance policy owners, or variable
contract owners of one or more Participating Insurance Companies) that votes in
favor of such withdrawal, or offering to the affected Contract owners the option
of taking such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented. Until the end of
such six (6) month period, the Trust shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company or Trust be required to establish a new funding medium for the
Contracts. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
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Article V), 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 indemnity 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 was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for
use in connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section 5.2
(a)(i)) or wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of the Contracts or
Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading
if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Trust
by or on behalf of the Company; or
(iv) arise out of or result from any failure by the company to
provide the services or furnish the materials required under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the 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 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 or to
the Trust or Underwriter, whichever is applicable. The Company shall also
not be liable under this indemnification provision with respect to any
claim made against an
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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 the
Indemnified Parties, the Company shall be entitled to participate, at its
own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained
by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares or the Contracts or the
operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company, the
underwriter of the Contracts and each of its directors and officers and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" and individually an
"Indemnified Party" for purposes of this Section 5.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter, which consent shall not be unreasonably
withheld) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses") to
which the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such Losses are related to the sale or acquisition
of the Trust's Shares or the Contracts and:
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(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses 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 or to each Company or the Account,
whichever is applicable.
(c) The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the expenses of any additional counsel retained by it, and the
Underwriter 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.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the Company, and each
of its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 5.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any
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statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Trust, and arise out of or
result from any material breach of any representation and/or warranty made by
the Trust in this Agreement or arise out of or result from any other material
breach of this Agreement by the Trust; as limited by and in accordance with the
provisions of Section 5.3(b) and 5.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally liable hereunder,
nor shall any resort to be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against any 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 and duties under this Agreement or to
the Company, the Trust, the Underwriter or each Account, whichever is
applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve the Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust 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.
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(d) The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either the Account,
or the sale or acquisition of share of the Trust.
ARTICLE VI.
Termination
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by ninety (90) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or
the Underwriter following consultation with the Trustees upon written notice to
the Company if:
(a) the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no longer
applies, or might not apply in the future, to the unregistered Accounts,
or that the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in the
future, to interests under the unregistered Contracts; or
(b) either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity.
6.3 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter:
(a) if the Company shall determine, in its sole judgment exercised
in good faith, that either the Trust or the Underwriter has suffered a
material adverse change in its business, operations, financial conditions
or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(b) if the Trust and Underwriter fail to promptly remedy a breach of
section 3.6 hereof.
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Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate Counsel
If to the Company:
Lincoln Life & Annuity Company of New York
120 Madison Street, 17th Floor
New York, NY 13202
Attention: Bob Sheppard, Esq.
WITH A COPY TO
The Lincoln National Life Insurance Company
1300 South Clinton Street, 2H-02
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger, Vice President
ARTICLE VIII.
Miscellaneous
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 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.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida. 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
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therefrom and the conditions of such orders. Copies of any such orders shall
be promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party 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.
8.7 Each party hereto shall treat as confidential the names and addresses
of the Contract owners and all information reasonably identified as confidential
in writing by any other party hereto, and, except as permitted by this Agreement
or as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize such names and addresses and other confidential
information until such time as they may come into the public domain, without the
express written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).
8.8 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.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in Section
1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
The Company:
Lincoln Life & Annuity Company of New York
By its authorized officer
By: /s/ Philip L. Holstein
---------------------------------------
Name: Philip L. Holstein
Title: President
The Trust:
Templeton Variable Products Series Fund
By its authorized officer
By: /s/ Karen L. Skidmore
---------------------------------------
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant
Secretary
The Underwriter:
Franklin Templeton Distributors. Inc.
By its authorized officer
By: /s/ Deborah R. Gatzek
---------------------------------------
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant
Secretary
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SCHEDULE A
Separate Accounts of
The Lincoln National Life Insurance Company
1. LLANY Separate Account R for Flexible Premium Variable Life Insurance
Date Established: 1/29/98
SEC Registration Number: 333-46113
2. Lincoln Life & Annuity Flexible Premium Variable Life Account M
Date Established: 11/24/97
SEC Registration Number: 333-42507
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SCHEDULE B
Trust Portfolios and Classes Available
Templeton Variable Products Series Adviser
- ---------------------------------- -------
Templeton Asset Allocation Fund Templeton Investment Counsel, Inc.
-Class I
Templeton International Fund Templeton Investment Counsel, Inc.
-Class I
Templeton Stock Fund Templeton Investment Counsel, Inc.
-Class I
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SCHEDULE C
Variable Life Insurance Contracts
Issued by Lincoln Life & Annuity Company of New York
Representative
Contract Form Number
- -------- -----------
1. LLANY Separate Account R for Flexible Premium Variable Life Insurance
Title: SVUL I Form: LN65ONY
SEC Registration Number: 333-46113
Lincoln Life & Annuity Flexible Premium Variable Life Account M
Title: VUL I Form: LN6O5NY
SEC Registration Number: 333-42507
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SCHEDULE D
Other Portfolios Available under the Contracts
AIM Capital Appreciation Fund
AIM Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
BT Equity 500 Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Investment Grade Bond Portfolio
Lincoln National Money Market Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
OpCap Global Equity Portfolio
OpCap Managed Portfolio
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PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 15th day of September 1998 by
and among Lincoln Life & Annuity Company of New York, a New York Corporation
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), OCC ACCUMULATION
TRUST, an open-end diversified management investment company organized under the
laws of the State of Massachusetts (hereinafter the "Fund") and OCC
DISTRIBUTORS, a Delaware general partnership (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
<PAGE>
WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and qualified
pension and retirement plans (hereinafter the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts and variable life insurance policies (the "Contracts") under
the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of New York, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
2
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WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Accounts named in Schedule 2 to fund the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of each Account, executing such orders
on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the order for the shares of the Fund. For
purposes of this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
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1.2. The Company shall pay for Fund shares on the next Business Day after
it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating
4
<PAGE>
Insurance Companies and (ii) a copy of the Participation Agreement executed by
any other Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon 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 net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.6, the Company shall be the designee of the Fund for receipt
of requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment shall be in federal funds transmitted by wire to the Company's account
as designated by the Company in writing from time to time, on the same Business
Day the Fund receives notice of the redemption order from the Company, except
that the Fund reserves the right to delay payment of redemption proceeds in the
event that portfolio holdings other than cash equivalents must be liquidated to
pay the redemption proceeds, but in no event may such payment be delayed longer
than the period permitted under Section 22(e) of the 1940 Act. Neither the Fund
nor the Underwriter shall bear any responsibility whatsoever for the proper
disbursement or crediting of redemption proceeds; the Company alone shall be
responsible for such action. If notification of redemption is received after
10:00 a.m. Eastern Time, payment for redeemed shares will be made on the next
following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders
5
<PAGE>
for Fund shares will be recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income, dividends or capital gain distributions payable on
the Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends and distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 5:30 p.m., Eastern Time, each
business day. Any material error in the calculation of net asset value per
share, dividend or capital gain information shall be reported promptly to the
Company upon discovery by the Fund and the Company shall be entitled to an
adjustment to the number of shares purchased or redeemed to reflect the correct
net asset value.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance 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
established each Account as a segregated asset account under applicable state
law and
6
<PAGE>
has registered each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as segregated investment accounts for the
Contracts, and that it will maintain each registration for so long as the 1940
Act requires. The Company shall amend the registration statement under the 1933
Act for the Contracts and the registration statement under the 1940 Act for the
Account 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 in accordance with the
securities laws of the various states only if and to the extent deemed necessary
by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts or
life insurance policies under applicable provisions of the Internal Revenue Code
and that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter 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.
2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
7
<PAGE>
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort 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.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any investment
restrictions imposed by state insurance laws which are applicable to the Fund.
To the extent feasible and consistent with market conditions, the Fund will
adjust its investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund shall
be allowed a reasonable period of time under the circumstances after receipt of
such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its Board of Trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
8
<PAGE>
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with all applicable federal and state securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser,
OpCap Advisors, is and shall remain duly registered under federal securities
laws and that the Adviser will perform its obligations to the Fund in accordance
with the laws of Massachusetts and any applicable state and federal securities
laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-1 adopted pursuant to the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
$5 million. The aforesaid includes coverage for larceny and
9
<PAGE>
embezzlement and is issued by a reputable bonding company. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Fund's current prospectus or, if requested by the
Company, a version of the Fund's prospectus that includes only the Portfolios of
the Fund that are used to fund the Company's contracts, as the Company may
reasonably request for use with prospective contractowners and applicants. The
Underwriter shall print and distribute, at the Fund's or Underwriter's expense,
as many copies of said prospectus as necessary for distribution to existing
contractowners or participants. If requested by the Company in lieu thereof, the
Fund shall provide such documentation including a final copy of a current
prospectus set in type at the Fund's expense and other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the new
prospectus for the Contracts and the Fund's new prospectus printed together in
one document. In such case the Fund shall bear its share of expenses as
described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively from
the Company (or, in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such Statement or, at
10
<PAGE>
the Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in an Account in accordance with
instructions received from contractowners or participants; and
(iii) vote Fund shares held in an Account for which no timely
instructions have been received, in the same proportion as
Fund shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of
11
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Section 16(a) with respect to periodic elections of Directors and with whatever
rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's adviser or the Underwriter is named, at
least fifteen business days prior to its use. No such material shall be used if
the Fund or the Underwriter reasonably objects in writing to such use within ten
business days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within ten
business days after receipt of such material.
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4.4. The Fund and the Underwriter 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 a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners or participants,
or in sales literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, within 20 days after
the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund, within
20 days after the filing of such document with the SEC or other regulatory
authorities.
4.7. For purposes of this Article IV, 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
13
<PAGE>
tape recording, videotape display, 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, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares will
be duly authorized for issuance and registered in accordance with applicable
federal law and to the extent deemed advisable by the Fund, in accordance with
applicable state law, prior to sale. The Fund shall bear the expenses for the
cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, Fund proxy materials
and reports, setting in type, printing and distributing the prospectuses, the
proxy materials and reports to
14
<PAGE>
existing shareholders and contractowners, the preparation of all statements and
notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares, and any expenses permitted to be paid or assumed
by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Internal Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations in accordance with guidelines provided by the Company prior to the
execution of this Agreement and as necessary thereafter. In the event of a
breach of this Article VI by the Fund, it will take all reasonable steps (a) to
notify the Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance with the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VIII. Potential Conflicts
7.1.The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (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
15
<PAGE>
ruling, private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference in
voting instructions given by Participating Insurance Companies or by variable
annuity contract and variable life insurance contractowners; or (f) a decision
by an insurer to disregard the voting instructions of contractowners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof. A majority of the Fund
Board shall consist of persons who are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board upon its request with all information
reasonably necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the Fund
Board whenever contractowner voting instructions are disregarded. The Fund Board
shall record in its minutes or other appropriate records, all reports received
by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to
16
<PAGE>
remedy or eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate, segregating the assets
of any appropriate group (i.e., variable annuity contractowners or variable life
insurance 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 (2) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw an Account's investment in
the Fund and terminate this Agreement with respect to such Account. Any such
withdrawal and termination must take place within 90 days after the Fund gives
written notice to the Company that this provision is being implemented. Until
the end of such 90 day period the Underwriter and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw an Account's investment in the Fund and terminate
this Agreement with respect to such Account. Any such withdrawal and termination
must take place within 90 days after the Fund gives written notice to the
Company that this provision is being implemented. Until the end of such 90 day
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period the Underwriter and Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund or the Underwriter be required to establish a new
funding medium for the Contracts. The Company shall not be required by Section
7.3 to establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners materially adversely
affected by the irreconcilable material conflict.
7.7. The Company shall from time to time submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if deemed appropriate by the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall
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<PAGE>
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including reasonable legal and other expenses), to which the
indemnified parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Contracts or contained in the
Contracts or sales literature or other promotional material
for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; 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 the
Fund for use in the registration statement, prospectus or
statement of additional information for the Contracts or in
the Contracts or sales literature or other promotional
material for the Contracts (or any amendment or supplement to
any of the foregoing) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
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<PAGE>
(ii) arise out of or as a result of untrue statements or
representations by or on behalf of the Company (other than
statements or representations contained in the Fund
registration statement, Fund prospectus, Fund statement of
additional information or sales literature or other
promotional material of the Fund not supplied by the Company
or persons under its control) or willful malfeasance, bad
faith or gross negligence of the Company or persons under its
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Fund registration
statement, Fund prospectus, statement of additional
information 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 a 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 persons under its control; or
(iv) 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
(v) arise out of 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 by the Company of
this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof This
indemnification shall be in addition to any liability which the Company may
otherwise have.
(b) No party shall be entitled to indemnification if such loss, claim,
damage, liability or litigation is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by the party seeking
indemnification.
20
<PAGE>
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. Indemnification By the Underwriter
(a) The Underwriter, on its own behalf and on behalf of the Fund, agrees
to indemnify and hold harmless the Company and each of its directors, officers,
employees or agents and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
(collectively, the "indemnified parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the indemnified parties
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Fund or sales literature or other
promotional material 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 in
light of the circumstances in which they were made; 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 Underwriter or
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature or other
promotional material of the Fund (or any amendment or
supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or
representations (other than statements or representations
contained in the Contracts
21
<PAGE>
or in the Contract or Fund registration statement, the
Contract or Fund prospectus, statement of additional
information, or sales literature or other promotional material
for the Contracts or of the Fund not supplied by the
Underwriter or the Fund or persons under the control of the
Underwriter or the Fund respectively) or willful malfeasance,
bad faith or gross negligence of the Underwriter or the Fund
or persons under the control of the Underwriter or the Fund
respectively, with respect to the sale or distribution of the
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, statement of additional information or sales
literature or other promotional material covering the
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
statement or 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 Company by or on behalf of the
Underwriter or the Fund or persons under the control of the
Underwriter or the Fund; or
(iv) 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 a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements and procedures related thereto specified in
Article VI of this Agreement except if such failure is a
result of the Company's failure to comply with the
notification procedures specified in Article VI); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter or the
Fund in this Agreement or arise out of or result from any
other material breach of this Agreement by the Underwriter or
the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.
(b) No party shall be entitled to indemnification if such loss, claim,
damage, liability or litigation is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by the party seeking
indemnification.
22
<PAGE>
(c) The indemnified parties will promptly notify the Underwriter of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Contracts or the operation of the Account.
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.3) shall not be liable
under the indemnification provisions of this Article VIII with respect to any
claim made against a party entitled to indemnification under this Article VIII
("indemnified party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party 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 party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party'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
23
<PAGE>
indemnifying party 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, 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.
8.4. Contribution
In order to provide for just and equitable contribution in circumstances
in which the indemnification provided for in this Article VIII is due in
accordance with its terms but for any reason is held to be unenforceable with
respect to a party entitled to indemnification ("indemnified party" for purposes
of this Section 8.4) pursuant to the terms of this Article VIII, then each party
obligated to indemnify pursuant to the terms of this Article VIII shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and litigations in such proportion
as is appropriate to reflect the relative benefits received by the parties to
this Agreement in connection with the offering of Fund shares to the Account and
the
24
<PAGE>
acquisition, holding or sale of Fund shares by the Account, or if such
allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also the
relative fault of the parties to this Agreement in connection with any actions
that lead to such losses, claims, damages, liabilities or litigations, as well
as any other relevant equitable considerations.
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
(including, but not limited to the Mixed and Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
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 unless otherwise agreed in a separate written
agreement among the parties; or
(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or
25
<PAGE>
(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 administration of the Contracts,
the operation of the Account, or the purchase of the Fund shares, which the Fund
reasonably believes would have a material adverse effect on the Company's
ability to perform its obligations under this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which the
Company reasonably believes would have a material adverse effect on the Fund's
or the Underwriter's ability to perform its obligations under this Agreement; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 days prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of
(i) all contractowners of variable insurance products of all separate accounts
or (ii) the interests of the Participating Insurance Companies investing in the
Fund as delineated in Article VII of this Agreement; or
26
<PAGE>
(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement; or
(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement; or
(l) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without notice.
10.2. Notice Requirement
(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
27
<PAGE>
(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written
notice of the election to terminate this Agreement for cause shall be furnished
by the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.
(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, and subject to Section 1.3 of this Agreement,
the Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund 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, the owners of the
Existing Contracts 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. The
28
<PAGE>
parties agree that this Section 10.4 shall not apply to any terminations under
Article VII and the effect of such Article VII terminations shall be governed by
Article VII of this Agreement.
(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but,
if given by the Fund or Underwriter, need not be for more than 90 days.
10.5. Except as necessary to implement contractowner initiated or approved
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Contracts (as opposed to Fund
shares attributable to the Company's assets held in an Account), and the Company
shall not prevent contractowners from allocating payments to a Portfolio that
was otherwise available under the Contracts, until 90 days after the Company
shall have notified the Fund or Underwriter of its intention to do so.
ARTICLE XI. Notices
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by 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. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.
29
<PAGE>
If to the Fund:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Kelly D. Clevenger
c/o The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
and
Robert O. Sheppard, Esq.
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential
30
<PAGE>
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. 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.
12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. 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 each other and 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.
12.8. 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.
31
<PAGE>
12.9. 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,
the Accounts or the Portfolios of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative as
of the date and year first written above.
Company:
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK
SEAL By: /s/ Philip L. Holstein
-------------------------------
Fund:
OCC ACCUMULATION TRUST
SEAL By: /s/ Bernard H. Garil
-------------------------------
Underwriter:
OCC DISTRIBUTORS
By: /s/ Thomas E. Duggan
-------------------------------
32
<PAGE>
Schedule 1
Participation Agreement
Among
OCC Accumulation Trust, Lincoln Life & Annuity Company of New York
and
OCC Distributors
The following separate accounts of Lincoln Life & Annuity Company of New
York are permitted in accordance with the provisions of this Agreement to invest
in Portfolios of the Fund shown in Schedule 2:
Lincoln Life & Annuity Flexible Premium Variable Life Account M
LLANY Separate Account R for Flexible Premium Variable Life Insurance
September 15, 1998
<PAGE>
Schedule 2
Participation Agreement
Among
OCC Accumulation Trust, Lincoln Life & Annuity Company of New York
and
OCC Distributors
The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Global Equity Portfolio
Managed Portfolio
September 15, 1998
<PAGE>
Robert O. Sheppard Lincoln Financial Group
Corporate Counsel Lincoln Life & Annuity
Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202-2802
Telephone: (315) 428 8420
Facsimile: (315) 428 8419
February 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: LLANY Separate Account M for Flexible Premium Variable Life Insurance
Lincoln Life & Annuity Company of New York
Post-Effective Amendment No. 1: 333-42507
Dear Sirs:
As Corporate Counsel of Lincoln Life & Annuity Company of New York ("LLANY"),
I am familiar with the actions of the Board of Directors of LLANY,
establishing the Account and its method of operation and authorizing the
filing of a Registration Statement under the Securities Act of 1933, (and
amendments thereto) for the securities to be issued by the Account and the
Investment Company Act of 1940 for the Account itself.
In the course of preparing this opinion, I have reviewed the Charter and the
By-Laws of the Company, the Board actions with respect to the Account, and
such other matters as I deemed necessary or appropriate. Based on such
review, I am of the opinion that the variable life insurance policies (and
interests therein) which are the subject of the Registration Statement under
the Securities Act of 1933, as amended, for the Account will, when issued, be
legally issued and will represent binding obligations of the Company, the
depositor for the Account.
I further consent to the use of this opinion as an Exhibit to Post-Effective
Amendment No. 1 to said Registration Statement and to the reference to me
under the heading "Experts" in said Registration Statement, as amended.
Very truly yours,
/s/ Robert O. Sheppard
Robert O. Sheppard
Corporate Counsel
<PAGE>
[LETTERHEAD]
February 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Lincoln Life & Annuity Flexible Premium
Variable Life Account M ("Account")
Post-Effective Amendment Number 1, File No. 333-42507
Commissioners:
This opinion is furnished in connection with Post-Effective Amendment No. 1 to
the Registration Statement on Form S-6 filed by Lincoln Life & Annuity Company
of New York under the Securities Act of 1993 recorded as File No.
333-42507. The prospectus included in said Post-Effective Amendment describes
flexible premium variable universal life insurance policies (the "Policies").
The forms of Policies were prepared under my direction.
In my opinion, the illustrations of benefits under the Policies included in the
Section entitled "Illustrations" in the prospectus, based on assumptions stated
in illustrations, are consistent with the provisions of the forms of the
Policies. The ages selected in the illustrations are representative of the
manner in which the Policies operate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to me under the heading "Experts" in the
prospectus.
Very truly yours,
/s/ Vaughn W. Robbins
Vaughn W. Robbins, FSA, MAAA
VWR:ao
