<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2000
1933 ACT REGISTRATION NO. 333-93875
1940 ACT REGISTRATION NO. 811-09763
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
------------------------
LINCOLN NEW YORK ACCOUNT N FOR VARIABLE ANNUITIES
(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
(315)428-8400
------------------------
COPY TO:
<TABLE>
<S> <C>
ROBERT O. SHEPPARD, ESQUIRE GEORGE N. GINGOLD, ESQUIRE
120 Madison Street 197 King Philip Drive
Suite 1700 West Hartford, CT 06117-1409
Syracuse, New York 13202
(Name & Address of Agent of Service)
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Title of Securities: Interests in a separate account under individual
flexible payment deferred variable annuity contracts.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
LINCOLN NEW YORK CHOICEPLUS
LINCOLN NEW YORK ACCOUNT N FOR VARIABLE ANNUITIES
HOME OFFICE:
Lincoln Life & Annuity Company of New York
120 Madison Street
Suite 1700
Syracuse, NY 13202
This prospectus describes an individual flexible premium deferred variable
annuity contract. It is for use with nonqualified and qualified retirement
plans. Generally, you do not pay federal income tax on the contract's growth
until it is paid out. The contract is designed to accumulate ANNUITY ACCOUNT
VALUE and to provide retirement income that you cannot outlive or for an agreed
upon time. These benefits may be a variable or fixed amount or a combination of
both. If you die before the ANNUITY DATE, we will pay your BENEFICIARY A DEATH
BENEFIT.
The minimum initial PREMIUM PAYMENT for the
contract is:
1. $10,000 for a nonqualified plan and for certain rollovers to IRA'S; and
2. $2,000 for a qualified plan.
Additional PREMIUM PAYMENTS may be made to the contract and must be at least $25
if transmitted electronically; otherwise the minimum amount is $100. The minimum
annual amount of subsequent premium payments is $100 per VAA subaccount, or
$2,000 per fixed account guarantee period.
You choose whether your contract value accumulates on a variable or fixed
(guaranteed) basis or both. We guarantee your principal and a minimum interest
rate on premium payments you put into the fixed account. WE LIMIT TRANSFERS FROM
THE FIXED ACCOUNT. A MARKET VALUE ADJUSTMENT (MVA) MAY BE APPLIED TO ANY
SURRENDER OR TRANSFER FROM THE FIXED ACCOUNT BEFORE THE EXPIRATION OF A
GUARANTEE PERIOD.
All PREMIUM PAYMENTS for benefits on a variable basis will be placed in Lincoln
New York Account N for Variable Annuities (VARIABLE ANNUITY ACCOUNT [VAA]). The
VAA is a segregated investment account of LNY. If you put all or some of your
PREMIUM PAYMENTS into one or more of the contract's variable options, you take
all of the investment risk on the ANNUITY ACCOUNT VALUE and the retirement
income. If the SUBACCOUNTS you select make money, your CONTRACT VALUE goes up;
if they lose money, your ANNUITY ACCOUNT VALUE goes down. How much the ANNUITY
ACCOUNT VALUE goes up or down depends on the performance of the SUBACCOUNTS you
select. WE DO NOT GUARANTEE HOW ANY OF THE VARIABLE OPTIONS OR THEIR FUNDS WILL
PERFORM. ALSO, NEITHER THE U.S. GOVERNMENT NOR ANY FEDERAL AGENCY INSURES OR
GUARANTEES YOUR INVESTMENT IN THE CONTRACT.
AIM Variable Insurance Funds,:
- - AIM V.I. Growth Fund
- - AIM V.I. International Equity Fund
- - AIM V.I. Value Equity Fund
- - AIM V.I. Capital Appreciation Fund
Alliance Variable Products Series Fund (Class B):
- - Alliance Growth and Income Portfolio
- - Alliance Growth Portfolio
- - Alliance Premium Growth Portfolio
- - Alliance Technology Portfolio
SERVICING OFFICE:
Lincoln New York ChoicePlus
P.O. Box 7866
Fort Wayne, IN 46801
American Variable Insurance series (AVIS) a.k.a.
American Funds Insurance Series (AFIS)(Class 2):
- - AFIS Global Small Capitalization Fund
- - AFIS Growth Fund
- - AFIS International Fund
- - AFIS Growth-Income Fund
Deutsche Asset Management VIT Funds:
- - BT Equity 500 Index Fund
Delaware Group Premium Fund (Standard Class):
- -Delaware Premium Growth & Income Series
- - Delaware Premium High Yield Series
- - Delaware Premium Emerging Markets Series
- - Delaware Premium Select Growth Series
- - Delaware Premium REIT Series
- - Delaware Premium Small Cap Value Series
- - Delaware Premium Social Awareness Series
- - Delaware Premium Trend Series
Franklin Templeton Variable Insurance Products Trust (Class 2):
- - Franklin Small Cap Securities Fund
- - Franklin Mutual Shares Securities Fund
- - Templeton Growth Securities Fund (formerly Global Growth)
- - Templeton International Securities Fund
Liberty Variable Investment Trust:
- - Newport Tiger Fund
Lincoln National:
- - Bond Fund
- - Money Market Fund
MFS-Registered Trademark- Variable Insurance Trust:
- - MFS Emerging Growth Series
- - MFS Research Series
- - MFS Total Return Series
- - MFS Utilities Series
Variable Insurance Products Fund
- - Fidelity VIP Equity-Income Portfolio
- - Fidelity VIP Growth Portfolio
- - Fidelity VIP Overseas Portfolio
Variable Insurance Products Fund III
- - Fidelity VIP III Growth Opportunities Portfolio
This Prospectus gives you information about the contract that you should know
before you decide to buy a contract and make PREMIUM PAYMENTS. You should also
review the prospectuses for the funds that are attached, and keep these
prospectuses for future reference.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THIS CONTRACT
OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE.
You can obtain a Statement of Additional Information (SAI dated the same date as
this Prospectus) about the contracts that has more information. Its terms are
made part of this Prospectus. For a free copy, write: Lincoln New York Choice
Plus, P.O. Box 7866, Fort Wayne, Indiana 46801, or call 1-888-868-2583. The SAI
and other information about LNY and the VAA are also available on the SEC's web
site (http:\\www.sec.gov). There is a table of contents for the SAI on the last
page of this Prospectus.
Prospectus Dated: May , 2000
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- -------------------------------------------
Special terms 2
Expense tables 3
Summary 7
Condensed financial information for
the VAA 9
Financial statements 9
Lincoln Life & Annuity Company of
New York 9
Variable annuity account (VAA) 9
Investments of the variable annuity
account 9
Charges and other deductions 12
The contracts 14
Annuity payouts 18
Annuity options 18
</TABLE>
<TABLE>
- -------------------------------------------
<CAPTION>
PAGE
<S> <C>
Fixed side of the contract 19
Federal tax matters 21
Voting rights 24
Distribution of the contracts 24
Return privilege 25
State regulation 25
Records and reports 25
Other information 25
Statement of additional information
table of contents for Lincoln Life
Variable Annuity Account N Lincoln
ChoicePlus 26
</TABLE>
SPECIAL TERMS
(We have ITALICIZED the terms that have special meaning throughout the
Prospectus).
ACCOUNT OR VARIABLE ANNUITY ACCOUNT (VAA) -- The segregated investment account,
Lincoln New York Account N for Variable Annuities, into which LNY sets aside and
invests the assets for the variable side of the contract offered in this
Prospectus.
ACCUMULATION UNIT -- A measure used to calculate ANNUITY ACCOUNT VALUE for the
variable side of the contract before the ANNUITY DATE.
ANNUITANT -- The person upon whose life the ANNUITY BENEFIT PAYMENTS are based
and made to after the ANNUITY DATE.
ANNUITY ACCOUNT VALUE -- At a given time before the ANNUITY DATE, the total
value of all ACCUMULATION UNITS for a contract plus the value of the fixed side
of the contract.
ANNUITY DATE -- The VALUATION DATE when values are withdrawn or converted into
ANNUITY UNITS or fixed dollar payout for payment of retirement income benefits
under the ANNUITY PAYOUT option you select.
ANNUITY PAYOUT -- An amount paid at regular intervals on a variable or fixed
basis or a combination of both after the ANNUITY DATE under one of several
options available to the ANNUITANT and/or any other payee.
ANNUITY UNIT -- A measure used to calculate the amount of each ANNUITY PAYOUT
after the ANNUITY DATE. See Annuity payout.
BENEFICIARY -- The person you choose to receive any DEATH BENEFIT paid if you
die before the ANNUITY DATE.
CONTRACTOWNER (you, your, owner) -- The person who can exercise the rights
within the contract (e.g., decides on investment allocations, transfers, payout
option, designates the BENEFICIARY, etc.) Usually, but not always, the owner is
the ANNUITANT.
CONTRACT YEAR -- Each one-year period starting with the effective date of the
contract and ending with each contract anniversary after that.
DEATH BENEFIT -- An amount payable to your designated BENEFICIARY if you die
before the ANNUITY DATE.
LINCOLN LIFE -- The Lincoln National Life Insurance Company.
LNC -- Lincoln National Corporation.
LINCOLN NEW YORK (we, us, our) -- Lincoln Life & Annuity Company of New York.
PREMIUM PAYMENTS -- Amounts paid into the contract.
SAI -- Statement of Additional Information.
SUBACCOUNT -- The portion of the VAA that reflects investments in ACCUMULATION
and ANNUITY UNITS of a particular fund available under the contract.
VALUATION DATE -- Each day the New York Stock Exchange (NYSE) is open for
trading.
VALUATION PERIOD -- The period starting at the close of trading (currently
4:00 p.m. New York time) on each VALUATION DATE and ending at the close of such
trading on the next VALUATION DATE.
2
<PAGE>
EXPENSE TABLES
SUMMARY OF CONTRACTOWNER EXPENSES:
The maximum surrender charge (contingent deferred sales charge) as a percentage
of PREMIUM PAYMENTS surrendered/ withdrawn: 6%
<TABLE>
<S> <C>
Transfer fee: $10
</TABLE>
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or
withdrawal. We may waive this charge in certain situations. See Charges and
other deductions -- Surrender charge.
A market value adjustment (MVA) may be applied to surrenders or transfers
(except for dollar cost averaging and account rebalancing) from a fixed account
guarantee period amount. See Fixed side of the contract.
The transfer charge will not be imposed on the first 12 transfers during a
CONTRACT YEAR. We reserve the right to charge a $10 fee for transfers over
12 times during any CONTRACT YEAR. Automatic dollar cost averaging and automatic
rebalancing transfers are not included in these first twelve transfers.
ACCOUNT N ANNUAL EXPENSES FOR LINCOLN NEW YORK CHOICEPLUS SUBACCOUNTS:
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and expense risk charge.................... 1.25%
Administrative charge................................ .15%
----
Total annual charge for each Delaware-Lincoln
ChoicePlus SUBACCOUNT.............................. 1.40%
</TABLE>
FUND ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
(AFTER ANY - + (AFTER ANY =
WAIVERS/ 12b-1 WAIVERS/
REIMBURSEMENTS) FEES REIMBURSEMENTS)
--------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. AIM V.I. Capital Appreciation............... 0.62% N/A 0.11%
2. AIM V.I. Growth............................. 0.63 N/A 0.10
3. AIM V.I. International Equity............... 0.75 N/A 0.22
4. AIM V.I. Value.............................. 0.61 N/A 0.15
5. Alliance Growth (Class B)................... 0.75 0.25 0.12
6. Alliance Growth and Income (Class B)........ 0.63 0.25 0.09
7. Alliance Premier Growth (Class B)........... 1.00 0.25 0.04
8. Alliance Technology (Class B)............... 0.71 0.25 0.24
9. AVIS Global Small Capitalization Class 2.... 0.78 0.25 0.03
10. AVIS Growth Class 2......................... 0.38 0.25 0.01
11. AVIS Growth Income Class 2.................. 0.34 0.25 0.01
12. AVIS International Class 2.................. 0.55 0.25 0.05
13. Delaware GPF Emerging Markets Standard
Class(2)................................... 1.19 N/A 0.28
14. Delaware GPF Growth and Income Standard
Class(2)................................... 0.60 N/A 0.11
15. Delaware GPF High Yield Standard Class(2)... 0.65 N/A 0.07
16. Delaware GPF REIT Standard Class(2)......... 0.64 N/A 0.21
17. Delaware GPF Select Growth Standard
Class(2)................................... 0.75 N/A 0.06
18. Delaware GPF Small Value Standard
Class(2)................................... 0.75 N/A 0.10
19. Delaware GPF Social Awareness Standard
Class(2)................................... 0.70 N/A 0.15
20. Delaware GPF Trend Standard Class........... 0.75 N/A 0.07
21. Deutsche VIT Equity 500 Index............... 0.14 N/A 0.16
22. Franklin Mutual Shares Securities
Class 2(5)(9).............................. 0.60 0.25 0.19
23. Franklin Small Cap Class 2(4)(9)............ 0.55 0.25 0.27
24. LN Bond..................................... 0.45 N/A 0.08
25. LN Money Market............................. 0.48 N/A 0.11
26. MFS Emerging Growth (Initial Class)(10)..... 0.75 N/A 0.09(1)
27. MFS Research (Initial Class)(10)............ 0.75 N/A 0.11(1)
<CAPTION>
TOTAL
EXPENSES
(AFTER ANY
WAIVERS/
REIMBURSEMENTS)
---------------
<S> <C>
1. 0.73%
2. 0.73
3. 0.97
4. 0.76
5. 1.12
6. 0.97
7. 1.29
8. 1.20
9. 1.06
10. 0.64
11. 0.60
12. 0.85
13.
1.47
14.
0.71
15. 0.72
16. 0.85
17.
0.81
18.
0.85
19.
0.85
20. 0.82
21. 0.30
22.
1.04
23. 1.07
24. 0.53
25. 0.59
26. 0.84
27. 0.86
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
(AFTER ANY - + (AFTER ANY =
WAIVERS/ 12b-1 WAIVERS/
REIMBURSEMENTS) FEES REIMBURSEMENTS)
--------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
28. MFS Total Return (Initial Class)(10)........ 0.75% N/A 0.15%(1)
29. MFS Utilities (Initial Class)(10)........... 0.75 N/A 0.16(1)
30. Newport Tiger Fund.......................... 0.49 N/A 0.31
31. Templeton Growth Securities Fund Class 2
(formerly Global Growth)(7)(8)(9).......... 0.83 0.25 0.05
32. Templeton International Securities Fund
Class 2(6)(9).............................. 0.69 0.25 0.19
33. VIP: Equity-Income Initial Class(3)......... 0.48 N/A 0.09
34. VIP: Growth Initial Class(3)................ 0.58 N/A 0.08
35. VIP: Overseas Initial Class(3).............. 0.73 N/A 0.18
36. VIP III Growth Opportunities Initial
Class(3)................................... 0.58 N/A 0.11
<CAPTION>
TOTAL
EXPENSES
(AFTER ANY
WAIVERS/
REIMBURSEMENTS)
---------------
<S> <C>
28. 0.90%
29. 0.91
30. 1.21
31.
1.13
32.
1.13
33. 0.57
34. 0.66
35. 0.91
36.
0.69
</TABLE>
(1) Under the Advisory Agreement with Bankers Trust Company (the "Advisor"), the
fund will pay an advisory fee at an annual percentage rate of 0.20% of the
average daily net assets of the Equity 500 Index Fund. These fees are
accrued daily and paid monthly. The Advisor has VOLUNTARILY undertaken to
waive its fee and to reimburse the fund for certain expenses so that the
fund's total operating expenses will not exceed 0.30% of average daily net
assets. Without the reimbursement to the Funds for the year ended 12/31/99
total expenses would have been 0.43% for the Equity 500 Index Fund.
(2) Effective May 1, 2000 through October 31, 2000, DMC has VOLUNTARILY agreed
to waive its management fee and reimburse the Series for expenses to the
extent that total expenses will not exceed 0.80% for Devon, High Yield and
Growth and Income; 0.85% for Global Bond, REIT, Select Growth, Small Cap
Value, Social Awareness and Trend; 0.95% for International Equity; 1.50% for
Emerging Markets. Without such an arrangement, the total operating expenses
would have been 0.96% for REIT, 0.90% for Social Awareness, 0.94% for Social
Awareness, and 1.53% for Emerging Markets. DMC voluntarily elected to cap
its management fee for the Growth and Income Series at 0.60% indefinitely.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds',
or FMR on behalf of certain funds' custodian, credits realized as a result
of uninvested cash balances were used to reduce a portion of each applicable
fund's expenses. The total operating expenses, after reimbursement would
have been: Equity-Income 0.56%; Growth 0.65%; Growth Opportunities 0.68%.
(4) On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of the Templeton Variable Products Series
Fund, effective 5/01/00. On 2/8/00, fund shareholders approved new
management fees, which apply to the combined fund effective 5/1/00. The
table shows restated total expenses based on the new fees and assets of the
fund as of 12/31/99, and not the assets of the combined fund. However, if
the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.55%,
Distribution and Service Fees 0.25%, Other Expenses 0.27% and Total Fund
Operating Expenses 1.07%.
(5) On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of the Templeton Variable Products Series
Fund, effective 5/01/00. The table shows restated total expenses based on
the new fees and assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees and the
combined assets, the fund's expenses after 5/1/00 would be estimated as:
Management Fees 0.60%, Distribution and Service Fees 0.25%, Other Expenses
0.19% and Total Fund Operating Expenses 1.04%.
(6) On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of the Templeton International Equity Fund,
effective 5/01/00. The shareholders of that fund approved new management
fees, which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and assets of the fund as of
12/31/99, and not the assets of the combined fund. However, if the table
reflected both the new fees and the combined assets, the fund's expenses
after 5/1/00 would be estimated as: Management Fees 0.65%, Distribution and
Service Fees 0.25%, Other Expenses 0.20% and Total Fund Operating Expenses
1.10%.
(7) On 2/8/00, a merger and reorganization was approved that combined the assets
of the fund with a similar fund of the Templeton Variable Products Series
Fund, effective 5/01/00. The table shows restated total expenses based on
the new fees and assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees and the
combined assets, the fund's expenses after 5/1/00 would be estimated
4
<PAGE>
as: Management Fees 0.80%, Distribution and Service Fees 0.25%, Other
Expenses 0.05% and Total Fund Operating Expenses 1.10%.
(8) The Fund administration fee is paid indirectly through the management fee.
(9) The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus. While the maximum amount payable under the fund's
class 2 rule 12b-1 plan is 0.35% per year of the fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year.
(10) Each series has an expense offset arrangement which reduces the series'
custodian fee based on the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other
such arrangement and directed brokerage arrangements, which would also have
the effect of reducing the series' expenses. "Other Expenses" do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series. Had the fee reductions been taken into
account, "Net Expenses" would be lower for certain series and would equal:
0.83% for Emerging Growth Series; 0.85% for Research Series; 0.89% for Total
Return Series; 0.90% for Utilities Series.
EXAMPLES
(expenses of the SUBACCOUNTS and the funds)
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
1. AIM V.I. Capital Appreciation Fund.......................... $82 $118 $147 $251
2. AIM V.I. Growth Fund........................................ 82 118 147 251
3. AIM V.I. International Equity Fund.......................... 85 126 159 276
4. AIM V.I. Value Fund......................................... 82 119 148 254
5. Alliance Premier Growth Portfolio........................... 88 136 176 308
6. Alliance Growth and Income Portfolio........................ 85 126 159 276
7. Alliance Growth Portfolio................................... 86 130 167 291
8. Alliance Technology Portfolio............................... 87 133 171 299
9. AFIS Global Small Capitalization Fund....................... 86 128 164 285
10. AFIS Growth Fund............................................ 81 115 142 242
11. AFIS International Fund..................................... 83 122 153 264
12. AFIS Growth-Income Fund..................................... 81 114 140 238
13. Deutsche VIT Equity 500 Index Fund.......................... 78 105 124 205
14. Delaware Premium Growth and Income Series................... 82 118 148 249
15. Delaware Premium High Yield Series.......................... 82 118 146 250
16. Delaware Premium Emerging Markets Series.................... 90 141 185 326
17. Delaware Premium REIT Series................................ 83 121 151 259
18. Delaware Premium Select Growth Series....................... 83 122 153 264
19. Delaware Premium Small Cap Value Series..................... 83 122 153 264
20. Delaware Premium Social Awareness Series.................... 83 121 152 261
21. Delaware Premium Trend Series............................... 83 121 152 261
22. Fidelity VIP Equity-Income Portfolio........................ 85 128 163 283
23. Fidelity VIP Growth Portfolio............................... 86 129 164 286
24. Fidelity VIP Overseas Portfolio............................. 87 133 171 300
25. Fidelity VIP III Growth Opportunities Portfolio............. 80 112 137 230
26. Franklin Small Cap Securities Fund.......................... 86 129 164 286
27. Franklin Mutual Shares Securities Fund...................... 85 128 163 283
28. Templeton Growth Securities Fund (formerly Global Growth)... 84 122 154 265
29. Templeton International Securities Fund..................... 84 124 156 269
30. Liberty Variable Trust Newport Tiger Fund................... 87 133 171 300
31. Lincoln National Bond Fund.................................. 80 112 137 230
32. Lincoln National Money Market Fund.......................... 81 114 140 237
33. MFS Variable Trust Emerging Growth Series................... 83 122 153 263
34. MFS Variable Trust Research Series.......................... 84 122 154 265
35. MFS Variable Trust Total Return Series...................... 84 124 156 269
36. MFS Variable Trust Utilities Series......................... 84 124 156 270
</TABLE>
5
<PAGE>
If you do not surrender your contract, or if you annuitize, you would pay the
following expenses on a $1,000 investment, assuming a 5% annual return.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
1. AIM V.I. Capital Appreciation Fund.......................... $22 $ 68 $117 $251
2. AIM V.I. Growth Fund........................................ 22 68 117 251
3. AIM V.I. International Equity Fund.......................... 25 76 129 276
4. AIM V.I. Value Fund......................................... 22 69 118 254
5. Alliance Premier Growth Portfolio........................... 28 85 146 308
6. Alliance Growth and Income Portfolio........................ 25 76 129 276
7. Alliance Growth Portfolio................................... 26 80 137 291
8. Alliance Technology Portfolio............................... 27 83 141 299
9. AFIS Global Small Capitalization Fund....................... 26 70 134 285
10. AFIS Growth Fund............................................ 21 65 112 242
11. AFIS International Fund..................................... 23 72 123 264
12. AFIS Growth-Income Fund..................................... 21 64 110 238
13. Deutsche VIT Equity 500 Index Fund.......................... 19 55 94 205
14. Delaware Premium Growth and Income Series................... 22 68 116 249
15. Delaware Premium High Yield Series.......................... 22 68 116 250
16. Delaware Premium Emerging Markets Series.................... 23 72 123 264
17. Delaware Premium REIT Series................................ 23 72 123 264
18. Delaware Premium Select Growth Series....................... 23 71 121 259
19. Delaware Premium Small Cap Value Series..................... 23 72 123 264
20. Delaware Premium Social Awareness Series.................... 23 72 123 264
21. Delaware Premium Trend Series............................... 23 71 122 261
22. Fidelity VIP Equity-Income Portfolio........................ 21 63 109 234
23. Fidelity VIP Growth Portfolio............................... 21 56 113 244
24. Fidelity VIP Overseas Portfolio............................. 24 74 126 270
25. Fidelity VIP III Growth Opportunities Portfolio............. 22 67 115 247
26. Franklin Small Cap Securities Fund.......................... 26 79 134 286
27. Franklin Mutual Shares Securities Fund...................... 25 78 133 283
28. Templeton Growth Securities Fund (formerly Global Growth)... 26 80 137 292
29. Templeton International Securities Fund..................... 26 80 137 292
30. Liberty Variable Trust Newport Tiger Fund................... 27 83 141 300
31. Lincoln National Bond Fund.................................. 20 62 107 230
32. Lincoln National Money Market Fund.......................... 21 64 110 237
33. MFS Variable Trust Emerging Growth Series................... 23 72 123 263
34. MFS Variable Trust Research Series.......................... 24 72 124 265
35. MFS Variable Trust Total Return Series...................... 24 74 126 269
36. MFS Variable Trust Utilities Series......................... 24 74 126 270
</TABLE>
We provide these examples to help you understand the direct and indirect costs
and expenses of the contract.
For more information, see Charges and other deductions in this Prospectus, and
in the Prospectuses for the funds. Premium taxes may also apply, although they
do not appear in the examples. THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
6
<PAGE>
SUMMARY
WHAT KIND OF CONTRACT AM I BUYING?
It is an individual annuity contract issued by LNY. It may provide for a fixed
annuity and/or a variable annuity. This Prospectus describes the variable side
of the contract. See The contracts.
WHAT IS THE VARIABLE ANNUITY ACCOUNT (VAA)?
It is a separate account we established under New York insurance law, and
registered with the SEC as a unit investment trust. We allocate VAA assets to
one or more SUBACCOUNTS, according to your investment choices. VAA assets are
not chargeable with liabilities arising out of any other business which LNY may
conduct. See Variable annuity account (VAA).
WHAT ARE MY INVESTMENT CHOICES?
Based upon your instruction, the VAA applies premium payments to buy shares in
one or more of the following investment options: AIM V.I. Growth Fund, AIM V.I.
Value Equity Fund, AIM V.I. International Equity Fund, AIM V.I. Capital
Appreciation Fund, Alliance Growth and Income Portfolio, Alliance Growth
Portfolio, Alliance Technology Portfolio, Alliance Premier Growth Portfolio,
AFIS Global Small Capitalization Fund, AFIS Growth Fund, AFIS International
Fund, AFIS Growth-Income Fund, BT Equity 500 Index Fund, Delaware Premium Growth
& Income Series, Delaware Premium High Yield Series, Delaware Premium REIT
Series, Delaware Premium Emerging Markets Series, Delaware Premium Small Cap
Value Series, Delaware Premium Trend Series, Delaware Premium Social Awareness
Growth Series, Delaware Premium Select Growth Series, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP Growth Portfolio, Fidelity VIP Overseas Portfolio,
Fidelity VIP III Growth Opportunities Portfolio, Liberty Newport Tiger Fund,
Lincoln National Money Market Fund, Lincoln National Bond Fund, MFS Emerging
Growth Series, MFS Research Series, MFS Total Return Series, MFS Utilities
Series, Franklin Small Cap Investments Fund, Franklin Mutual Shares Securities
Fund, Templeton International Fund, Templeton Global Growth Fund.
HOW DOES THE CONTRACT WORK?
If we approve your application, we will send you a contract. When make PREMIUM
PAYMENTS during the accumulation phase, you buy ACCUMULATION UNITS. If you later
decide to receive retirement income payments, your ACCUMULATION UNITS are
converted to ANNUITY UNITS. We base your retirement income payments on the
number of ANNUITY UNITS you received and the value of each ANNUITY UNIT on
payout days. See Charges and other deductions -- The contracts.
WHAT CHARGES DO I PAY?
If you withdraw from your ANNUITY ACCOUNT, you pay a surrender or withdrawal
charge which may range from 0% to 6%, depending upon how many CONTRACT YEARS
your premium payments have been in the contract. We may waive surrender charges
in certain situations. See Charges and other deductions -- Surrender charge.
We reserve the right to charge a $10 fee for transfers over 12 times during any
CONTRACT YEAR, excluding automatic dollar cost averaging and automatic
rebalancing program transfers.
The surrender or transfer of value from a fixed account guaranteed period may be
subject to a market value adjustment (MVA). See Fixed side of the contract.
We will deduct any applicable premium tax from PREMIUM PAYMENTS or ANNUITY
ACCOUNT VALUE at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.40% to the daily net asset value of the
VAA. This charge includes 0.15% as an administrative charge and 1.25% as a
mortality and expense risk charge. See Charges and other deductions. We may
waive these charges in certain situations.
The funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in the funds' Prospectuses.
WHAT PREMIUM PAYMENTS DO I MAKE, AND HOW OFTEN?
Subject to minimum and maximum PREMIUM PAYMENT AMOUNTS, your PREMIUM PAYMENTS
are completely flexible. See The contracts -- premium payments.
HOW WILL MY ANNUITY PAYOUTS BE CALCULATED?
If you decide to annuitize, you may select an annuity option and start receiving
retirement income payments from your contract as a fixed option or variable
option or a combination of both. See Annuity Payouts -- Annuity Options.
REMEMBER THAT PARTICIPANTS IN THE VAA BENEFIT FROM ANY GAIN, AND TAKE A RISK OF
ANY LOSS IN THE VALUE OF THE SECURITIES IN THE FUNDS' PORTFOLIOS.
WHAT HAPPENS IF I DIE BEFORE I ANNUITIZE?
Your BENEFICIARY will receive the greatest of the PREMIUM PAYMENTS, ANNUITY
ACCOUNT VALUE or the highest ANNUITY ACCOUNT VALUE as of the most recent
CONTRACT ANNIVERSARY occurring on or before the CONTRACTOWNER'S 80th birthday.
Your BENEFICIARY has options as to how the DEATH BENEFIT is paid. See The
contracts -- death benefit before the ANNUITY DATE.
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MAY I TRANSFER CONTRACT VALUE AMONG VARIABLE OPTIONS AND BETWEEN THE FIXED SIDE
AND VARIABLE SIDE OF THE CONTRACT?
Yes, with certain limits. See The contracts -- Transfers between SUBACCOUNTS on
or before the ANNUITY DATE; Transfers after the ANNUITY DATE; and Transfers to
and from a Fixed Account on or before the ANNUITY DATE.
MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL?
Yes, subject to contract requirements and to restrictions of any qualified
retirement plan for which the contract was purchased. See The Contracts --
Surrenders and withdrawals. If you surrender the contract or make a withdrawal,
certain charges may apply. In addition, if you decide to take a distribution
before age 59-1/2, a 10% Internal Revenue Service (IRS) tax penalty may apply. A
surrender or withdrawal may also be subject to 20% withholding. See Federal tax
matters.
DO I GET A FREE LOOK AT THIS CONTRACT?
Yes. You can cancel the contract within ten days of the date you first received
the contract. You need to return the contract, postage prepaid, to our Servicing
Office. You assume the risk of any market drop on PREMIUM PAYMENTS you allocate
to the variable side of the contract. See Return privilege.
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CONDENSED FINANCIAL INFORMATION FOR THE VARIABLE ANNUITY ACCOUNT
ACCUMULATION UNIT VALUES
No condensed financial information for the VAA is presented because as of
December 31, 1999, the Account had not yet commenced operations.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of LNY as of December 31, 1999
and 1998 and for each of the three years ended December 31, 1999 may be found in
the Statement of Additional Information. No financial statements are included
for the VAA because as of December 31, 1999, the Account had not yet commenced
operations.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
LNY is a life insurance company founded in New York on June 6, 1996. LNY is a
subsidiary of LINCOLN LIFE. LINCOLN LIFE is one of the largest stock life
insurance companies in the United States. LINCOLN LIFE, an Indiana corporation,
is owned by Lincoln National Corp. (LNC) which is also organized under Indiana
law. LNC's primary businesses are insurance and financial services.
VARIABLE ANNUITY ACCOUNT (VAA)
On March 11, 1999, the VAA was established as an insurance company separate
account under New York law. It is registered with the SEC as a unit investment
trust under the provisions of the Investment Company Act of 1940 (1940 Act). The
SEC does not supervise the VAA or LNY. The VAA is a segregated investment
account, meaning that its assets may not be charged with liabilities resulting
from any other business that we may conduct. Income, gains and losses, whether
realized or not, from assets allocated to the VAA are, in accordance with the
applicable annuity contracts, credited to or charged against the VAA. They are
credited or charged without regard to any other income, gains or losses of LNY.
The VAA satisfies the definition of separate account under the federal
securities laws. We do not guarantee the investment performance of the VAA. Any
investment gain or loss depends on the investment performance of the funds. You
assume the full investment risk for all amounts placed in the VAA.
The VAA may be used to support other contracts offered by LNY in addition to the
contracts described in this Prospectus.
INVESTMENTS OF THE VARIABLE ANNUITY ACCOUNT
You decide the SUBACCOUNT(S) to which you allocate PREMIUM PAYMENTS. You may
change your allocation without penalty or charges. Shares of the funds will be
sold at net asset value with no initial sales charge to the VAA in order to fund
the contracts. Each fund is required to redeem fund shares at net asset value
upon our request. We reserve the right to add, delete or substitute funds,
subject to compliance with applicable law.
INVESTMENT ADVISORS
The investment advisors of the funds are:
AIM Variable Insurance Funds, Inc. ("AIM V.I. Funds"), managed by A I M
Advisors, Inc.
Alliance Variable Products Series Fund is managed by Alliance Capital
Management, L.P.
American Funds Insurance Series is managed by Capital Research and Management
Company.
BT Insurance Funds Trust (the "BT Insurance Trust") managed by Bankers Trust
Company.
Delaware Group Premium Fund Inc., ("Delaware Group"), managed by Delaware
Management Company. The Social Awareness Series is sub-advised by Vantage
Investment Advisors. The REIT Series is sub-advised by Lincoln Investment
Management. The International and Emerging Markets are managed by Delaware
International Advisers Ltd.
Variable Insurance Products Fund ("Fidelity VIP") and Variable Insurance
Products Fund III ("Fidelity VIP III") managed by Fidelity Management & Research
Company.
Franklin Templeton Variable Insurance Products Trust -- Franklin Small Cap is
managed by Franklin Advisers, Inc.; Mutual Shares Securities is managed by
Franklin Mutual Advisers, LLC; Templeton Growth Securities is managed by
Templeton Global Advisors Limited; Templeton International Securities is managed
by Templeton Investment Counsel, Inc.
Liberty Variable Investment Trust ("Liberty Variable Trust") managed by Liberty
Advisory Series Corp., and sub-advised by Colonial Management Associates, Inc.
and Newport Fund Management, Inc.
Lincoln National Bond Fund, Inc., and Lincoln National Money Market Fund, Inc.,
managed by Lincoln Investment Management, Inc.
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MFS -- Variable Insurance Trust ("MFS Variable Trust") managed by Massachusetts
Financial Services Company.
As compensation for their services to a fund, the investment advisors receive a
fee from each fund, which is accrued daily and paid monthly. This fee is based
on the net assets of each fund.
With respect to a fund, the advisor and/or distributor, or an affiliate thereof,
may compensate LNY or an affiliate for administrative, distribution, or other
services. It is anticipated that such compensation will be based on assets of
the particular fund attributable to the contracts along with certain other
variable contracts issued or administered by LNY or an affiliate.
The funds' shares are issued and redeemed only in connection with variable
annuity contracts and variable life insurance policies (mixed funding) issued
through separate accounts of LNY and other life insurance companies (shared
funding). The funds do not foresee any disadvantage to CONTRACTOWNERS arising
out of mixed or shared funding. Nevertheless, the funds' Boards intend to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate accounts
might withdraw its investment in a fund. This might force a fund to sell
portfolio securities at disadvantageous prices.
DESCRIPTION OF THE FUNDS
Certain funds offered under this contract have similar investment objectives and
policies to other portfolios managed by the advisor or sub-advisor. The
investment results of the funds, however, may be higher or lower than the other
portfolios that are managed by the advisor or sub-advisor. There can be no
assurance, and no representation is made, that the investment results of any of
the funds will be comparable to the investment results of any other portfolio
managed by the advisor or sub-advisor.
Following are brief summaries of the investment objectives and policies of the
funds. Each fund is subject to certain investment policies and restrictions
which may not be changed without a majority vote of shareholders of that fund.
More detailed information may be obtained from the current Prospectus for the
fund which accompanies or precedes this Prospectus. PLEASE BE ADVISED THAT THERE
IS NO ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE THEIR STATED OBJECTIVES.
1. AIM V.I. Growth Fund: Seeks growth of capital primarily by investing in
seasoned and better capitalized companies considered to have strong
earnings momentum.
2. AIM V.I. International Equity Fund: Seeks to provide long-term growth of
capital by investing in a diversified portfolio of international equities
whose issuers are considered to have strong earnings momentum.
3. AIM V.I. Value Fund: Seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by its investment advisor
to be undervalued relative to the investment advisor's appraisal of the
current or projected earnings of the companies issuing the securities, or
relative to the current market values of assets owned by the companies
issuing the securities or relative to the equity market generally. Income
is a secondary objective.
4. AIM V.I. Capital Appreciation Fund: Seeks growth of capital through
investment in common stocks, with emphasis on medium and small-sized
growth companies. The investment advisor will be particularly interested
in companies that are likely to benefit from new or innovative products,
services or processes that should enhance such companies prospects' for
future growth in earnings.
5. Alliance Premier Growth Portfolio: Seeks long-term growth of capital by
investing predominantly in the equity securities of a limited number of
large, carefully selected, high-quality U.S. companies that are judged
likely to achieve superior earnings growth.
6. Alliance Growth and Income Portfolio: Seeks reasonable current income and
reasonable appreciation through investments primarily in dividend-paying
common stocks of good quality. The portfolio also may invest in
fixed-income securities and convertible securities.
7. Alliance Growth Portfolio: Seeks to provide long-term growth of capital.
Current income is only an incidental consideration. The portfolio invests
primarily in equity securities of companies with favorable earnings
outlooks, which have long-term growth rates that are expected to exceed
that of the U.S. economy over time.
8. Alliance Technology Portfolio: Emphasizes growth of capital and invests
for capital appreciation. Current income is only an incidental
consideration. The portfolio may seek income by writing listed call
options. The portfolio invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or
improved products or processes).
9. AFIS Global Small Capitalization Fund: Seeks to make your investment grow
over time by investing primarily in stocks of smaller companies located
around the world that typically have market capitalizations of $50 million
to $1.5 billion. The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should have a long-term
perspective and be
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able to tolerate potentially wide price fluctuations.
10. AFIS Growth Fund: Seeks to make your investment grow by investing
primarily in common stocks of companies that appear to offer superior
opportunities for growth of capital. The fund is designed for investors
seeking capital appreciation through stocks. Investors in the fund should
have a long-term perspective and be able to tolerate potentially wide
price fluctuations.
11. AFIS International Fund: Seeks to make your investment grow over time by
investing primarily in common stocks of companies located outside the
United States. The fund is designed for investors seeking capital
appreciation through stocks. Investors in the fund should have a long-term
perspective and be able to tolerate potentially wide price fluctuations.
12. AFIS Growth and Income Fund: Seeks to make your investment grow and
provide you with income over time by investing primarily in common stocks
or other securities which demonstrate the potential for appreciation
and/or dividends. The fund is designed for investors seeking both capital
appreciation and income.
13. Deutsche VIT Equity 500 Index Funds: Seeks to match the performance of the
stock market as represented by Standard & Poor's 500-Registered Trademark-
Index, before fund expenses.
14. Delaware Premium Growth and Income Series: Seeks the highest possible
total return by investing in stocks that exhibit the potential for growth
while providing higher than average dividend income.
15. Delaware Premium High Yield Series: Seeks total return and, as a secondary
objective, a high current income. The Series invests in rated and unrated
corporate bonds (including high-risk, high-yield bonds commonly known as
junk bonds), foreign 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.
16. Delaware Premium Emerging Markets Series: Seeks long-term growth by
investing primarily in stocks of companies located or operating in
emerging or developing countries.
17. Delaware Premium Select Growth Series: Seeks long-term capital
appreciation by primarily investing in common stocks of companies that
have the potential for high earnings growth. Companies of any size are
considered, as long as they are larger than $300 million in market
capitalization.
18. Delaware Premium REIT Series: Seeks to achieve maximum long-term total
return by investing primarily in the securities of real estate investment
trusts and real estate operating companies.
19. Delaware Premium Small Cap Value Series: Seeks growth by investing
primarily in stocks of small cap companies whose market values appear low
relative to underlying value or future earnings and growth potential.
20. Delaware Premium Trend Series: Seeks long-term growth by investing
primarily in stocks of small companies and convertible securities of
emerging and other growth-oriented companies.
21. Delaware Premium Aggressive Growth Series: Seeks long-term capital
appreciation by primarily investing in common stocks of companies that
have the potential for high earnings growth. Companies of any size are
considered, as long as they are larger than $300 million in market
capitalization.
22. Fidelity VIP Equity-Income Portfolio: Seeks reasonable income by investing
primarily in income-producing equity securities, with some potential for
capital appreciation, seeking a yield that exceeds the composite yield on
the securities comprising the Standard and Poor's 500 Index (S&P 500).
23. Fidelity VIP Growth Portfolio: Seeks long-term capital appreciation. The
portfolio normally purchases common stocks.
24. Fidelity VIP Overseas Portfolio: Seeks long-term growth of capital by
investing primarily in foreign securities.
25. Fidelity VIP III Growth Opportunities Portfolio: Seeks capital growth by
investing primarily in common stocks.
26. Franklin Small Cap Securities Fund: Seeks long-term capital growth by
investing in equity securities of U.S. small cap growth companies. Small
cap companies are generally those with market cap values of less than $1.5
billion at time of purchase.
27. Franklin Mutual Shares Securities Fund: Seeks capital appreciation with
income as a secondary goal. It invests in equity securities of companies
that the manager believes are available at market prices less than their
actual value on certain recognized or objective criteria.
28. Liberty Newport Tiger Fund: Seeks long-term capital growth by investing
primarily in the stocks of high quality international companies located in
the nine "Tigers" of Asia: Hong Kong, China, Singapore, Malaysia,
Thailand, Indonesia, the Philippines, South Korea and Taiwan.
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29. Lincoln National Bond Fund: Seeks maximum current income consistent with
prudent investment strategy. The fund invests primarily in medium- and
long-term corporate and government bonds.
30. Lincoln National Money Market Fund: 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.
31. MFS Emerging Growth Series: Seeks to provide long-term growth by investing
primarily in the common stocks of companies the managers believe are in
the early stages of their life cycle but which have the potential to
become major enterprises.
32. MFS Research Series: Seeks long-term growth and future income by investing
primarily in equity companies believed to possess better than average
prospects for long-term growth. A committee of investment research
analysts selects the securities for the fund, with individual analysts
responsible for choosing securities within an assigned industry.
33. MFS Total Return Series: Seeks to provide above-average income consistent
with the prudent employment of capital and to provide a reasonable
opportunity for capital growth and income. The fund invests in a broad
range of securities, including short-term obligations, and may be
diversified not only by company and industry, but also by security type.
34. MFS Utilities Series: Seeks capital growth and current income by investing
the majority of its assets in equity and debt securities of both domestic
and foreign companies in the utilities industry.
35. Templeton International Securities Fund: Seeks long-term capital growth.
It invests primarily in stocks of companies outside the United States,
including emerging markets. Any income realized will be incidental.
36. Templeton Growth Securities Fund: Seeks long-term capital growth. It
invests primarily in equity securities issued by companies, large and
small, in various nations throughout the world, including the United
States and emerging markets.
FUND SHARES
We will purchase shares of the funds at net asset value and direct them to the
appropriate SUBACCOUNTS of the VAA. We will redeem sufficient shares of the
appropriate funds to pay ANNUITY PAYOUTS, DEATH BENEFITS, surrender/ withdrawal
proceeds or for other purposes described in the contract. If you want to
transfer all or part of your investment from one SUBACCOUNT to another, we may
redeem shares held in the first and purchase shares of the other. Redeemed
shares are retired, but they may be reissued later.
When a fund sells any of its shares both to variable annuity and to variable
life insurance separate accounts, it is said to engage in mixed funding. When a
fund sells any of its shares to separate accounts of unaffiliated life insurance
companies, it is said to engage in shared funding.
The funds currently engage in mixed and shared funding. Therefore, due to
differences in redemption rates or tax treatment, or other considerations, the
interest of various CONTRACTOWNERS participating in a fund could conflict. Each
of the fund's Board of Directors will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. See the
Prospectuses for the funds.
Shares of the funds are not sold directly to the general public. They are sold
to LNY, and may be sold to other insurance companies, for investment of the
assets of the SUBACCOUNTS established by those insurance companies to fund
variable annuity and variable life insurance contracts.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
All dividends and capital gain distributions of the funds are automatically
reinvested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to CONTRACTOWNERS as additional
units, but are reflected as changes in unit values.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
WE RESERVE THE RIGHT, WITHIN THE LAW, TO MAKE ADDITIONS, DELETIONS AND
SUSTITUTIONS FOR THE FUNDS IN WHICH THE VAA PARTICIPATES. We may substitute
shares of other funds for shares already purchased, or to be purchased in the
future, under the contract. This substitution might occur if shares of a fund
should no longer be available, or if investment in any fund's shares should
become inappropriate, in the judgment of our management, for the purposes of the
contract. We cannot substitute shares of one fund for another without the
approval by the SEC. We will also notify you.
CHARGES AND OTHER DEDUCTIONS
We will deduct the charges described below to cover our costs and expenses,
services provided and risks assumed under the contracts. We incur certain costs
and expenses for the distribution and administration of the
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contracts and for providing the benefits payable thereunder. More particularly,
our administrative services include: processing applications for and issuing the
contracts, processing purchases and redemptions of fund shares as required
(including dollar cost averaging, account rebalancing and automatic withdrawal
services), maintaining records, administering ANNUITY PAYOUTS, furnishing
accounting and valuation services (including the calculation and monitoring of
daily SUBACCOUNT values), reconciling and depositing cash receipts, providing
contract confirmations, providing toll-free inquiry services and furnishing
telephone fund transfer services. The risks we assume include: the risk that
ANNUITANTS receiving ANNUITY PAYOUTS under contract live longer than we assumed
when we calculated our guaranteed rates (these rates are incorporated in the
contract and cannot be changed); the risk that more owners than expected will
qualify for waivers of the surrender charge; and the risk that our costs in
providing the services will exceed our revenues from the contract charges (which
we cannot change). The amount of a charge may not necessarily correspond to the
costs associated with providing the services or benefits indicated by the
description of the charge. For example, the surrender charge collected may not
fully cover all of the sales and distribution expenses actually incurred by us.
DEDUCTIONS FROM THE VAA FOR LINCOLN NEW YORK CHOICEPLUS
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.40% of the average daily net assets. The charge consists of a 0.15%
administrative charge and a 1.25% mortality and expense risk charge.
SURRENDER CHARGE
A surrender charge applies (except as described below) to surrenders and
withdrawals of PREMIUM PAYMENTS that have been invested for the periods
indicated as follows:
<TABLE>
<CAPTION>
Number of complete CONTRACT YEARS that a
PREMIUM PAYMENT has been invested
<S> <C> <C>
- ---------------------------------------------------------------
Less than At least
One year 1 2 3 4 5 6 7+
Surrender charge as a
percentage of the
PREMIUM PAYMENTS
surrendered or
withdrawn 6% 6 5 4 3 2 1 0
</TABLE>
A surrender charge does not apply to:
1. A surrender or withdrawal of PREMIUM PAYMENTS that have been invested for
more than seven full CONTRACT YEARS;
2. Withdrawals of ANNUITY ACCOUNT VALUE during a CONTRACT YEAR to the extent
that the total ANNUITY ACCOUNT VALUE withdrawn during the current contract
year does not exceed 15% of PREMIUM PAYMENTS;
3. Electing an annuity option available within
the contract;
4. The surviving spouse's assuming ownership of the contract as a result of
the death of the original owner;
5. A surrender amount equal to a maximum of 75% of the ANNUITY ACCOUNT VALUE
as a result of 180 days of continuous confinement of the CONTRACTOWNER in
an accredited nursing home or equivalent health care facility subsequent
to the effective date of the contract;
6. A surrender of the contract as a result of the death of the CONTRACTOWNER,
JOINT OWNER OR ANNUITANT. However, the surrender charge is not waived as a
result of the death of an ANNUITANT who is not the CONTRACTOWNER.
For purposes of calculating the surrender charge on withdrawals on contracts
where the CONTRACTOWNER is not a Charitable Remainder Trust, LNY assumes that:
a. the FREE AMOUNT will be withdrawn from PURCHASE PAYMENTS on a "first in-first
out (FIFO)" basis.
b. Prior to the seventh anniversary of the contract, any amount withdrawn above
the FREE AMOUNT during a CONTRACT YEAR will be withdrawn in the following
order:
1. from PURCHASE PAYMENTS (on a FIFO basis) until exhausted; then
2. from earnings.
c. On or after the seventh anniversary of the contract, any amount withdrawn
above the FREE AMOUNT during a CONTRACT YEAR will be withdrawn in the
following order:
1. from PURCHASE PAYMENTS (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from PURCHASE PAYMENTS (on a FIFO basis) to which a surrender charge still
applies.
For purposes of calculating the surrender charge on withdrawals on contracts
where the CONTRACTOWNER is a Charitable Remainder Trust, LNY assumes that:
a. the FREE AMOUNT will be withdrawn from PURCHASE PAYMENTS on a FIFO basis.
b. Any amount withdrawn above the FREE AMOUNT during a CONTRACT YEAR will be
withdrawn in the following order:
1. from PURCHASE PAYMENTS (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
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2. from earnings until exhausted; then
3. from PURCHASE PAYMENTS (on a FIFO basis) to which a surrender charge still
applies.
The surrender charge is calculated separately for each CONTRACT YEAR'S PURCHASE
PAYMENTS to which a charge applies. The surrender charges associated with
surrender or withdrawal are paid to us to compensate us for the loss we
experience on contract distribution costs when CONTRACTOWNERS surrender or
withdraw before distribution costs have been recovered.
If the CONTRACTOWNER is a corporation or other non-individual (non-natural
person), the ANNUITANT or joint annuitant will be considered the CONTRACTOWNER
or joint owner for purposes of determining when a surrender charge does not
apply.
TRANSFER FEE
We reserve the right to impose a $10 fee for transfers over 12 times during any
CONTRACT YEAR. Automatic dollar cost averaging and automatic rebalancing
transfers are not included in the limit of twelve transfers.
RIDER CHARGES
A fee or expense may also be deducted in connection with any benefits added to
the contract by rider or endorsement. See the rider for any applicable fee
or expense.
DEDUCTIONS FOR PREMIUM TAXES
Any premium tax or other tax levied by any government entity with respect to the
contracts will be deducted from the ANNUITY ACCOUNT VALUE when incurred, or at
another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. These premium taxes
generally depend upon the law of your state of residence. The tax ranges from 0%
to 3.5%.
OTHER CHARGES AND DEDUCTIONS
Deductions from and expenses paid out of the assets of each underlying fund are
more fully described in the Prospectus for each fund.
ADDITIONAL INFORMATION
We may reduce or eliminate the administrative and surrender charges and the
account fees described previously for any particular contract. However, we will
do so only to the extent that we anticipate lower distribution and/or
administrative expenses, or that we perform fewer sales or administrative
services than those originally contemplated in establishing the level of those
charges.
THE CONTRACTS
PURCHASE OF CONTRACTS
If you wish to purchase a contract, you must apply for it through a sales
representative authorized by us. We review the completed application and decide
whether to accept or reject it. If we accept it, a CONTRACT is prepared and
executed by our legally authorized officers. We then send the CONTRACT to you
through your sales representative. See Distribution of the contracts.
When a completed application and all other information necessary for processing
a purchase order is received, an initial PREMIUM PAYMENT will be priced no later
than two business days after we receive the order. While attempting to finish an
incomplete application, we may hold the initial PREMIUM PAYMENT for no more than
five business days. If the incomplete application cannot be completed within
those five days, you will be informed of the reasons, and the PREMIUM PAYMENT
will be returned immediately. Once the application is complete, the initial
PREMIUM PAYMENT must be priced within two business days.
WHO CAN INVEST?
To apply for a contract, you must be of legal age in New York where the
contracts may be lawfully sold and also be eligible to participate in any of the
qualified or nonqualified plans for which the contracts are designed. The
CONTRACTOWNER cannot be older than age 89 at the time of application. The
maximum annuitization age is 90.
PREMIUM PAYMENTS
PREMIUM PAYMENTS are payable to us at a frequency and in an amount selected by
you in the application. The minimum initial PREMIUM PAYMENT is $10,000 for
nonqualified contracts and Section 403(b) transfers/rollovers to IRAs; and
$2,000 for other qualified contracts. The minimum annual amount for additional
PREMIUM PAYMENTS for nonqualified and qualified contracts is $25 if transmitted
electronically; otherwise the minimum amount is $100. There is no set maximum
for additional PREMIUM PAYMENTS. However, PREMIUM PAYMENTS in excess of
$1,000,000 require pre-approval by LNY. LNY also reserves the right to limit
aggregate premium payments to $2,000,000. If you stop making PREMIUM PAYMENTS
for three consecutive years, and the ANNUITY ACCOUNT VALUE decreases to less
than $2,000, we may terminate the contract as allowed by New York non-forfeiture
law for deferred annuities and pay the CONTRACTOWNER an adjusted ANNUITY ACCOUNT
VALUE.
We will notify the CONTRACTOWNER at least 30 days in advance of the intended
action. During the notification period, the CONTRACTOWNER may make additional
PREMIUM PAYMENTS to meet the minimum value requirements and to avoid
cancellation of the contract.
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VALUATION DATE
ACCUMULATION and ANNUITY units will be valued once daily at the close of trading
(currently) 4:00 p.m., New York time) on each day the New York Stock Exchange is
open (VALUATION DATE). On any date other than a VALUATION DATE, the ACCUMULATION
UNIT value and the ANNUITY UNIT value will not change.
ALLOCATION OF PREMIUM PAYMENTS
PREMIUM PAYMENTS are placed, according to your instructions into either (a) one
or more fixed account(s), or (b) one or more of the VAA'S SUBACCOUNTS, each of
which invests in shares of its corresponding fund.
The minimum amount of any PREMIUM PAYMENT that can be put into any one variable
SUBACCOUNT is $50, or $2,000 for a fixed account. No allocation can be made that
would result in a variable SUBACCOUNT of less than $50, or that would result in
a fixed account of less than $2,000. Upon allocation to a VAA SUBACCOUNT,
PREMIUM PAYMENTS are converted into ACCUMULATION UNITS. The number of
ACCUMULATION UNITS credited is determined by dividing the amount allocated to
each SUBACCOUNT by the value of an ACCUMULATION UNIT for that SUBACCOUNT on the
VALUATION DATE on which the PREMIUM PAYMENT is received at our servicing office
if received before 4:00 p.m., New York time. If the PREMIUM PAYMENT is received
at or after 4:00 p.m., New York time, we will use the ACCUMULATION UNIT value
computed on the next VALUATION DATE. The number of ACCUMULATION UNITS determined
in this way is not changed by any subsequent change in the value of an
ACCUMULATION UNIT. However, the dollar value of an ACCUMULATION UNIT will vary
depending not only upon how well the underlying fund's investments perform, but
also upon the expenses of the VAA and the underlying funds.
VALUATION OF ACCUMULATION UNITS
PREMIUM PAYMENTS allocated to the VAA are converted into ACCUMULATION UNITS.
This is done by dividing each PREMIUM PAYMENT by the value of an ACCUMULATION
UNIT for the VALUATION PERIOD during which the PREMIUM PAYMENT is allocated to
the VAA. The ACCUMULATION UNIT value for each SUBACCOUNT was or will be
established at the inception of the SUBACCOUNT. It may increase or decrease from
VALUATION PERIOD to VALUATION PERIOD. The ACCUMULATION UNIT value for a
SUBACCOUNT for a later VALUATION PERIOD is determined as follows:
(1) The total value of the fund shares held in the SUBACCOUNT is calculated by
multiplying the number of fund shares owned by the SUBACCOUNT 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 SUBACCOUNT at the end of the valuation period; these
liabilities include daily charges imposed on the SUBACCOUNT, and may include a
charge or credit with respect to any taxes paid or reserved for by us that we
determine result from the operations of the VAA; and
(3) The result of (2) is divided by the number of SUBACCOUNT units outstanding
at the beginning of the valuation period.
The charges imposed on a SUBACCOUNT for any VALUATION PERIOD are equal to the
sum of the daily mortality and expense risk charge and the daily administrative
charge, multiplied by the number of calendar days in the VALUATION PERIOD.
TRANSFERS BETWEEN SUBACCOUNTS ON OR BEFORE THE ANNUITY DATE
You may transfer all or a portion of your investment from one SUBACCOUNT to
another. A transfer involves the surrender of ACCUMULATION UNITS in one
SUBACCOUNT and the purchase of ACCUMULATION UNITS in the other SUBACCOUNT. A
transfer will be done using the respective ACCUMULATION UNIT values determined
at the end of the VALUATION DATE on which the transfer request is received. We
reserve the right to impose a $10 fee for transfers after the first 12 times
during a CONTRACT YEAR.
The minimum amount that may be transferred between subaccounts is $100 per
SUBACCOUNT. If the transfer from a SUBACCOUNT would leave you with less than $50
in the SUBACCOUNT, we may transfer the entire balance of the SUBACCOUNT.
Transfers will also be subject to any restrictions that may be imposed by the
funds themselves.
A transfer request may be made in writing to our Servicing Office.
When thinking about a transfer of ANNUITY ACCOUNT VALUE, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time. LNY may
refuse to permit more than twelve transfers in any year and may modify the
transfer provisions of the contract. This contract is not designed for
professional market timing organizations or other entities using programmed and
frequent transfers.
Repeated patterns of frequent transfers are disruptive to the operation of the
sub-accounts, and should LNY become aware of such disruptive practices, LNY may
refuse to permit more than 12 transfers in any year and may modify the transfer
provisions of the contract.
We may delay transfer as permitted by the 1940 Act.
TRANSFERS TO AND FROM A FIXED ACCOUNT ON OR BEFORE THE ANNUITY DATE
You may transfer all or any part of the ANNUITY ACCOUNT VALUE from the
SUBACCOUNT(S) to the fixed side of the contract. The minimum amount which can be
transferred to a fixed account is $2,000 or the total amount in the
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SUBACCOUNT if less than $2,000. However, if a transfer from a SUBACCOUNT would
leave you with less than $50 in the SUBACCOUNT, we may transfer the total amount
to the fixed side of the contract.
You may also transfer all or any part of the ANNUITY ACCOUNT VALUE from a fixed
account to the various SUBACCOUNT(S) subject to the following restrictions:
(1) the sum of the percentages of a fixed account transferred is limited to 15%
of the value of that fixed account in any contract year and, (2) the minimum
amount transferred is $2,000 (or the amount in the fixed account, if less).
Currently, there is no charge to you for a transfer. However, we reserve the
right to impose a charge in the future for any transfers in excess of 12 times
per contract year. Transfers of all or a portion of a fixed account (other than
dollar cost averaging) may be subject to a MVA.
We may delay transfer as permitted by the 1940 Act.
TRANSFERS AFTER THE ANNUITY DATE
You may transfer all or a portion of your investment in one SUBACCOUNT to
another SUBACCOUNT in the VAA or to the fixed side of the contract. Those
transfers will be limited to three times per CONTRACT YEAR. Currently, there is
no charge for those transfers. However, we reserve the right to impose a charge.
NO TRANSFERS ARE ALLOWED FROM THE FIXED SIDE OF THE CONTRACT TO THE SUBACCOUNTS.
DEATH BENEFIT BEFORE THE ANNUITY DATE
You may designate a BENEFICIARY during your lifetime and change the BENEFICIARY
by filing a written request with our Servicing Office. Each change of
beneficiary revokes any previous designation. We reserve the right to request
that you send us the contract for endorsement of a change of BENEFICIARY.
If you die before the annuity date, the DEATH BENEFIT will be equal to the
greatest of: the VALUE for the valuation period during which the death benefit
election becomes effective; the sum of all PREMIUM PAYMENTS less the sum of all
withdrawals; or the highest ANNUITY ACCOUNT VALUE as of any contract anniversary
occurring on or before the CONTRACTOWNER'S 80th birthday, adjusted for any
subsequent PREMIUM PAYMENTS, withdrawals and charges made since the contract
anniversary.
On or after your 89th birthday, the amount of any DEATH BENEFIT will be the
greater of: the ANNUITY ACCOUNT VALUE for the valuation period during which the
death benefit election becomes effective; or the sum of all PREMIUM PAYMENTS
less the sum of all withdrawals.
The amount of the DEATH BENEFIT will be determined as of the date on which we
receive all of the following requirements: (1) proof, satisfactory to us, of the
death of the CONTRACTOWNER; (2) written election of a method of settlement; and
(3) our receipt of any other required claim forms, fully completed.
Unless you have already selected a settlement option, the BENEFICIARY may elect
to receive payment of the DEATH BENEFIT either in the form of a lump settlement
or an annuity payout.
If a lump sum settlement is requested, the proceeds will be mailed within seven
days of receipt of satisfactory claim documentation as discussed previously,
subject to laws and regulations governing payment of DEATH BENEFITS. If an
election has not been made by the end of a 60-day period, a lump sum settlement
will be made to the BENEFICIARY at that time. This payment may be postponed as
permitted by the 1940 Act.
We will follow the applicable laws and regulations governing payment of DEATH
BENEFITS.
Unless otherwise provided in the BENEFICIARY designation, one of the following
procedures will take place on the death of a BENEFICIARY.
1. The interest of any BENEFICIARY who dies before the CONTRACTOWNER will go to
any other BENEFICIARIES named, according to their respective interests (there
are no restrictions on the BENEFICIARY'S use of the proceeds); and/ or
2. If no BENEFICIARY survives the CONTRACTOWNER, the proceeds will be paid to
the CONTRACTOWNER'S estate.
The DEATH BENEFIT payable to the BENEFICIARY must be distributed within five
years after the contractowner dies unless the BENEFICIARY begins receiving it
within one year of the CONTRACTOWNER'S death in the form of a life annuity over
an annuity for a designated period not extending beyond the BENEFICIARY'S life
expectancy. This payment may be postponed as permitted by the 1940 Act.
If the BENEFICIARY is the spouse of the CONTRACTOWNER, then the spouse may elect
to continue as owner. If the CONTRACTOWNER is a corporation or other
non-individual (non-natural person), the death of the annuitant will be treated
as death of the CONTRACTOWNER and the above distribution rules will apply.
DEATH OF ANNUITANT
If the ANNUITANT dies before the ANNUITY DATE, and the annuitant is not the
CONTRACTOWNER, then the CONTRACTOWNER (if a natural person) may select a new
ANNUITANT. The CONTRACTOWNER will become the new ANNUITANT until a new person
has been selected. If the CONTRACTOWNER is not a natural person, then the death
benefit will be based on the ANNUITANT and will be paid upon due proof of the
ANNUITANT'S death.
If the ANNUITANT dies after the ANNUITY DATE, the death benefit, if any, will be
paid based on the annuity option selected. LNY will require proof of the
ANNUITANT'S death. Under any option providing for guaranteed payouts, the number
of payouts which remain unpaid at the date of
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the ANNUITANT'S death (or surviving ANNUITANT'S death in the case of a joint
life annuity) will be paid to your BENEFICIARY as payouts become due.
SURRENDERS AND WITHDRAWALS
Before the ANNUITY DATE, we will allow the surrender of the contract or a
withdrawal of the ANNUITY ACCOUNT upon your written request, subject to the
rules discussed below. Surrender or withdrawal rights after the ANNUITY DATE
depend upon the annuity option you select.
The amount available upon the surrender/withdrawal is the cash surrender value
(ANNUITY ACCOUNT, plus or minus any market value adjustment, less any applicable
surrender charges, account fees and premium tax charges) at the end of the
VALUATION PERIOD during which the written request for surrender/withdrawal is
received at our Servicing Office. Unless a request for withdrawal specifies
otherwise, withdrawals will be made from all SUBACCOUNTS within the VAA and from
the fixed account in the same proportion that the amount of withdrawal bears to
the total ANNUITY ACCOUNT. As long as surrender charges apply, the maximum
amount which can be withdrawn is 15% of your PREMIUM PAYMENTS per contract year
without incurring any surrender charges and the remaining ANNUITY ACCOUNT VALUE
must be at least $1,000. Unless prohibited, surrender/withdrawal payments will
be mailed within seven days after we receive a valid written request at the
Servicing Office. The payment may be postponed as permitted by the 1940 Act.
The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax matters.
We may terminate the contract, if your PREMIUM PAYMENT frequency or your ANNUITY
ACCOUNT VALUE falls below New York's minimum standards.
DELAY OF PAYMENTS
Contract proceeds from the VAA will be paid within seven days, except (i) when
the NYSE is closed (except weekends and holidays); (ii) times when the market
trading is restricted or the SEC declares an emergency, and we cannot value
units or the funds cannot redeem shares; or (iii) when the SEC so orders to
protect CONTRACTOWNERS.
REINVESTMENT PRIVILEGE
You may, only once, elect to make a reinvestment purchase with any part of the
proceeds of a surrender/withdrawal, and we will recredit the
surrender/withdrawal charges previously deducted. You must make this election
within 30 days of the date of the surrender/withdrawal, and the repurchase must
be of a contract covered by this Prospectus. You must represent that the
proceeds being used to make the purchase have retained their tax-favored status
under an arrangement for which the contracts offered by this Prospectus are
designed. The number of ACCUMULATION UNITS which will be credited when the
proceeds are reinvested will be based on the value of the ACCUMULATION UNIT(S)
on the next VALUATION DATE. This computation will occur following receipt of the
proceeds and request for reinvestment at the Servicing Office. You may use the
reinvestment privilege only once. For tax reporting purposes, we will treat a
surrender/withdrawal and a subsequent reinvestment purchase as separate
transactions. You should consult a tax advisor before you request a
surrender/withdrawal or subsequent reinvestment purchase.
AMENDMENT OF CONTRACT
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. Any changes are
subject to prior approval by the New York Superintendent of Insurance. You will
be notified in writing of any changes, modifications or waivers.
COMMISSIONS
The commissions paid to dealers are a maximum of 7.0% of each PREMIUM PAYMENT.
In some instances, commissions on deposits may be lowered by as much as 2.50%
and replaced by a commission of up to .65% of annual ANNUITY ACCOUNT VALUES. LNY
will incur all other promotional or distribution expenses associated with the
marketing of the contracts. These commissions are not deducted from PREMIUM
PAYMENTS or ANNUITY ACCOUNT VALUE, they are paid by us.
OWNERSHIP
The Owner on the date of issue will be the person designated in the contract
specifications. If no owner is designated, the annuitants(s) will be the owner.
The owner may name a Joint Owner. Joint owner(s) shall be treated as having
equal, individed interests in the contract, including rights of survivorship.
Either joint owner, independently of the other, may exercise any ownership
rights in the contract.
As CONTRACTOWNER, you have all rights under the contract. According to New York
law, the assets of the VAA are held for the exclusive benefit of all
CONTRACTOWNERS and their designated BENEFICIARIES; and the assets of the VAA are
not chargeable with liabilities arising from any other business that we may
conduct. Qualified CONTRACTS may not be assigned or transferred except as
permitted by the Employee Retirement Income Security Act of 1974 (ERISA) and
upon written notification to us. Non-qualified CONTRACTS may not be collaterally
assigned. We assume no responsibility for the validity or effect of any
assignment. An assignment affects the death benefit calculated under the
contract. Consult your tax advisor about the tax consequences of an assignment.
For non-qualified contracts, in accordance with Code Section 72(u), a deferred
annuity contract held by a corporation or other entity that is not a natural
person is not treated as an annuity contract for tax purposes.
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Income on the contract is treated as ordinary income received by the owner
during the taxable year. But in accordance with Code Section 72(u), an annuity
contract held by a trust or other entity as agent for a natural person is
considered held by a natural person.
CONTRACTOWNER QUESTIONS
The obligations to purchasers under the contracts are those of LNY. Questions
about your contract should be directed to us at 1-888-868-2583.
ANNUITY PAYOUTS
When you apply for a contract, you may select any ANNUITY DATE permitted by law
which must be on or before the CONTRACTOWNER'S 90th birthday. (PLEASE NOTE THE
FOLLOWING EXCEPTION: Contracts issued under qualified employee pension and
profit-sharing trusts [described in the Section 401(a) and tax exempt under
Section 501(a) of the tax code] and qualified annuity plans [described in
Section 403(a) of the tax code], including H.R. 10 trusts and plans covering
self-employed individuals and their employees, provide for annuity payouts to
start at the date and under the option specified.)
The contract provides optional forms of payouts of annuities (annuity options),
which are payable on a variable basis, fixed basis or a combination of both as
you specify. The contract provides that all or part of the ANNUITY ACCOUNT VALUE
may be used to purchase an annuity. You may elect ANNUITY PAYOUTS in monthly,
quarterly, semiannual or annual installments. If the payouts from any SUBACCOUNT
would be or become less than $50, we have the right to reduce their frequency
until the payouts are at least $50 each. Following are explanations of the
annuity options available.
ANNUITY OPTIONS
CONTRACT CALLS THIS "SETTLEMENT OPTIONS"
LIFE ANNUITY. A periodic payout during the lifetime of the ANNUITANT and ends
with the last payout before the death of the ANNUITANT. This option offers the
highest periodic payout since there is no guarantee of a minimum number of
payments or provision for a DEATH BENEFIT for BENEFICIARIES. HOWEVER, THERE IS
THE RISK UNDER THIS OPTION THAT THE RECIPIENT WOULD RECEIVE NO PAYMENTS IF THE
ANNUITANT DIES BEFORE THE DATE SET FOR THE FIRST PAYMENT; ONLY ONE PAYMENT IF
DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYMENT, AND SO ON.
LIFE ANNUITY WITH GUARANTEED PERIOD. Guaranteed periodic payouts during a
designated period, usually 10 or 20 years, which then continue throughout the
lifetime of the ANNUITANT. The guarantee period is selected by the
CONTRACTOWNER.
JOINT LIFE ANNUITY. A periodic payout during the joint lifetime of the ANNUITANT
and a joint ANNUITANT until the survivor of them dies.
JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY. A periodic payout during the joint
lifetime of the ANNUITANT and a designated joint ANNUITANT. When one of the
joint ANNUITANTS dies, the survivor receives two-thirds of the periodic payout
made when both were alive.
JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. Guaranteed periodic payouts during a
period, usually 10 or 20 years, which continue during the joint lifetime of the
ANNUITANT and a joint ANNUITANT until the survivor of them dies. The payout
continues during the lifetime of the survivor. The designated period is elected
by the CONTRACTOWNER.
JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY WITH GUARANTEED PERIOD. A periodic
payout during the joint lifetime of the ANNUITANT and a joint ANNUITANT. When
one of the joint ANNUITANTS dies, the survivor receives two-thirds of the
periodic payout made when both were alive. This option further provides that
should one or both of the ANNUITANTS die during the elected guaranteed period,
usually 10 or 20 years, full benefit payment will continue for the rest of the
guaranteed period.
LIFE ANNUITY WITH UNIT REFUND. VARIABLE ANNUITY benefit payments that will be
made for the lifetime of the ANNUITANT with the guarantee that upon death,
should (a) the number of ANNUITY UNITS purchased, as determined by dividing the
total dollar amount applied to purchase this option by the ANNUITY UNIT VALUE at
the ANNUITY DATE be greater than (b) the number of ANNUITY UNITS paid in each
variable annuity benefit payment multiplied by the number of annuity benefit
payments paid prior to death, then a refund payment equal to the number of
ANNUITY UNITS determined by (a) minus (b) will be made. The refund payment value
will be determined using the ANNUITY UNIT VALUE on the date the death claim is
approved by us and payment is made after LNY is in receipt of: (1) proof,
satisfactory to LNY, of the death; (2) written authorization for payment; and
(3) all claim forms, fully completed.
LIFE ANNUITY WITH CASH REFUND. Fixed ANNUITY benefit payments that will be made
for the lifetime of the ANNUITANT with the guarantee that upon death, should
(a) the total dollar amount applied to purchase this option be greater than
(b) the fixed annuity benefit payment multiplied by the number of ANNUITY
benefit payments paid prior to death, then a refund payment
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equal to the dollar amount of (a) minus (b) will be made after LNY is in receipt
of: (1) proof, satisfactory to LNY, of the death; (2) written authorization for
payment; and (3) all claim forms, fully completed.
GENERAL INFORMATION
Under the options listed above, you may not make withdrawals. We may make
available other options, with or without withdrawal features. Options are only
available to the extent they are consistent with the requirements of the
contract as well as Sections 72(s) and 401(a)(9) of the Code, if applicable. We
will assess the mortality and expense risk charge and the charge for
administrative services on all variable ANNUITY PAYOUTS, including options that
do not have a life contingency and therefore no mortality risk.
The ANNUITY DATE must be on or before the CONTRACTOWNER'S 90th birthday. You may
change the ANNUITY DATE, change the annuity option or change the allocation of
the investment among SUBACCOUNTS up to 30 days before the scheduled ANNUITY
DATE, upon written notice to the Servicing Office. You must give us at least 30
days notice before the date on which you want payouts to begin. If you have not
already chosen an annuity payout option, the BENEFICIARY of the death benefit
may choose any annuity payout option.
Unless you select another option, the contract automatically provides for a life
annuity with ANNUITY PAYOUTS guaranteed for 10 years (on a fixed, variable or
combination fixed and variable basis, in proportion to the account allocation at
the time of annuitization) except when a joint life payout is required by law.
Under any option providing for guaranteed period payouts, the number of payouts
which remain unpaid at the date of the ANNUITANT'S death (or surviving
ANNUITANT'S death in case of joint life annuity) will be paid to your
BENEFICIARY as payouts become due.
VARIABLE ANNUITY PAYOUTS
Variable ANNUITY PAYOUTS will be determined using:
1. The ANNUITY ACCOUNT VALUE on the ANNUITY DATE;
2. The annuity purchase rate tables contained in the contract;
3. The annuity option selected; and
4. The investment performance of the fund(s) selected.
To determine the amount of variable payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of ANNUITY UNITS equal to the
first periodic payout divided by the ANNUITY UNIT value; and
3. Calculate the value of the ANNUITY UNITS each period thereafter.
We assume an investment return of 4% per year, as applied to the applicable
mortality table. The amount of each variable payout after the initial payout
will depend upon how the underlying fund(s) perform, relative to the 4% assumed
rate. If the actual net investment rate (annualized) exceeds 4%, the variable
annuity payout will increase at a rate proportional to the amount of such
excess. Conversely, if the actual rate is less than 4%, annuity variable payouts
will decrease. There is a more complete explanation of this calculation in the
SAI.
FIXED SIDE OF THE CONTRACT
PREMIUM PAYMENTS allocated to the fixed side of the contract become part of
LNY'S general account, and DO NOT participate in the investment experience of
the VAA. The general account is subject to regulation and supervision by the New
York Insurance Department.
In reliance on certain exemptions, exclusions and rules, LNY has not registered
interests in the general account as a security under the Securities Act of 1933
and has not registered the general account as an investment company under the
1940 Act. Accordingly, neither the general account nor any interests in it are
regulated under the 1933 Act or the 1940 Act. LNY has been advised that the
staff of the SEC has not made a review of the disclosures which are included in
this Prospectus which relate to our general account and to the fixed account
under the contract. These disclosures, however, may be subject to certain
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in Prospectuses. This Prospectus is generally
intended to serve as a disclosure document only for aspects of the contract
involving the VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of the
contract are in the contract.
GUARANTEED PERIODS
The owner may allocate PREMIUM PAYMENTS to one or more fixed accounts with
guaranteed periods of 1, 3, 5, 7, or 10 years. LNY may offer a fixed account for
a period of less than one year for the purpose of dollar cost averaging. Each
PREMIUM PAYMENT allocated to a fixed account will start its own guaranteed
period and will earn a guaranteed interest rate. The duration of the guaranteed
period affects the guaranteed interest rate of the fixed account. A fixed
account guarantee period ends on the date after the number of calendar years in
the fixed account's guaranteed period. Interest will be credited daily at a
guaranteed rate that is equal to the compound annual rate determined on the
first day of the fixed
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account guaranteed period. Amounts transferred or withdrawn from a fixed account
prior to the end of the guaranteed period will be subject to the MVA. Each
guaranteed period PREMIUM PAYMENT amount will be treated separately for purposes
of determining any applicable market value adjustment. Any amount withdrawn from
a fixed account may be subject to any applicable surrender charges, account fees
or premium taxes.
LNY will notify the CONTRACTOWNER in writing at least 15 but not more than 45
days prior to the expiration date for any guaranteed period amount. A new fixed
account guaranteed period of the same duration as the previous fixed account
guaranteed period will begin automatically at the end of the previous guaranteed
period, unless LNY receives, prior to the end of a guaranteed period, a written
election by the contractowner. The written election may request the transfer of
the guaranteed period amount to a different fixed account or to a variable
subaccount from among those being offered by LNY. Transfers of any guaranteed
period amount which become effective upon the date of expiration of the
applicable guaranteed period are not subject to the limitation of twelve
transfers per CONTRACT YEAR or the additional fixed account transfer
restrictions.
MARKET VALUE ADJUSTMENT
Any surrender or transfer of a fixed account guaranteed period amount before the
end of the guaranteed period (other than Dollar Cost Averaging transfers) will
be subject to a market value adjustment (MVA). A surrender or transfer effective
upon the expiration date of the guaranteed period will not be subject to an MVA.
The MVA will be added to the amount being surrendered or transferred. The MVA
will be added after the deduction of any applicable account fees and before any
applicable surrender or transfer charges. In general, the MVA reflects the
relationship between the index rate in effect at the time a PREMIUM PAYMENT is
allocated to a fixed account's guaranteed period under the contract and the
index rate in effect at the time of the PREMIUM PAYMENT'S surrender or transfer.
It also reflects the time remaining in the fixed account's guaranteed period. If
the index rate at the time of the surrender or transfer is lower than the index
rate at the time the PREMIUM PAYMENT was allocated, then the addition of the MVA
will generally result in a higher payment at the time of the surrender or
transfer. Similarly, if the index rate at the time of surrender or transfer is
higher than the index rate at the time of the allocation of the PURCHASE
PAYMENT, then the application of the MVA will generally result in a lower
payment at the time of the surrender or transfer.
The amount of the MVA is calculated by multiplying the dollar amount of the cash
withdrawal or transfer by the following amount:
1 subtracted from the result of (1 + a)TO THE POWER OF n divided by (1 + b)TO
THE POWER OF n , where:
a = The yield rate for a Treasury security with time to maturity equal to the
Guaranteed Period, determined at the beginning of the Guaranteed Period.
b = The yield rate for a Treasury security with time to maturity equal to
Guaranteed Period, determined at the time of transfer or withdrawal plus, if
yield rates "a" and "b" differ by more than 0.25%, 0.25%. This adjustment builds
into the formula a factor representing direct and indirect costs to LNY
associated with liquidating general account assets in order to satisfy surrender
requests. This adjustment of 0.25% has been added to the denominator of the
formula because it is anticipated that a substantial portion of applicable
general account portfolio assets will be in relatively illiquid securities.
Thus, in addition to direct transaction costs, if such securities must be sold
(e.g., because of surrenders), the market price may be lower. As used herein
"The yield rate for a Treasury security" means the applicable yield rate for
United States Treasury Bonds, Notes or Bills as published in the Wall Street
Journal. If such yields are no longer published, the Company will substitute an
appropriate index of publicly traded obligations subject to approval by the
Superintendent of Insurance of the State of New York. Straight-line
interpolation is used for periods to maturity not quoted.
n = The number of years, including fractional years, remaining in the
Guaranteed Period (e.g. 1 year and 73 days = 1 + (73 divided by 365) =
1.2 years)
We guarantee an interest rate of not less than 3.0% per year on amounts held in
a fixed account. Any amount withdrawn from or transferred out of a fixed account
prior to the expiration of the guaranteed period is subject to a MVA (see Market
value adjustment below) and Charges and other deductions -- Surrender charge.
The Market Value Adjustment will NOT reduce the amount available for a
surrender, withdrawal or transfer to an amount less than the initial amount
allocated or transferred to a fixed account plus interest of 3.0% per year, less
surrender charges and account fees, if any.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE AT LNY'S SOLE
DISCRETION, CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0% WILL
BE DECLARED.
20
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FEDERAL TAX MATTERS
INTRODUCTION
The Federal income tax treatment of the contract is complex and sometimes
uncertain. The Federal income tax rules may vary with your particular
circumstances. This discussion does not include all the Federal income tax rules
that may affect you and your contract. This discussion also does not address
other Federal tax consequences or state or local tax consequences, associated
with the contract. As a result, you should always consult a tax adviser about
the application of tax rules to your individual situation.
TAXATION OF NONQUALIFIED ANNUITIES
This part of the discussion describes some of the Federal income tax rules
applicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan receiving special tax
treatment under the tax law, such as an IRA.
TAX DEFERRAL ON EARNINGS
The Federal income tax law generally does not tax any increase in your contract
value until you receive a contract distribution. However, for this general rule
to apply, certain requirements must be satisfied:
- - An individual must own the contract (or the tax law must treat the contract as
owned by an individual).
- - The investments of the VAA must be "adequately diversified" in accordance with
IRS regulations.
- - Your right to choose particular investments for a contract must be limited.
- - The ANNUITY DATE must not occur near the end of the ANNUITANT'S life
expectancy.
CONTRACTS NOT OWNED BY AN INDIVIDUAL
If a contract is owned by an entity (rather than an individual), the tax law
generally does not treat it as an annuity contract for Federal income tax
purposes. This means that the entity owning the contract pays tax currently on
the excess of the contract value over the purchase payments for the contract.
Examples of contracts where the owner pays current tax on the contract's
earnings are contracts issued to a corporation or a trust. Exceptions to this
rule exist. For example, the tax law treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a contract to provide deferred compensation for its
employees.
INVESTMENTS IN THE VAA MUST BE DIVERSIFIED
For a contract to be treated as an annuity for Federal Income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations define
standards for determining whether the investments of the VAA are adequately
diversified. If the VAA fails to comply with these diversification standards,
you could be required to pay tax currently on the excess of the CONTRACT VALUE
over the contract PREMIUM PAYMENTS. Although we do not control the investments
of the underlying investment options, we expect that the underlying investment
options will comply with the IRS regulations so that the VAA will be considered
"adequately diversified."
RESTRICTIONS
Federal income tax law limits your right to choose particular investments for
the contract. Because the IRS has not issued guidance specifying those limits,
the limits are uncertain and your right to allocate ANNUITY ACCOUNT VALUES among
the SUBACCOUNTS may exceed those limits. If so, you would be treated as the
owner of the assets of the VAA and thus subject to current taxation on the
income and gains from those assets. We do not know what limits may be set by the
IRS in any guidance that it may issue and whether any such limits will apply to
existing contracts. We reserve the right to modify the contract without your
consent to try to prevent the tax law from considering you as the owner of the
assets of the VAA.
AGE AT WHICH ANNUITY PAYOUTS BEGIN
Federal income tax rules do not expressly identify a particular age by which
ANNUITY PAYOUTS must begin. However, those rules do require that the annuity
contract provide for amortization, through ANNUITY PAYOUTS, of the contract's
PREMIUM PAYMENTS and earnings. If ANNUITY PAYOUTS under the contract begin or
are scheduled to begin on a date past the ANNUITANT'S 85th birthday, it is
possible that the tax law will not treat the contract as an annuity for Federal
income tax purposes. In that event, you would be currently taxable on the excess
of the ANNUITY ACCOUNT VALUE over the PREMIUM PAYMENTS of the contract.
TAX TREATMENT OF PAYMENTS
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
your contract will be treated as an annuity for Federal income tax purposes and
that the tax law will not tax any increase in your ANNUITY ACCOUNT VALUE until
there is a distribution from your contract.
TAXATION OF WITHDRAWALS AND SURRENDERS
You will pay tax on withdrawals to the extent your ANNUITY ACCOUNT VALUE exceeds
your PREMIUM PAYMENTS in
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the contract. This income (and all other income from your contract) is
considered ordinary income. A higher rate of tax is paid on ordinary income than
on capital gains. You will pay tax on a surrender to the extent the amount you
receive exceeds your PREMIUM PAYMENTS. In certain circumstances, your PREMIUM
PAYMENTS are reduced by amounts received from your contract that were not
included in income.
TAXATION OF ANNUITY PAYOUTS
The tax law imposes tax on a portion of each ANNUITY PAYOUT (at ordinary income
tax rates) and treats a portion as a nontaxable return of your PREMIUM PAYMENTS
in the contract. We will notify you annually of the taxable amount of your
ANNUITY PAYOUT. Once you have recovered the total amount of the PREMIUM PAYMENTS
in the contract, you will pay tax on the full amount of your ANNUITY PAYOUTS. If
ANNUITY PAYOUTS end because of the ANNUITANT'S death and before the total amount
of the PREMIUM PAYMENTS in the contract has been received, the amount not
received generally will be deductible.
TAXATION OF DEATH BENEFITS
We may distribute amounts from your contract because of the death of a
CONTRACTOWNER or an ANNUITANT. The tax treatment of these amounts depends on
whether you or the ANNUITANT dies before or after the ANNUITY DATE.
- - Death prior to the ANNUITY DATE
- If the beneficiary receives DEATH BENEFITS under an ANNUITY PAYOUT option,
they are taxed in the same manner as ANNUITY PAYOUTS.
- If the BENEFICIARY does not receive DEATH BENEFITS under an ANNUITY PAYOUT
option, they are taxed in the same manner as a withdrawal.
- - Death after the ANNUITY DATE
- If DEATH BENEFITS are received in accordance with the existing ANNUITY
PAYOUT option, they are excludible from income if they do not exceed the
PURCHASE PAYMENTS not yet distributed from the contract. All ANNUITY
PAYOUTS in excess of the PURCHASE PAYMENTS not previously received are
included in income.
- If DEATH BENEFITS are received in a lump sum, the tax law imposes tax on
the amount of DEATH BENEFITS which exceeds the amount of PREMIUM PAYMENTS
not previously received.
PENALTY TAXES PAYABLE ON WITHDRAWALS, SURRENDERS OR ANNUITY PAYOUTS
The tax law may impose a 10% penalty tax on any distribution from your contract
which you must include in your gross income. The 10% penalty tax does not apply
if one of several exceptions exists. These exceptions include withdrawals,
surrenders or ANNUITY PAYOUTS that:
- - You receive on or after you reach age 59 1/2,
- - You receive because you became disabled (as defined in the tax law),
- - A beneficiary receives on or after your death, or
- - You receive as a series of substantially equal periodic payments for your life
(or life expectancy).
SPECIAL RULES IF YOU OWN MORE THAN ONE ANNUITY CONTRACT
In certain circumstances, you must combine some or all of the nonqualified
annuity contracts you own in order to determine the amount of an ANNUITY PAYOUT,
a surrender or a withdrawal that you must include in income. For example, if you
purchase two or more deferred annuity contracts from the same life insurance
company (or its affiliates) during any calendar year the tax law treats all such
contracts as one contract. Treating two or more contracts as one contract could
affect the amount of a surrender, a withdrawal or an ANNUITY PAYOUT that you
must include in income and the amount that might be subject to the penalty tax
described above.
LOANS AND ASSIGNMENTS
Except for certain qualified contracts, the tax law treats any amount received
as a loan under a contract, and any assignment or pledge (or agreement to assign
or pledge) any portion of your ANNUITY ACCOUNT VALUE, as a withdrawal of such
amount or portion.
GIFTING A CONTRACT
If you transfer ownership of your contract to a person other than your spouse
(or to your former spouse incident to divorce), and receive a payment less than
your contract's value to the extent that it exceeds your PREMIUM PAYMENTS not
previously received, the new owner's PREMIUM PAYMENTS in the contract would then
be increased to reflect the amount included in your income.
LOSS OF INTEREST DEDUCTION
After June 8, 1997, if a contract is issued to a taxpayer that is not an
individual, or if a contract is held for the benefit of an entity, the entity
will lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
ANNUITY ACCOUNT VALUE. Entities that are considering purchasing a contract, or
entities that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
QUALIFIED RETIREMENT PLANS
We have also designed the contracts for use in connection with certain types of
retirement plans that receive favorable treatment under the tax law. Contracts
issued to or in connection with a qualified retirement plan are called
"qualified contracts". We issue contracts for use
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with different types of qualified plans. The Federal income tax
rules applicable to those plans are complex and varied. As a result, this
Prospectus does not attempt to provide more than general information about use
of the contract with the various types of qualified plans. Persons planning to
buy the contract in connection with a qualified plan should obtain advice from a
competent tax advisor.
TYPES OF QUALIFIED CONTRACTS AND TERMS OF CONTRACTS
Currently, we issue contracts in connection with the following types of
qualified plans:
- - Individual Retirement Accounts and Annuities
("Traditional IRAs")
Subject to the approval of the New York Superintendent of Insurance, we intend
to make available contracts in connection with the following types of qualified
plans:
- - Roth IRAs
- - Public school system and tax-exempt organization annuity plans ("403(b)
plans")
We may in the future issue contracts in connection with the following types of
qualified plans:
- - Simplified Employee Pensions ("SEPs")
- - Savings Incentive Matched Plan for Employees
("Simple 401(k) plans")
- - Qualified corporate employee pension and profit sharing plans ("401(a)") and
qualified annuity plans ("403(a) plans")
- - Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans")
- - Deferred compensation plans of state and local governments and tax-exempt
organizations ("457 plans")
We may issue contracts for use with other types of qualified plans in the
future.
We will amend contracts to be used with a qualified plan as generally necessary
to conform to tax law requirements for the type of plan. However, the rights of
a person to any qualified plan benefits may be subject to the plan's terms and
conditions, regardless of the contract's terms and conditions. In addition, we
are not bound by the terms and conditions of qualified plans to the extent such
terms and conditions contradict the contract, unless we consent.
TAX TREATMENT OF QUALIFIED CONTRACTS
The Federal income tax rules applicable to qualified plans and qualified
contracts vary with the type of plan and contract. For example,
- - Federal tax rules limit the amount of PREMIUM PAYMENTS that can be made and
the tax deduction or exclusion that may be allowed for the PREMIUM PAYMENTS.
These limits vary depending on the type of qualified plan and the plan
participant's specific circumstances, e.g., the participant's compensation.
- - Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the
ANNUITANT must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum
distribution rules" do not apply to a Roth IRA.
- - Loans are allowed under certain types of qualified plans, but Federal income
tax rules permit loans under some section 403(b) plans, but prohibit loans
under Traditional and Roth IRAs. If allowed, loans are subject to a variety of
limitations, including restrictions as to the loan amount, the loan duration,
and the manner of repayment. Your contract or plan may not permit loans.
TAX TREATMENT OF PAYMENTS
Federal income tax rules generally include distributions from a qualified
contract in the recipient's income as ordinary income. These taxable
distributions will include PREMIUM PAYMENTS that were deductible or excludible
from income. Thus, under many qualified contracts the total amount received is
included in income since a deduction or exclusion from income was taken for
PREMIUM PAYMENTS. There are exceptions. For example, you do not include amounts
received from a Roth IRA in income if certain conditions are satisfied.
Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax generally equals 50% of the amount by which a
minimum required distribution exceeds the actual distribution from the qualified
plan.
FEDERAL PENALTY TAXES PAYABLE ON DISTRIBUTIONS
The tax law may impose a 10% penalty tax on the amount received from the
qualified contract that must be included in income. The tax law does not impose
the penalty tax if one of several exceptions applies. The exceptions vary
depending on the type of qualified contract you purchase. For example, in the
case of an IRA, exceptions provide that the penalty tax does not apply to a
withdrawal, surrender or ANNUITY PAYOUT:
- - received on or after the annuitant reaches age 59 1/2,
- - received on or after the ANNUITANT'S death or because of the ANNUITANT'S
disability (as defined in the tax law),
- - received as a series of substantially equal periodic payments for the
ANNUITANT'S life or (life expectancy), or
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- - received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
TRANSFERS AND DIRECT ROLLOVERS
In many circumstances, money may be moved between qualified contracts and
qualified plans by means of a rollover or a transfer. Special rules apply to
such rollovers and transfers. If the applicable rules are not followed, you may
suffer adverse Federal income tax consequences, including paying taxes which
might not otherwise have had to be paid. A qualified advisor should always be
consulted before you move or attempt to move funds between any qualified plan or
contract and another qualified plan or contract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs or section 457 plans).
The direct rollover rules require that we withhold Federal income tax equal to
20% of the eligible rollover distribution from the distribution amount unless
you elect to have the amount directly transferred to certain qualified plans or
contracts. Before we send a rollover distribution, we will provide the recipient
with a notice explaining these requirements and how the 20% withholding can be
avoided by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless the distributee notifies us at or
before the time of distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender or ANNUITY PAYOUT is requested, we will give the
recipient an explanation of the withholding requirements.
TAX STATUS OF LINCOLN NEW YORK
Under existing Federal income tax laws, LNY does not pay tax on investment
income and realized capital gains of the VAA. LNY does not expect that it will
incur any Federal income tax liability on the income and gains earned by the
VAA. We, therefore, do not impose a charge for Federal income taxes. If Federal
income tax law changes and we must pay tax on some or all of the income and
gains earned by the VAA, we may impose a charge against the VAA to pay the
taxes.
CHANGES IN THE LAW
The above discussion is based on the tax law existing on the date of this
Prospectus. However, Congress, the IRS and the courts may modify these
authorities, sometimes retroactively.
VOTING RIGHTS
As required by law, we will vote the fund shares held in the VAA at meetings of
the shareholders of the fund. The voting will be done according to the
instructions of CONTRACTOWNERS who have interests in the SUBACCOUNTS which
invest in classes of funds. If the 1940 Act or any regulation under it should be
amended or if present interpretations should be amended or if present
interpretations should change, and if as a result we determine that we are
permitted to vote the fund shares in our own right, we may elect to do so.
The number of votes which you have the right to cast will be determined by
applying your percentage interest in a SUBACCOUNT to the total number of votes
attributable to the SUBACCOUNT. In determining the number of votes, fractional
shares will be recognized.
Fund shares of a class held in a SUBACCOUNT for which no timely instructions are
received will be voted by us in proportion to the voting instructions which are
received for all contracts participating in that SUBACCOUNT. Voting instructions
to abstain on any item to be voted on will be applied on a pro-rata basis to
reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, each person having a voting interest
in a SUBACCOUNT will receive proxy voting material, reports and other materials
relating to the trust. Since the fund engages in shared funding, other persons
or entities besides LNY may vote fund shares. See Sale of fund shares by the
fund.
DISTRIBUTION OF THE CONTRACTS
LINCOLN FINANCIAL ADVISORS CORPORATION ("LFA"), an Indiana corporation
registered with the Securities and Exchange Commission as a broker-dealer, is
the distributor and principal underwriter of the contracts. Under an agreement
with LFA, Delaware Distributors, L.P. ("DDLP") will act as wholesaler and will
assist LFA in forming the selling group. DDLP will also perform certain
enumerated marketing and ancillary functions in support of the selling group.
The contracts will be sold by LFA registered representatives and by properly
licensed registered representatives of independent broker-dealers which in turn
have selling agreements with LFA and have been licensed by state insurance
departments to represent us. LNY will offer the contracts in New York only.
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<PAGE>
RETURN PRIVILEGE
Within the 10-day free-look period after you receive the contract, you may
cancel it for any reason by delivering or mailing it postage prepaid, to the
Servicing Office at P.O. Box 7866, Fort Wayne, Indiana, 46801. A contract
canceled under this provision will be void. With respect to the fixed portion of
a contract, we will return PREMIUM PAYMENTS. With respect to the VAA, except as
explained in the following paragraph, we will return the ANNUITY ACCOUNT VALUE
as of the date of receipt of the cancellation, plus any premium taxes which had
been deducted. No surrender charge will be assessed. A PURCHASER WHO
PARTICIPATES IN THE VAA IS SUBJECT TO THE RISK OF A MARKET LOSS DURING THE
FREE-LOOK PERIOD.
STATE REGULATION
As a life insurance company organized and operated under New York law, we are
subject to provisions governing life insurers and to regulation by the New York
Superintendent of Insurance.
Our books and accounts are subject to review and examination by the New York
Insurance Department at all times. A full examination of our operations is
conducted by that Department at least every five years.
RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
will enter into an agreement with the Delaware Management Holdings Company,
Inc., 2005 Market Street, Philadelphia, PA 19203, that provides accounting
services to the VAA. We will mail to you, at your last known address of record
at the Servicing Office, at least semiannually after the first contract year,
reports containing information required by that Act or any other applicable law
or regulation. Administration services necessary for the operation of the VAA
and the contracts are currently provided by Lincoln Life. However, neither the
assets of Lincoln Life nor the assets of LNC support the obligations of LNY
under the contracts.
OTHER INFORMATION
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further information
about the VAA, LNY and the contracts offered. Statements in this Prospectus
about the content of contracts and other legal instruments are summaries. For
the complete text of those contracts and instruments, please refer to those
documents as filed with the SEC.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services for individually
sold life insurance and annuities.
25
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STATEMENT OF ADDITIONAL
INFORMATION TABLE OF
CONTENTS FOR LINCOLN
NEW YORK ACCOUNT N
FOR VARIABLE ANNUITIES (REGISTRANT)
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
(DEPOSITOR)
<TABLE>
<S> <C>
ITEM Page
---------------------------------------------
Lincoln Life & Annuity Company of
New York B-2
---------------------------------------------
Special terms B-2
---------------------------------------------
Services B-2
---------------------------------------------
Principal underwriter B-2
ITEM Page
---------------------------------------------
Purchase of securities being offered B-2
---------------------------------------------
Calculation of investment results B-2
---------------------------------------------
Annuity payouts B-6
---------------------------------------------
Advertising and sales literature B-6
---------------------------------------------
Financial statements B-9
</TABLE>
<PAGE>
[LOGO]
<TABLE>
<S> <C>
LINCOLN NEW YORK CHOICEPLUS-SM- VARIABLE ANNUITY IS ISSUED
AND DISTRIBUTED BY LFA (FORM AN426NY), AND WHOLESALED BY
P-CP SAI DELAWARE DISTRIBUTORS, L.P.
</TABLE>
<PAGE>
LINCOLN NEW YORK
ACCOUNT N FOR VARIABLE ANNUITIES (REGISTRANT)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK (DEPOSITOR)
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This SAI should be read along with the Prospectus of Lincoln New York Account N
for Variable Annuities (Lincoln New York ChoicePlus) dated May , 2000. You may
obtain a copy of the Delaware-Lincoln New York ChoicePlus Prospectus on request
and without charge. Please write Lincoln New York ChoicePlus, P.O. Box 7866,
Fort Wayne, Indiana 46801 or call 1-888-868-2583.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
- ------------------------------------------
Lincoln Life & Annuity Company of
New York B-2
Special terms B-2
Services B-2
Principal underwriter B-2
</TABLE>
<TABLE>
- ------------------------------------------
<CAPTION>
ITEM PAGE
<S> <C>
Purchase of securities being offered B-2
Calculation of investment results B-2
Annuity payouts B-6
Advertising and sales literature B-6
Financial statements B-9
</TABLE>
THIS SAI IS NOT A PROSPECTUS.
The date of this SAI is May , 2000
B-1
<PAGE>
GENERAL INFORMATION AND
HISTORY OF LINCOLN LIFE &
ANNUITY COMPANY OF
NEW YORK ("LNY")
LNY is a life insurance company founded in New York on June 6, 1996. LNY is a
subsidiary of Lincoln Life. Lincoln Life is one of the largest stock life
insurance companies in the United States. Lincoln Life is owned by Lincoln
National Corp. (LNC). LNC and Lincoln Life are organized under Indiana law.
LNC's primary businesses are insurance and financial services.
SPECIAL TERMS
The special terms used in this SAI are the ones defined in the Prospectus. In
connection with the term VALUATION DATE the New York Stock Exchange is currently
closed on weekends and on these holidays: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. If any of these holidays occurs on a
weekend day, the Exchange may also be closed on the business day occurring
before or just after the holiday.
SERVICES
INDEPENDENT AUDITORS
The statutory-basis financial statements of LNY appearing in this SAI and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report also appearing elsewhere in this document
and in the Registration Statement. The financial statements audited by Ernst &
Young LLP have been included in this document in reliance on their report given
on their authority as experts in accounting and auditing.
KEEPER OF RECORDS
All accounts, books, records and other documents which are to be maintained for
the VAA are maintained by LNY or by third parties responsible to LNY. We have
entered into an agreement with Delaware Management Company, 2005 Market Street,
Philadelphia, PA 19203, to provide accounting services to the VAA. No separate
charge against the assets of the VAA is made by LNY for this service.
PRINCIPAL UNDERWRITER
LINCOLN FINANCIAL ADVISORS CORPORATION ("LFA"), an Indiana corporation
registered with the Securities and Exchange Commission as a broker-dealer, is
the principal underwriter for the contracts, which are offered continuously.
Delaware Distributors, L.P. will perform certain marketing and other ancillary
functions as described in the Prospectus.
Sales charges and exchange privileges under the contracts are described in the
Prospectus.
PURCHASE OF SECURITIES BEING OFFERED
The variable annuity contracts are offered to the public through licensed
insurance agents who specialize in selling LNY products; through independent
insurance brokers; and through certain securities brokers/dealers selected by
LNY whose personnel are legally authorized to sell annuity products. There are
no special purchase plans for any class of prospective buyers. However, under
certain limited circumstances described in the Prospectus under the section
Charges and other deductions, the contract and/or surrender charges may be
waived.
There are exchange privileges between subaccounts, and between the VAA and LNY'S
general account (see The Contract--Transfers of accumulation units between
SUBACCOUNTS in the Prospectus.) No exchanges are permitted between the VAA and
other separate accounts.
The offering of the contract is continuous.
CALCULATION OF INVESTMENT RESULTS
The paragraphs set forth below represent performance information for the VAA and
the SUBACCOUNTS calculated in several different ways.
The seven-day yield is determined by calculating the change in unit value for
the base period (the 7-day period ended December 31, 1999); then dividing this
figure by the account value at the beginning of the period; then annualizing
this result by the factor of 365/7. This yield includes all deductions charged
to the CONTRACTOWNER'S account, and excludes any realized gains and losses from
the sale of securities.
PERFORMANCE OF THE VAA AND SUBACCOUNTS
Paragraph A is commonly referred to as "standard performance" because it is the
formula used to calculate performance in accordance with that prescribed by the
B-2
<PAGE>
SEC. Under rules issued by the SEC, standard performance must be included in
certain advertising material that discusses the performance of the VAA and the
SUBACCOUNTS. Paragraph B below shows non-standard performance of the SUBACCOUNTS
over the periods indicated in the tables set forth in the paragraph, adjusted to
reflect the recurring charges and expenses associated with the contracts.
HISTORICAL PERFORMANCE DATA
MONEY MARKET SUB-ACCOUNT YIELD
There currently is no yield for the Money Market Sub-Account, as it has not
commenced operations as of the date of the Statement of Additional Information.
TOTAL RETURNS
Lincoln New York may from time to time advertise or disclose annual average
total returns for one or more of the Sub-Accounts of the Variable Account for
various periods of time. When a Sub-Account has been in operation for 1, 5 and
10 years, respectively, the total return for these periods will be provided.
Total returns for other periods of time may from time to time also be disclosed.
Total returns represent the average annual compounded rates of return that would
equate the initial amount invested to the redemption value of that investment as
of the last day of each of the periods.
Total returns will be calculated using Sub-Account Unit Values which Lincoln
Life calculates on each Valuation Period based on the performance of the
Sub-Account's underlying Fund, and the deductions for the mortality and expense
risk charge, the administrative expense charge, and the Account Fee. The Account
Fee is reflected by dividing the total amount of such charges collected during
the year that are attributable to the Variable Account by the total average net
assets of all the Variable Sub-Accounts. The resulting percentage is deducted
from the return in calculating the ending redeemable value. These figures will
not reflect any premium taxes. Total return calculations will reflect the effect
of deferred sales charges that may be applicable to a particular period. The
total return will then be calculated according to the following formula:
P(1+T)TO THE POWER OF n = ERV
Where: P = A hypothetical initial Premium Payment of $1,000.
T = Average annual total return.
n = Number of years in the period.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five or ten-year period, at the end of
the one, five or ten-year period (or fractional portion thereof).
OTHER PERFORMANCE DATA
Lincoln New York may from time to time also disclose average annual total
returns in a non-standard format in conjunction with the standard format
described above. The non-standard format will be identical to the standard one
except that the deferred sales charge percentage will be assumed to be 0%.
Lincoln New York may from time to time disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the deferred sales
charge percentage will be 0%.
CTR = (ERV/P) - 1
Where: CTR = The cumulative total return net of Sub-Account recurring charges
for the period.
ERV = The ending redeemable value of the hypothetical investment made
at the beginning of the one, five or ten-year period, at the end
of the one, five or ten-year period (or fractional portion
thereof).
P = A hypothetical initial payment of $10,000
All non-standard performance data will only be advertised if the standard
performance data is also disclosed.
Lincoln New York may also from time to time use advertising which includes
hypothetical illustrations to compare the difference between the growth of a
taxable investment and a tax-deferred investment in a variable annuity.
B-3
<PAGE>
WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT
Examples
The following example illustrates the detailed calculations for a $50,000
deposit into the fixed account with a guaranteed rate of 4.5% for a duration of
five years. The intent of the example is to show the effect of the "MVA" and the
3% minimum guarantee under various interest rates on the calculation of the cash
surrender (withdrawal) values. Any charges for optional death benefit risks are
not taken into account in the example. The effect of the MVA is reflected in the
index rate factor in column (2) and the minimum 3% guarantee is shown under
column (4) under the "Surrender Value Calculation". The "Market Value Adjustment
Tables" and "Minimum Value Calculation" contain the explicit calculation of the
index factors and the 3% minimum guarantee respectively. The "Annuity Value
Calculation" and "Minimum Value"' calculations assume the imposition of the
annual $35 account fee, but that fee is waived if the annuity account value at
the end of a contract year is $100,000 or more. The results would be slightly
different in the states where the annual fee is less than $35.
WITHDRAWAL CHARGE EXAMPLE
SAMPLE CALCULATIONS FOR MALE 35 ISSUE
CASH SURRENDER VALUES
<TABLE>
<S> <C>
Single Premium.............................................. $50,000
Premium Taxes............................................... None
Withdrawals................................................. None
Guaranteed Period........................................... 5 years
Guaranteed Interest Rate.................................... 4.50%
Annuity Date................................................ Age 70
Index Rate A................................................ 5.00%
Index Rate B................................................ 6.00% End of contract year 1
5.50% End of contract year 2
5.00% End of contract year 3
4.00% End of contract year 4
Percentage Adjustment to Index Rate B....................... 0.25%
</TABLE>
SURRENDER VALUE CALCULATION
<TABLE>
<CAPTION>
(5)
(1) (2) (3) (4) GREATER (6) (7)
ANNUITY INDEX RATE ADJUSTED MINIMUM OF SURRENDER SURRENDER
CONTRACT YEAR VALUE FACTOR ANNUITY VALUE VALUE (3) & (4) CHARGE VALUE
- ------------- -------- ---------- ------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1.................... $52,250 0.953765 $49,834 $51,500 $51,500 $3,000 $48,500
2.................... $54,601 0.978874 $53,448 $53,045 $53,448 $3,000 $50,448
3.................... $57,058 0.995255 $56,788 $54,636 $56,788 $2,500 $54,288
4.................... $59,626 1.007194 $60,055 $56,275 $60,055 $2,000 $58,055
5.................... $62,309 NA $62,309 $57,964 $62,309 $1,500 $60,809
</TABLE>
ANNUITY VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR
- -------------
<S> <C>
1........................................ $50,000 X 1.045 = $52,250
2........................................ $52,250 X 1.045 = $54,601
3........................................ $54,601 X 1.045 = $57,058
4........................................ $57,058 X 1.045 = $59,626
5........................................ $59,626 X 1.045 = $62,309
</TABLE>
B-4
<PAGE>
SURRENDER CHARGE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR SC FACTOR SURRENDER CHG
- ------------- --------- -------------
<S> <C> <C>
1........................................................... 0.06 $3,000
2........................................................... 0.06 $3,000
3........................................................... 0.05 $2,500
4........................................................... 0.04 $2,000
5........................................................... 0.03 $1,500
</TABLE>
MARKET VALUE ADJUSTMENT EXAMPLE
INTEREST RATE FACTOR CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR INDEX A INDEX B ADJ INDEX B N RESULT
- ------------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
1............................................ 5.00% 6.00% 6.25% 4 0.953765
2............................................ 5.00% 5.50% 5.75% 3 0.978874
3............................................ 5.00% 5.00% 5.00% 2 1.000000
4............................................ 5.00% 4.00% 4.25% 1 1.007194
5............................................ 5.00% N/A N/A N/A N/A
</TABLE>
MINIMUM VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR
- -------------
<S> <C>
1............................... $50,000 X 1.03 = $51,500
2............................... $51,500 X 1.03 = $53,045
3............................... $53,045 X 1.03 = $54,636
4............................... $54,636 X 1.03 = $56,275
5............................... $56,275 X 1.03 = $57,964
</TABLE>
B-5
<PAGE>
ANNUITY PAYOUTS
VARIABLE ANNUITY PAYOUTS
Variable ANNUITY PAYOUTS will be determined on the basis of: (1) the dollar
value of the contract on the ANNUITY DATE; (2) the annuity tables contained in
the CONTRACT; (3) the type of ANNUITY OPTION selected; and (4) the investment
results of the fund(s) selected. In order to determine the amount of variable
ANNUITY PAYOUTS, LNY makes the following calculation: first, it determines the
dollar amount of the first payout; second, it credits the contract with a fixed
number of ANNUITY UNITS based on the amount of the first payout; and third, it
calculates the value of the ANNUITY UNITS each period thereafter. These steps
are explained below.
The dollar amount of the first periodic variable ANNUITY PAYOUT is determined by
applying the total value of the ACCUMULATION UNITS credited under the contract
valued as of the ANNUITY DATE (less any premium taxes) to the annuity tables
contained in the contract. The first variable annuity payout will be paid 14
days after the ANNUITY DATE. This day of the month will become the day on which
all future ANNUITY PAYOUTS will be paid. Amounts shown in the tables are based
on the 1983 Table "a" Individual Annuity Mortality Tables, modified, with an
assumed investment return at the rate of 4% per annum. The first ANNUITY PAYOUT
is determined by multiplying the benefit per $1,000 of value shown in the
contract tables by the number of thousands of dollars of value accumulated under
the contract. These annuity tables vary according to the form of annuity
selected and the age of the ANNUITANT at the ANNUITY DATE. The 4% interest rate
stated above is the measuring point for subsequent ANNUITY PAYOUTS. If the
actual net investment rate (annualized) exceeds 4%, the payout will increase at
a rate equal to the amount of such excess. Conversely, if the actual rate is
less than 4%, ANNUITY PAYOUTS will decrease. If the assumed rate of interest
were to be increased, ANNUITY PAYOUTS would start at a higher level but would
decrease more rapidly or increase more slowly.
LNY may use sex distinct annuity tables in contracts that are not associated
with employer sponsored plans and where not prohibited by law. At an ANNUITY
DATE, the contract is credited with ANNUITY UNITS for each SUBACCOUNT on which
variable ANNUITY PAYOUTS are based. The number of ANNUITY UNITS to be credited
is determined by dividing the amount of the first periodic payout by the value
of an ANNUITY UNIT in each subaccount selected. Although the number of ANNUITY
UNITS is fixed by this process, the value of such units will vary with the value
of the underlying fund.
The amount of the second and subsequent periodic payout is determined by
multiplying the CONTRACTOWNER'S fixed number of ANNUITY UNITS in each SUBACCOUNT
by the appropriate ANNUITY UNIT value for the valuation date ending 14 days
prior to the date that payout is due.
The value of each subaccount's ANNUITY UNIT will be set initially at $1.00. The
ANNUITY UNIT value for each SUBACCOUNT at the end of any VALUATION DATE is
determined by multiplying the SUBACCOUNT ANNUITY UNIT value for the immediately
preceding VALUATION DATE by the product of:
(a) The net investment factor of the SUBACCOUNT for the VALUATION PERIOD for
which the ANNUITY UNIT value is being determined, and
(b) A factor to neutralize the assumed investment return in the annuity table.
The value of the ANNUITY UNITS is determined as of a VALUATION DATE 14 days
prior to the payment date in order to permit calculation of amounts of ANNUITY
PAYOUTS and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
PROOF OF AGE, SEX AND SURVIVAL
LNY may require proof of age, sex, or survival of any payee upon whose age, sex,
or survival payments depend.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, LNY may refer to the following organizations
(and others) in its marketing materials.
LINCOLN FINANCIAL GROUP is the marketing name for Lincoln National Corporation
(NYSE-LNC) and its affiliates. With headquarters in Philadelphia, Lincoln
Financial Group has consolidated assets of over $103 billion and annual
consolidated revenues of $6.8 billion. Through its wealth accumulation and
protection businesses, the company provides annuities, life insurance, 401(k)
plans, life-health reinsurance, mutual funds, institutional investment
management and financial planning and advisory services.
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors affecting
the overall performance of an insurance company in order to provide an opinion
as to an insurance company's relative financial strength and ability to meet its
contractual obligations. The procedure includes both a quantitative and
qualitative review of each company. A.M. Best also provides certain rankings, to
which LNY intends to refer.
B-6
<PAGE>
DUFF & PHELPS insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S. licensed
companies, both mutual and stock.
EAFE INDEX is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of equity securities in Europe, Australia and the Far East.
The index reflects the movements of world stock markets by representing the
evolution of an unmanaged portfolio. The EAFE Index offers international
diversification representing 1,000 companies across 20 different countries.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports, including
reports on performance and portfolio analysis, fee and expense analysis.
MOODY'S INVESTORS SERVICE insurance financial strength rating is a an opinion of
an insurance company's financial strength, market leadership, and ability to
meet financial obligations. The purpose of Moody's ratings is to provide
investors with a simple system of gradation by which the relative quality of
insurance companies may be noted.
MORNINGSTAR is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuities.
STANDARD & POOR'S insurance claims-paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element in
the rating determination for such debt issues.
VARDS (VARIABLE ANNUITY RESEARCH DATA SERVICE) provides a comprehensive guide to
variable annuity contract features and historical fund performance. The service
also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable contracts.
STANDARD & POOR'S INDEX -- A broad-based measurement of U.S. stock-market
performance based on the weighted performance of 500 common stocks of leading
company's and leading industries, commonly known as the Standard & Poor's (S&P
500). The selection of stocks, their relative weightings to reflect differences
in the number of outstanding shares, and publication of the index itself are
services of Standard & Poor's Corporation, a financial advisory, securities
rating, and publishing firm.
RUSSELL 1000 INDEX -- Measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
RUSSELL 2000 INDEX -- Measures the performance of the 2,000 smallest companies
in the Russell 3000 Index, which represents approximately 10% of the total
market capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
LEHMAN BROTHERS AGGREGATE BOND INDEX -- Composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. Indexes are rebalanced monthly by market
capitalization.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -- This is a measurement of the
movement of approximately 4,200 corporate, publicly traded, fixed-rate,
nonconvertible, domestic debt securities, as well as the domestic debt
securities issued by the U.S. government or its agencies.
LEHMAN BROTHERS GOVERNMENT INTERMEDIATE BOND INDEX -- Composed of all bonds
covered by the Lehman Brothers Government Bond Index (all publicly issued,
nonconvertible, domestic debt of the US government or any agency thereof,
quasi-federal corporations, or corporate debt guaranteed by the US government)
with maturities between one and 9.99 years.
MERRILL LYNCH HIGH YIELD MASTER INDEX -- This is an index of high yield debt
securities. High yield securities are those below the top four quality rating
categories and are considered more risky than investment grade. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less).
Issues must be in the form of publicly placed nonconvertible, coupon-bearing US
domestic debt and must carry a term to maturity of at least one year.
MORGAN STANLEY EMERGING MARKETS FREE INDEX -- A market capitalization weighted
index composed of companies representative of the market structure of 22
Emerging Market countries in Europe, Latin America, and the Pacific Basin. This
index excludes closed markets and those shares in otherwise free markets, which
are not purchasable by foreigners.
MORGAN STANLEY WORLD CAPITAL INTERNATIONAL WORLD INDEX -- A market
capitalization weighted index composed of companies representative of the market
structure of 22 Developed Market countries in North America, Europe and the
Asia/Pacific Region.
B-7
<PAGE>
MORGAN STANLEY PACIFIC BASIN (EX-JAPAN) INDEX -- An arithmetic, market
value-weighted average of the performance of securities listed on the stock
exchanges of the following Pacific Basin Countries: Australia, Hong Kong,
Malaysia, New Zealand and Singapore.
NAREIT EQUITY REIT INDEX -- All of the data is based on the last closing price
of the month for all tax-qualified REITs listed on the New York Stock Exchange,
American Stock Exchange, and the NASDAQ National Market System. The data is
market weighted.
SALOMON BROTHERS WORLD GOVERNMENT BOND (NON US) INDEX -- A market capitalization
weighted index consisting of government bond markets of the following 13
countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy,
Japan, The Netherlands, Spain, Sweden, and The United Kingdom.
SALOMON BROTHERS 90 DAY TREASURY-BILL INDEX -- Equal dollar amounts of
three-month Treasury bills are purchased at the beginning of each of three
consecutive months. As each bill matures, all proceeds are rolled over or
reinvested in a new three-month bill.
STANDARD AND POOR'S INDEX (S&P 400) -- Consists of 400 domestic stocks chosen
for market size, liquidity, and industry group representations.
STANDARD AND POOR'S UTILITIES INDEX -- The utility index is one of several
industry groups within the broader S&P 500. Utility stocks include electric,
natural gas, and telephone companies included in the S&P 500.
NASDAQ-QTC PRICE INDEX -- this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA) -- A price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but including American Express
Company and American Telephone and Telegraph Company. Prepared and published by
Dow Jones & Company, it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
In its advertisements and other sales literature for the VAA and the SERIES
funds, LNY intends to illustrate the advantages of the contracts in a number of
ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of the
variable annuity contract. For example, but not by way of illustration, the
literature may emphasize the potential tax advantage of the VARIABLE ANNUITY
ACCOUNT over the fixed account; and the compounding effect when a client makes
regular deposits to his or her contract.
INTERNET. An electronic communications network which may be used to provide
information regarding LNY, performance of the subaccounts and advertisement
literature.
DOLLAR-COST AVERAGING. (DCA) -- You may systematically transfer on a monthly
basis amounts from certain SUBACCOUNTS, or the fixed side of the contract into
the SUBACCOUNTS. You may elect to participate in the DCA program at the time of
application or at anytime before the ANNUITY DATE by completing an election form
available from us and sending it to our Servicing Office. The minimum amount to
be dollar cost averaged is $2,000 over any period between six and 60 months.
Once elected, the program will remain in effect until the earlier of: (1) the
ANNUITY DATE; (2) the value of the amount being dollar cost averaged is
depleted; or (3) you cancel the program by written request or by telephone if we
have your telephone authorization on file. Currently, there is no charge for
this service. However, we reserve the right to impose one. A transfer under this
program is not considered a transfer for purposes of limiting the number of
transfers that may be made, or assessing any charges or MVA which may apply to
transfers. We reserve the right to discontinue this program at any time. DCA
does not assure a profit or protect against loss.
AUTOMATIC WITHDRAWAL SERVICE. (AWS) -- AWS provides an automatic, periodic
withdrawal of ANNUITY ACCOUNT VALUE to you. You may elect to participate in AWS
at the time of application or at any time before the ANNUITY DATE by sending a
written request to our Servicing Office. The minimum ANNUITY ACCOUNT VALUE
required to establish AWS is $10,000. You may cancel or make changes to your AWS
program at any time by sending a written request to us at our Servicing Office.
If telephone authorization has been elected, certain changes may be by
telephone. Notwithstanding the requirements of the program, any withdrawal must
be permitted by Section 401(a)(9) of the Code for qualified plans or permitted
under Section 72 for non-qualified contracts. To the extent that withdrawals
under AWS do not qualify for an exemption from the contingent deferred sales
charge, we will assess any applicable surrender charges on those withdrawals.
See Charges and other deductions -- Surrender charge. Currently, there is no
charge for this service. However, we reserve the right to impose one. If a
charge is imposed, it will not exceed $25 per transaction or 2% of the amount
withdrawn, whichever is less. We reserve the right to discontinue this service
at any time.
ACCOUNT REBALANCING. Account rebalancing is an option which, if elected by the
CONTRACTOWNER, restores to a pre-determined level the percentage of ANNUITY
ACCOUNT VALUE allocated to each variable account SUBACCOUNT (e.g., 20% Money
Market, 50% Growth, 30% Utilities). This
B-8
<PAGE>
pre-determined level will be the allocation initially selected when the contract
was purchased, unless subsequently changed. The account rebalancing allocation
may be changed at any time by submitting a request to us at our Servicing
Office.
If account rebalancing is elected, all PREMIUM PAYMENTS allocated to the
variable account SUBACCOUNTS must be subject to account rebalancing. The fixed
account SUBACCOUNT is not available for account rebalancing.
Account rebalancing may take place on either a quarterly, semi-annual or annual
basis, as selected by the CONTRACTOWNER. Once the account rebalancing option is
activated, any variable account SUBACCOUNT transfers executed outside of the
account rebalancing option will terminate the account rebalancing option. Any
subsequent PREMIUM PAYMENT or withdrawal that modifies the account balance
within each variable account SUBACCOUNT may also cause termination of the
account rebalancing option. Any such termination will be confirmed to the
CONTRACTOWNER. The CONTRACTOWNER may terminate the account rebalancing option or
re-enroll at any time by calling or writing LNY at our Servicing Office.
The account rebalancing program is not available following the ANNUITY DATE.
Currently, there is no charge for this service. However, we reserve the right to
impose one.
LNY'S CUSTOMERS. More than 145,000 individuals and 400 employers trust LNY to
help them plan for retirement. They're in good company with a good company, a
company known for financial strength and superior service. As a member of the
Insurance Marketplace Standards Association (IMSA), we are committed to
upholding strong business ethics.
LNY'S ASSETS, SIZE. LNY may discuss its general financial condition (see, for
example, the reference to A.M. Best Company, above); it may refer to its assets;
it may also discuss its relative size and/or ranking among companies in the
industry or among any sub-classification of those companies, based upon
recognized evaluation criteria (see reference to A.M. Best Company above). For
example, at December 31, 1999 LNY had statutory-basis admitted assets of almost
$2.3 billion.
FINANCIAL STATEMENTS
The statutory-basis financial statements of LNY appear on the following pages.
B-9
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTED ASSETS:
Bonds $1,482,592,831 $1,435,882,019
- ------------------------------------------------------------
Unaffiliated common stocks 161,005 155,039
- ------------------------------------------------------------
Mortgage loans on real estate 197,425,386 184,503,805
- ------------------------------------------------------------
Policy loans 177,437,149 170,372,567
- ------------------------------------------------------------
Cash and short-term investments 29,467,267 143,546,873
- ------------------------------------------------------------
Other invested assets 223,126 60,000
- ------------------------------------------------------------
Receivable for securities 1,313,866 3,477,120
- ------------------------------------------------------------ -------------- --------------
Total cash and invested assets 1,888,620,630 1,937,997,423
- ------------------------------------------------------------
Premiums and fees in course of collection 6,578,363 6,959,116
- ------------------------------------------------------------
Accrued investment income 29,296,814 25,925,055
- ------------------------------------------------------------
Other admitted assets 38,442,338 438,335
- ------------------------------------------------------------
Separate account assets 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total admitted assets $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $ 853,572,463 $ 851,746,596
- ------------------------------------------------------------
Other policyholder funds 951,347,964 962,725,311
- ------------------------------------------------------------
Other liabilities 25,045,378 44,824,520
- ------------------------------------------------------------
Federal income taxes recoverable -- (3,206,611)
- ------------------------------------------------------------
Asset valuation reserve 7,884,503 5,374,594
- ------------------------------------------------------------
Interest maintenance reserve 956,570 5,051,304
- ------------------------------------------------------------
Net transfers due from separate accounts (8,262,299) (6,915,063)
- ------------------------------------------------------------
Separate account liabilities 328,767,871 236,861,781
- ------------------------------------------------------------ -------------- --------------
Total liabilities 2,159,312,450 2,096,462,432
- ------------------------------------------------------------
CAPITAL AND SURPLUS:
Common stock, $100 par value:
Authorized, issued and outstanding -- 20,000 shares (owned
by The Lincoln National Life Insurance Company) 2,000,000 2,000,000
- ------------------------------------------------------------
Paid-in surplus 384,128,481 384,128,481
- ------------------------------------------------------------
Unassigned surplus -- deficit (253,734,915) (274,409,203)
- ------------------------------------------------------------ -------------- --------------
Total capital and surplus 132,393,566 111,719,278
- ------------------------------------------------------------ -------------- --------------
Total liabilities and capital and surplus $2,291,706,016 $2,208,181,710
- ------------------------------------------------------------ ============== ==============
</TABLE>
See accompanying notes. S-1
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------ -------------- ------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $172,708,594 $1,291,566,984 $184,112,330
- ------------------------------------------------------------
Net investment income 132,213,228 105,083,579 43,953,796
- ------------------------------------------------------------
Surrender and administrative charges 2,401,973 2,834,073 1,334,705
- ------------------------------------------------------------
Mortality and expense charges on deposit funds 2,937,632 1,980,728 1,548,722
- ------------------------------------------------------------
Amortization of the interest maintenance reserve 925,547 579,137 370,129
- ------------------------------------------------------------
Other revenues 2,127,634 536,698 183,048
- ------------------------------------------------------------ ------------ -------------- ------------
Total revenues 313,314,608 1,402,581,199 231,502,730
- ------------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 207,985,159 1,320,787,190 72,475,389
- ------------------------------------------------------------
Commissions 17,665,459 274,529,390 2,459,308
- ------------------------------------------------------------
Underwriting, insurance and other expenses 32,297,064 28,064,172 8,012,925
- ------------------------------------------------------------
Net transfers to separate accounts 28,255,807 33,875,951 141,027,195
- ------------------------------------------------------------ ------------ -------------- ------------
Total benefits and expenses 286,203,489 1,657,256,703 223,974,817
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before dividends to
policyholders, federal income taxes (benefit) and net
realized loss on investments 27,111,119 (254,675,504) 7,527,913
- ------------------------------------------------------------
Dividends to policyholders 5,624,728 3,375,629 --
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before federal income taxes
(benefit) and net realized loss on investments 21,486,391 (258,051,133) 7,527,913
- ------------------------------------------------------------
Federal income taxes (benefit) (427,033) (4,561,826) 1,942,625
- ------------------------------------------------------------ ------------ -------------- ------------
Gain (loss) from operations before net realized loss on
investments 21,913,424 (253,489,307) 5,585,288
- ------------------------------------------------------------
Net realized loss on investments (2,012,331) (721,449) (73,398)
- ------------------------------------------------------------ ------------ -------------- ------------
Net income (loss) $ 19,901,093 $ (254,210,756) $ 5,511,890
- ------------------------------------------------------------ ============ ============== ============
</TABLE>
See accompanying notes.
S-2
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
<TABLE>
<CAPTION>
UNASSIGNED TOTAL
COMMON PAID-IN SURPLUS -- CAPITAL AND
STOCK SURPLUS DEFICIT SURPLUS
---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Balances at January 1, 1997 $2,000,000 $ 69,000,000 $ (20,824,003) $ 50,175,997
Add (deduct):
Surplus paid-in -- 158,407,481 -- 158,407,481
- -------------------------------------------------
Net income -- -- 5,511,890 5,511,890
- -------------------------------------------------
Increase in nonadmitted assets -- -- (21,278) (21,278)
- -------------------------------------------------
Increase in asset valuation service -- -- (1,221,863) (1,221,863)
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1997 2,000,000 227,407,481 (16,555,254) 212,852,227
Add (deduct):
Surplus paid-in -- 156,721,000 -- 156,721,000
- -------------------------------------------------
Net loss -- -- (254,210,756) (254,210,756)
- -------------------------------------------------
Increase in unrealized capital losses -- -- (178,648) (178,648)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 241,698 241,698
- -------------------------------------------------
Increase in asset valuation reserve -- -- (3,024,183) (3,024,183)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (682,060) (682,060)
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1998 2,000,000 384,128,481 (274,409,203) 111,719,278
Add (deduct):
Net income -- -- 19,901,093 19,901,093
- -------------------------------------------------
Increase in unrealized capital losses -- -- (939,080) (939,080)
- -------------------------------------------------
Decrease in nonadmitted assets -- -- 187,322 187,322
- -------------------------------------------------
Increase in asset valuation reserve -- -- (2,509,909) (2,509,909)
- -------------------------------------------------
Increase in liability for reinsurance in
unauthorized companies -- -- (605,340) (605,340)
- -------------------------------------------------
Gain on reinsurance transaction -- -- 4,640,202 4,640,202
- ------------------------------------------------- ---------- ------------ ------------- -------------
Balances at December 31, 1999 $2,000,000 $384,128,481 $(253,734,915) $ 132,393,566
- ------------------------------------------------- ========== ============ ============= =============
</TABLE>
See accompanying notes. S-3
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------- -------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other considerations received $ 172,535,360 $1,284,669,810 $184,112,330
- ------------------------------------------------------------
Investment income received 138,850,106 96,331,551 43,781,378
- ------------------------------------------------------------
Benefits paid (204,263,171) (83,399,329) (85,008,691)
- ------------------------------------------------------------
Insurance expenses paid (96,041,640) (351,272,500) (154,355,904)
- ------------------------------------------------------------
Federal income taxes received (paid) (656,134) 1,703,193 (1,893,859)
- ------------------------------------------------------------
Dividends paid to policyholders (5,921,665) 2,651,237 --
- ------------------------------------------------------------
Other income received, less other expenses paid 1,653,592 39,064,672 1,613,631
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) operating activities 6,156,448 989,748,634 (11,751,115)
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 294,554,595 249,409,117 272,961,178
- ------------------------------------------------------------
Purchase of investments (369,356,711) (1,280,892,696) (265,700,363)
- ------------------------------------------------------------
Net decrease (increase) in policy loans (7,064,582) (131,317,640) 1,554,149
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by (used in) investing activities (81,866,698) (1,162,801,219) 8,814,964
- ------------------------------------------------------------
FINANCING AND MISCELLANEOUS ACTIVITIES
Capital and surplus paid-in -- 156,721,000 158,407,481
- ------------------------------------------------------------
Other (38,369,356) (3,895,136) (11,032,743)
- ------------------------------------------------------------ ------------- -------------- ------------
Net cash provided by financing activities (38,369,356) 152,825,864 147,374,738
- ------------------------------------------------------------ ------------- -------------- ------------
Net increase (decrease) in cash and short-term investments (114,079,606) (20,226,721) 144,438,587
- ------------------------------------------------------------
Total cash and short-term investments at beginning of year 143,546,873 163,773,594 19,335,007
- ------------------------------------------------------------ ------------- -------------- ------------
Total cash and short-term investments at end of year $ 29,467,267 $ 143,546,873 $163,773,594
- ------------------------------------------------------------ ============= ============== ============
</TABLE>
See accompanying notes.
S-4
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND OPERATIONS
Lincoln Life & Annuity Company of New York (the "Company") is a wholly owned
subsidiary of The Lincoln National Life Insurance Company ("Lincoln Life"),
which is a wholly owned subsidiary of Lincoln National Corporation ("LNC").
In 1996, the Company was organized under the laws of the state of New York
as a life insurance company and received approval from the New York
Insurance Department (the "Department") to operate as a licensed insurance
company in the State of New York.
The Company's principal business consists of underwriting annuities,
deposit-type contracts and life insurance sold through multiple distribution
channels. The Company conducts business only in the State of New York.
USE OF ESTIMATES
The nature of the insurance business requires management to make estimates
and assumptions that affect amounts reported in the statutory-basis
financial statements and accompanying notes. Actual results could differ
from these estimates.
BASIS OF PRESENTATION
The accompanying statutory-basis financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the
Department. "Prescribed" statutory accounting practices include state laws,
regulations and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
("NAIC"). "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may
change in the future.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change,
to some extent, prescribed statutory accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory-basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the
state of New York must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Department. At this time, it is anticipated that New York
will adopt Codification, however, based on current guidance, management
believes that the impact of Codification will not be material to the
Company's statutory-basis financial statements.
Existing statutory accounting practices differ from accounting principles
generally accepted in the United States ("GAAP"). The more significant
variances from GAAP are as follows:
INVESTMENTS
Bonds are reported at cost or amortized cost or fair value based on their
NAIC rating. For GAAP, the Company's bonds are classified as
available-for-sale and, accordingly, are reported at fair value with changes
in the fair values reported directly in shareholder's equity after
adjustments for related amortization of deferred acquisition costs,
additional policyholder commitments and deferred income taxes.
Changes between cost and admitted asset investment amounts are credited or
charged directly to unassigned surplus rather than to a separate surplus
account.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of bonds and mortgage loans
attributable to changes in the general level of interest rates and amortizes
those deferrals over the remaining period to maturity of the individual
security sold. The net deferral is reported as the interest maintenance
reserve ("IMR") in the accompanying balance sheets. Realized capital gains
and losses are reported in income net of federal income tax and transfers to
IMR. The asset valuation reserve ("AVR") is determined by a NAIC prescribed
formula and is reported as a liability rather than a reduction to unassigned
surplus. Under GAAP, realized capital gains and losses
S-5
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
are reported in the income statement on a pretax basis in the period that
the asset giving rise to the gain or loss is sold and valuation allowances
are provided when there has been a decline in value deemed other than
temporary, in which case, the provision for such declines are charged to
income.
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance, to the
extent recoverable from future policy revenues, are deferred and amortized
over the premium-paying period of the related policies using assumptions
consistent with those used in computing policy benefit reserves. For
universal life insurance, annuity and other investment-type products,
deferred policy acquisition costs, to the extent recoverable from future
gross profits, are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality, and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally furniture and
equipment, are excluded from the accompanying balance sheets and are charged
directly to unassigned surplus.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than on estimated expected
experience or actual account balances as would be required under GAAP.
PREMIUMS AND DEPOSITS
Premiums and deposits with respect to universal life policies and annuity
and other investment-type contracts consist of the entire premium received
and are reported as premium revenue. Under GAAP, premiums and deposits
received in excess of policy charges would not be recognized as premium
revenue.
BENEFITS AND SETTLEMENT EXPENSES
Death benefits paid, policy and contract withdrawals, and the change in
policy reserves on universal life policies, annuity and other
investment-type contracts are reported as benefits and settlement expenses
in the accompanying statements of operations. Under GAAP, withdrawals are
treated as a reduction of the policy or contract liabilities and benefits
would represent the excess of benefits paid over the policy account value
and interest credited to the account values. For traditional life and
disability income products, benefits and expenses are recognized when
incurred in a manner consistent with the related premium recognition
policies.
REINSURANCE
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs as
required under GAAP. Business assumed under 100% indemnity and assumption
reinsurance agreements is accounted for as a purchase for GAAP reporting
purposes and the ceding commission represents the purchase price. Under
purchase accounting, assets acquired and liabilities assumed are reported at
fair value at the date of the transaction and the excess of the purchase
price over the sum of the amounts assigned to assets acquired less
liabilities assumed is recorded as goodwill. On a statutory-basis of
accounting, the ceding commission is expensed when paid.
Premiums, benefits and settlement expenses and policy benefits and contract
liabilities are reported in the accompanying financial statements net of
reinsurance amounts. Under GAAP, policy benefits and contract liabilities
are reported on a gross basis.
A liability for reinsurance balances has been provided for unsecured policy
and contract liabilities and unearned premiums ceded to reinsurers not
authorized by the Department to assume such business. Changes to those
amounts are credited or charged directly to unassigned surplus. Under GAAP,
an allowance for amounts deemed uncollectible is established through a
charge to income.
INCOME TAXES
Deferred federal income taxes are not provided for differences between
financial statement amounts and tax bases of assets and liabilities.
S-6
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
POSTRETIREMENT BENEFITS
For purposes of calculating the Company's postretirement benefit obligation,
only vested employees and current retirees are included in the actuarial
benefit valuation. Under GAAP, active employees not currently eligible would
also be included.
STATEMENTS OF CASH FLOWS
Cash and short-term investments in the statements of cash flows represent
cash balances and investments with initial maturities of one year or less
from the date of acquisition. Under GAAP, the corresponding captions of cash
and cash equivalents include cash balances and investments with initial
maturities of three months or less from the date of acquisition.
A reconciliation of the Company's capital and surplus and net income (loss)
determined on a statutory accounting basis with amounts determined in
accordance with GAAP is as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
----------------------------------------------------------------------------
DECEMBER 31 YEAR ENDED DECEMBER 31
1999 1998 1999 1998 1997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(IN THOUSANDS)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts as reported on a
statutory -- basis
$132,394 $111,719 $ 19,901 $(254,211) $ 5,512
-----------------------------------
GAAP adjustments:
Net unrealized gain (loss) on
investments (74,971) 27,851 -- -- --
-----------------------------------
Interest maintenance reserve (792) 5,051 458 (579) (370)
-----------------------------------
Net realized gain (loss) on
investments (1,951) (990) (6,348) 3,050 (240)
-----------------------------------
Asset valuation reserve 7,885 5,375 -- -- --
-----------------------------------
Policy and contract reserves (72,302) (85,875) 25,985 271,293 (3,667)
-----------------------------------
Present value of future profits,
deferred policy acquisition
costs and goodwill 369,032 336,568 (6,639) 6,091 524
-----------------------------------
Policyholders' share of earnings
and surplus on participating
business (9,325) (9,904) 1,071 (100) --
-----------------------------------
Deferred income taxes 17,505 35,280 (12,159) (12,696) 671
-----------------------------------
Nonadmitted assets 1,685 880 -- -- --
-----------------------------------
Other, net 4,304 (1,705) (2,096) (82) --
----------------------------------- -------- -------- -------- --------- -------
Net increase (decrease) 241,070 312,531 272 266,977 (3,082)
----------------------------------- -------- -------- -------- --------- -------
Amounts on a GAAP -- basis $373,464 $424,250 $ 20,173 $ 12,766 $ 2,430
----------------------------------- ======== ======== ======== ========= =======
</TABLE>
S-7
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Other significant accounting practices are as follows:
INVESTMENTS
Bonds not backed by loans are principally stated at amortized cost and the
discount or premium is amortized using the interest method.
Mortgage-backed bonds are valued at amortized cost and income is recognized
using a constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the securities is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition.
Policy loans are reported at unpaid principal balances.
Mortgage loans on real estate are reported at unpaid principal balances,
less allowances for impairments.
Realized investment gains and losses on investments sold are determined
using the specific identification method. Changes in admitted asset carrying
amounts of bonds, mortgage loans, and common stocks are credited or charged
directly in unassigned surplus.
PREMIUMS
Premiums for group tax-qualified annuity business are recognized as revenue
when deposited. Life insurance and individual annuity premiums are
recognized as revenue when due. Accident and health premiums are earned pro
rata over the contract term of the policies.
BENEFIT RESERVES
Life, annuity and accident and health disability benefit reserves are
developed by actuarial methods and are determined based on published tables
using statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Department. The Company waives deduction of deferred fractional premiums on
the death of life and annuity policy insureds and returns any premium beyond
the date of death, except for policies issued prior to March 1977. Surrender
values on policies do exceed the corresponding benefit reserves. Additional
reserves are established when the results of cash flow testing under various
interest rate scenarios indicate the need for such reserves. If net premiums
exceed the gross premiums on any insurance inforce, additional reserves are
established. Benefit reserves for policies underwritten on a substandard
basis are determined using the multiple table reserve method.
The tabular interest, tabular less actual reserves released and the tabular
cost have been determined by formula or from the basic data for such items.
Tabular interest funds not involving life contingencies were determined
using the actual interest credited to the funds plus the change in accrued
interest.
Liabilities related to policyholders' funds left on deposit with the Company
generally are equal to fund balances less applicable surrender charges.
CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Unpaid claims and claim adjustment expenses on accident and health policies
represent the estimated ultimate net cost of all reported and unreported
claims incurred through December 31. The Company does not discount claims
and claim adjustment expense reserves. The reserves for unpaid claims and
claim adjustment expenses are estimated using individual case-basis
valuations and statistical analyses. Those estimates are subject to the
effects of trends in claim severity and frequency. Although considerable
variability is inherent in such estimates, management believes that reserves
for unpaid claims and claim adjustment
S-8
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
1. ORGANIZATION AND OPERATIONS AND
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
expenses are adequate. The estimates are continually reviewed and adjusted
as necessary as experience develops or new information becomes known; such
adjustments are included in current operations.
REINSURANCE CEDED AND ASSUMED
Reinsurance premiums, benefits and settlement expenses are accounted for on
bases consistent with those used in accounting for the original policies
issued and the terms of the reinsurance contracts.
PENSION BENEFITS
Costs associated with the Company's defined benefit pension plans are
systematically accrued during the expected period of active service of the
covered employees.
ASSETS HELD IN SEPARATE ACCOUNTS AND LIABILITIES RELATED TO SEPARATE
ACCOUNTS
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the exclusive
benefit of variable annuity and universal life contractholders and for which
the contractholders, and not the Company, bears the investment risk.
Separate account contractholders have no claim against the assets of the
general account of the Company. Separate account assets are reported at fair
value and consist of unit investments in mutual funds. The detailed
operations of the separate accounts are not included in the accompanying
statutory-basis financial statements. The fees received by the Company for
administrative and contractholder maintenance services performed for these
separate accounts are included in the Company's statements of operations.
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains and
losses and the fair value of investments in bonds are
summarized as follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Corporate $1,214,312,519 $ 908,731 $(65,599,479) $1,149,621,771
--------------------------------
U.S. government 25,736,299 11,711 (1,900,750) 23,847,260
--------------------------------
Foreign government 17,602,777 362,624 (1,070,496) 16,894,905
--------------------------------
Mortgage-backed 221,570,519 2,732 (9,530,799) 212,042,452
--------------------------------
State and municipal 3,370,717 -- (105,915) 3,264,802
-------------------------------- -------------- ----------- ------------ --------------
$1,482,592,831 $ 1,285,798 $(78,207,439) $1,405,671,190
============== =========== ============ ==============
At December 31, 1998:
Corporate $1,148,083,966 $27,649,036 $ (7,489,560) $1,168,243,442
--------------------------------
U.S. government 39,617,653 564,146 (119,394) 40,062,405
--------------------------------
Foreign government 19,532,744 994,331 (720,250) 19,806,825
--------------------------------
Mortgage-backed 225,005,162 6,239,684 (421,281) 230,823,565
--------------------------------
State and municipal 3,642,494 164,552 -- 3,807,046
-------------------------------- -------------- ----------- ------------ --------------
$1,435,882,019 $35,611,749 $ (8,750,485) $1,462,743,283
============== =========== ============ ==============
</TABLE>
S-9
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The carrying amount of investments in bonds in the balance
sheet at December 31, 1999 and 1998 reflects adjustments of
$1,123,693 and $178,648, respectively, to decrease amortized
cost as a result of the Securities Valuation Office of the
NAIC designating certain investments as low or lower
quality.
A summary of the cost or amortized cost and fair value of
investments in bonds at December 31, 1999, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
-----------------------------------
<S> <C> <C>
Maturity:
In 2000 $ 64,699,324 $ 64,449,287
------------------------------------------------------------
In 2001-2004 360,685,026 351,609,953
------------------------------------------------------------
In 2005-2009 490,969,108 462,139,167
------------------------------------------------------------
After 2009 344,668,854 315,430,331
------------------------------------------------------------
Mortgage-backed securities 221,570,519 212,042,452
------------------------------------------------------------ -------------- --------------
Total $1,482,592,831 $1,405,671,190
------------------------------------------------------------ ============== ==============
</TABLE>
The expected maturities may differ from the contractual
maturities in the foregoing table because certain borrowers
may have the right to call or prepay obligations with or
without call or prepayment penalties.
Proceeds from sales of investments in bonds were $253,876,450, $203,748,028
and $274,742,319 in 1999, 1998 and 1997, respectively. Gross gains of
$842,229, $3,612,434 and $1,533,793, and gross losses of $6,968,975,
$1,529,149 and $1,922,165 during 1999, 1998 and 1997, respectively, were
realized on those sales. Net gains (losses) of ($186), $17,705 and ($26)
were realized on sales of short-term investments in 1999, 1998 and 1997,
respectively.
At December 31, 1999 and 1998, investments in bonds with an admitted asset
value of $500,078 and $500,129, respectively, were on deposit with the
Department to satisfy regulatory requirements.
During 1999, the minimum and maximum lending rates for mortgage loans were
6.62% and 10.29%, respectively. At the issuance of a loan, the percentage of
loan to value on any one loan does not exceed 75%. At December 31, 1999, the
Company did not hold any mortgages with interest overdue beyond one year.
All properties covered by mortgage loans have fire insurance at least equal
to the excess of the loan over the maximum loan that would be allowed on the
land without the building.
S-10
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
2. INVESTMENTS (CONTINUED)
The major categories of net investment income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------------------------
<S> <C> <C> <C>
Income:
Bonds $106,590,150 $ 78,205,686 $42,237,959
--------------------------------------------------
Mortgage loans on real estate 13,522,104 14,304,385 --
--------------------------------------------------
Policy loans 11,018,423 7,981,377 1,990,613
--------------------------------------------------
Cash and short-term investments 2,391,977 5,893,453 315,328
-------------------------------------------------- ------------ ------------ -----------
Total investment income 133,522,654 106,384,901 44,543,900
----------------------------------------------------
Investment expenses 1,309,426 1,301,322 590,104
---------------------------------------------------- ------------ ------------ -----------
Net investment income $132,213,228 $105,083,579 $43,953,796
---------------------------------------------------- ============ ============ ===========
</TABLE>
Realized capital gains and losses are reported net of federal income taxes
of $437,941, $1,223,897 and $55,541 in 1999, 1998 and 1997, respectively,
and amounts transferred to the interest maintenance reserve of $3,169,187,
$3,035,887 and $239,459 in 1999, 1998 and 1997, respectively.
At December 31, 1999, the Company did not have a material concentration of
financial instruments in a single investee, industry or geographic location.
3. FEDERAL INCOME TAXES
The Company's federal income tax return is not consolidated with any other
entities. The effective federal income tax rate for financial reporting
purposes differs from the prevailing statutory tax rate principally due to
tax-exempt investment income, other pass through tax attributes from
investments, differences in ceding commissions, policy acquisition costs,
and policy and contract liabilities in the tax return versus the financial
statements.
In 1998, a federal income tax net operating loss of $80,156,000 was
incurred. The Company utilized $9,162,000 of the net operating loss to
recover taxes paid in prior years. In 1999, an additional $10,170,000 of net
operating loss was utilized to offset taxable income. The remaining portion
of the net operating loss at December 31, 1999 of $60,824,000 will be
available for use to offset taxable income in future years. The net
operating loss carryforward of $60,824,000 will expire in 2013.
The Company paid $3,675,000 in 1997 for federal income taxes. No federal
income tax payments were made in 1999 or 1998. The Company received a refund
of $3,196,000 in 1999 as a result of the utilization of the net operating
loss.
4. REINSURANCE
The Company cedes insurance to other companies, including affiliated
companies. The portion of risks exceeding the Company's retention limits is
reinsured with Lincoln Life. The Company limits its maximum risk that it
retains on an individual to $500,000. The Company remains obligated for
amounts ceded in the event that the reinsurers do not meet their
obligations. The Company did not cede or assume any business prior to
January 1, 1998.
On January 2, 1998, the Company and Lincoln Life entered into an indemnity
reinsurance transaction whereby the Company and Lincoln Life reinsured 100%
of a block of individual life insurance and annuity business of CIGNA
Corporation ("CIGNA"). The Company paid $149,621,452 to CIGNA on January 2,
1998 under the terms of the reinsurance agreement and recognized a ceding
commission expense of $149,714,239 in 1998, which is included in the
statements of operations line item "Commissions." At the time of closing,
this block of business had statutory liabilities of $779,551,235 which
became the Company's obligations. The Company also received assets, measured
on a historical statutory-basis, equal to the liabilities. Subsequent to the
CIGNA transaction, the
S-11
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
4. REINSURANCE (CONTINUED)
Company and Lincoln Life announced that they had reached an agreement to
sell the administration rights to a variable annuity portfolio that had been
acquired as part of the block of business assumed on January 2, 1998. This
sale closed on October 12, 1998 with an effective date of September 1, 1998.
During 1999, the Company received $5,800,000 from CIGNA as a result of the
final settlement of the statutory-basis values of assets and liabilities for
the reinsured business. The $5,800,000 is included in the statements of
operations line item "Other revenues." Additionally, on November 1, 1999,
the Company and Lincoln Life closed the previously announced agreement to
retrocede virtually 100% of the disability income business assumed from
CIGNA. This retrocession agreement was effective November 1, 1999. A gain on
the transaction of $4.6 million was recorded directly in unassigned surplus,
net of tax.
On October 1, 1998, the Company entered into an indemnity reinsurance
transaction whereby the Company and Lincoln Life reinsured 100% of a block
of individual life insurance business from Aetna, Inc. The Company paid
$143,721,000 to Aetna on October 1, 1998 under the terms of the reinsurance
agreement and recognized a ceding commission expense of $135,374,141 in
1998, which is included in the statements of operations line item
"Commissions." At the time of closing, this block of business had statutory
liabilities of $463,007,132 which became the Company's obligation. The
Company also received assets, measured on a historical statutory-basis,
equal to the liabilities.
Subsequent to the Aetna transaction, the Company and Lincoln Life announced
that they had reached an agreement to retrocede the sponsored life business
assumed for $87,600,000, of which $11,900,000 was received by the Company.
The retrocession agreement was executed on October 14, 1998 with an
effective date of October 1, 1998.
The balance sheet caption, "Future policy benefits and claims" has been
reduced for insurance ceded by $97,457,160 and $54,411,763 at December 31,
1999 and 1998, respectively. The balance sheet caption, "Other policyholder
funds" has been reduced for insurance ceded by $2,290,826 and $2,722,404 at
December 31, 1999 and 1998, respectively.
The caption "Premiums and deposits" in the statements of operations includes
$140,394,771 and $1,276,884,778 of insurance assumed and $44,245,573 and
$52,443,264 of insurance ceded in 1999 and 1998, respectively.
The caption "Benefits and settlement expenses" in the statements of
operations is net of reinsurance recoveries of $71,763,962 and $47,526,681
for 1999 and 1998, respectively.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $1,287,400 and $682,060 at December 31, 1999 and
1998, respectively. Amounts payable or recoverable for reinsurance on policy
and contract liabilities are not subject to periodic or maximum limits. At
December 31, 1999, the Company's reinsurance recoverables are not material
and no individual reinsurer owed the Company an amount that was equal to or
greater than 3% of the Company's surplus.
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES
At December 31, 1999 and 1998, the Company had $1,149,964,000 and
$1,092,754,000, respectively, of insurance in force for which the gross
premiums are less than the net premiums according to the standard of
valuation set by the State of New York. Reserves to cover the above
insurance totaled $5,893,549 and $6,937,379 at December 31, 1999 and 1998,
respectively.
At December 31, 1999, the Company's annuity reserves and deposit fund
liabilities, including separate accounts, that are subject to discretionary
withdrawal with adjustment, subject to discretionary withdrawal without
adjustment and not subject to discretionary withdrawal provisions are
summarized as follows:
S-12
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
5. LIFE AND ANNUITY RESERVES AND DEPOSIT FUND LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
AMOUNT PERCENT
-------------- -------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 338,886,028 26.5%
------------------------------------------------------------
At book value, less surrender charge 123,141,771 9.6
------------------------------------------------------------
At market value 319,140,374 24.9
------------------------------------------------------------
Subject to discretionary withdrawal without adjustment:
At book value with minimal or no charge or adjustment 487,578,243 38.1
------------------------------------------------------------
Not subject to discretionary withdrawal 10,884,302 .9
------------------------------------------------------------ -------------- ------
Total annuity reserves and deposit fund liabilities, before
reinsurance 1,279,630,718 100.0%
======
Less reinsurance 2,560,424
------------------------------------------------------------ --------------
Net annuity reserves and deposit fund liabilities, including
separate accounts $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
A reconciliation of the total net annuity reserves and deposit fund
liabilities to the amounts reported in the Company's 1999 Annual Statement
and the Company's Separate Accounts Annual Statement at December 31, 1999 is
as follows:
<TABLE>
<S> <C>
Per 1999 Annual Statement:
Exhibit 8, Section B -- Total (net) $ 10,029,253
------------------------------------------------------------
Exhibit 8, Section C -- Total (net) 1,122,910
------------------------------------------------------------
Exhibit 10, Column 1, Line 19 946,777,757
------------------------------------------------------------ --------------
957,929,920
------------------------------------------------------------
Per Separate Account Annual Statement:
------------------------------------------------------------
Exhibit 6, Column 2, Line 0299999 Page 3, Line 3 319,140,374
------------------------------------------------------------ --------------
319,140,374
--------------
Total net annuity reserves and deposit fund liabilities $1,277,070,294
------------------------------------------------------------ ==============
</TABLE>
Details underlying the balance sheet caption "Other policyholder funds" are
as follows:
<TABLE>
<S> <C> <C>
DECEMBER 31
1999 1998
------------ ------------
Premium deposit funds $920,665,883 $931,230,214
------------------------------------------------------------
Undistributed earnings on participating business 30,544,045 30,772,519
------------------------------------------------------------
Other 138,036 722,578
------------------------------------------------------------ ------------ ------------
$951,347,964 $962,725,311
============ ============
</TABLE>
6. CAPITAL AND SURPLUS
The Company received additional paid-in surplus from Lincoln Life of
$158,407,481 and $156,721,000 in December 1997 and October 1998,
respectively.
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1999, the Company exceeds the RBC requirements.
S-13
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
6. CAPITAL AND SURPLUS (CONTINUED)
The payment of dividends by the Company requires 30 day advance notice to
the Department.
7. EMPLOYEE BENEFIT PLANS
LNC maintains defined benefit pension plans for its employees (including
Company employees) and a defined contribution plan for the Company's agents.
LNC also maintains 401(k) plans, deferred compensation plans and
postretirement medical and life insurance plans for its employees and agents
(including the Company's employees and agents). The aggregate expenses and
accumulated obligations for the Company's portion of these plans are not
material to the Company's statutory-basis statements of operations or
balance sheets for any of the periods shown.
LNC has various incentive plans for key employees, agents and directors of
LNC and its subsidiaries that provide for the issuance of stock options,
stock appreciation rights, restricted stock awards and stock incentive
awards. These plans are comprised primarily of stock option incentive plans.
Stock options granted under the stock option incentive plans are at the
market value at the date of grants and, subject to termination of
employment, expire ten years from the date of grant.
Such options are transferable only upon death and are exercisable one year
from the date of grant for options issued prior to 1992. Options issued
subsequent to 1991 are exercisable in equal increments on the option
issuance anniversary in three to four years following issuance.
As of December 31, 1999, 27,534 shares of LNC common stock were subject to
options granted to Company employees under the stock option incentive plans
of which 8,934 were exercisable on that date. The exercise prices of the
outstanding options range from $21.32 to $50.83. During 1999 and 1998, 3,740
and 137 options, respectively, were exercised. During 1999, 2,400 options
were forfeited.
8. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1999, the Company did not have a concentration of:
1) business transactions with a particular customer, lender or distributor;
2) revenues from a particular product or service; 3) sources of supply of
labor or services used in the business; or 4) a market or geographic area in
which business is conducted that makes it vulnerable to an event that is at
least reasonably possible to occur in the near term and which could cause a
severe impact to the Company's financial condition.
CONTINGENCY MATTERS
The Company is occasionally involved in various pending or threatened legal
proceedings arising from the conduct of business. These proceedings are
routine in the ordinary course of business. In some instances, these
proceedings include claims for compensatory and punitive damages and similar
types of relief in addition to amounts for alleged contractual liability or
requests for equitable relief. After consultation with legal counsel and a
review of available facts, it is management's opinion that the ultimate
liability, if any, under these proceedings will not have a material adverse
effect on the financial position of the Company.
The number of insurance companies that are under regulatory supervision has
resulted, and is expected to continue to result, in assessments by state
guaranty funds to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company has
accrued for expected assessments net of estimated future premium tax
deductions.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion outlines the methodologies and assumptions used to
determine the estimated fair values of the Company's financial instruments.
Considerable judgment is required to develop these fair values. Accordingly,
the estimates shown are not necessarily indicative of the
S-14
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
amounts that would be realized in a one-time, current market exchange of the
Company's financial instruments.
BONDS AND COMMON STOCK
Fair values of bonds are based on quoted market prices, where available. For
bonds not actively traded, fair values are estimated using values obtained
from independent pricing services. In the case of private placements, fair
values are estimated by discounting expected future cash flows using a
current market rate applicable to the coupon rate, credit quality and
maturity of the investments. The fair values of common stocks are based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair values of mortgage loans on real estate are established
using a discounted cash flow method based on credit rating, maturity and
future income. The rating for mortgages in good standing are based on
property type, location, market conditions, occupancy, debt service
coverage, loan to value, caliber of tenancy, borrower and payment record.
Fair values for impaired mortgage loans are based on: 1) the present value
of expected future cash flows discounted at the loan's effective interest
rate; 2) the loan's market prices; or 3) the fair value of the collateral if
the loan is collateral dependent.
POLICY LOANS
The estimated fair value of investments in policy loans was calculated on a
composite discounted cash flow basis using U.S. Treasury interest rates
consistent with the maturity durations assumed. These durations were based
on historical experience.
CASH AND SHORT-TERM INVESTMENTS
The carrying value of cash and short-term investments approximates their
fair value.
INVESTMENT-TYPE INSURANCE CONTRACTS
The balance sheet captions, "Future policy benefits and claims" and "Other
policyholder funds," include investment type insurance contracts (i.e.,
deposit contracts). The fair values for the deposit contracts are based on
their approximate surrender values.
The remainder of the balance sheet captions "Future policy benefits and
claims" and "Other policyholder funds," that do not fit the definition of
"investment-type insurance contracts" are considered insurance contracts.
Fair value disclosures are not required for these insurance contracts and
have not been determined by the Company. It is the Company's position that
the disclosure of the fair value of these insurance contracts is important
because readers of these financial statements could draw inappropriate
conclusions about the Company's capital and surplus determined on a fair
value basis. It could be misleading if only the fair value of assets and
liabilities defined as financial instruments are disclosed. The Company and
other companies in the insurance industry are monitoring the related actions
of the various rule-making bodies and attempting to determine an appropriate
methodology for estimating and disclosing the "fair value" of their
insurance contract liabilities.
SEPARATE ACCOUNTS
Assets held in separate accounts are reported in the accompanying
statutory-basis balance sheets at fair value. The related liabilities are
also reported at fair value in amounts equal to the separate account assets.
S-15
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
<S> <C> <C> <C> <C>
-------------------------------------------------------------
<CAPTION>
DECEMBER 31
1999 1998
---------------------------------------------------------------
(IN THOUSANDS)
---------------------------------------------------------------
ASSETS (LIABILITIES)
<S> <C> <C> <C> <C>
-----------------------------------------------
Bonds $1,482,593 $1,405,671 $1,435,882 $1,462,743
-----------------------------------------------
Unaffiliated common stocks 161 161 155 155
-----------------------------------------------
Mortgage loans on real estate 197,425 189,179 184,504 185,694
-----------------------------------------------
Policy loans 177,437 190,667 170,373 183,408
-----------------------------------------------
Cash and short-term investments 29,467 29,467 143,547 143,547
-----------------------------------------------
Other invested assets 223 223 60 60
-----------------------------------------------
Investment-type insurance contracts (951,348) (910,752) (962,725) (938,191)
-----------------------------------------------
Separate account assets 328,768 328,768 236,862 236,862
-----------------------------------------------
Separate account liabilities (328,768) (328,768) (236,862) (236,862)
-----------------------------------------------
</TABLE>
10. TRANSACTIONS WITH AFFILIATES
The Company has entered into agreements with Lincoln Life to receive
processing and other corporate services. Fees paid to Lincoln Life for such
services were $22,675,891, $18,504,450 and $3,454,014 in 1999, 1998 and
1997, respectively. The Company has also entered into an agreement with
Lincoln Life to provide certain processing services. Fees received from
Lincoln Life for such services were $1,359,279, $273,952 and $578,003 in
1999, 1998 and 1997, respectively.
The Company has an investment management agreement with an affiliate,
Lincoln Investment Management, Inc., for investment advisory and asset
management services. Fees paid for such investment services were $1,309,426,
$1,501,592 and $558,011 in 1999, 1998 and 1997, respectively.
The Company cedes business to two affiliated companies, Lincoln Life and
Lincoln National Reassurance Company. The caption "Premiums and deposits" in
the accompanying statements of operations has been reduced by $6,269,272 and
$2,095,019 for premiums paid on these contracts in 1999 and 1998,
respectively. The caption "Future policy benefits and claims" has been
reduced by $2,323,435 and $2,583,702 related to reserve credits taken on
these contracts as of December 31, 1999 and 1998, respectively.
11. SEPARATE ACCOUNTS
Separate account premiums, deposits and other considerations amounted to
$109,574,216 and $73,993,993 in 1999 and 1998, respectively. Reserves for
separate accounts with assets at fair value were $320,413,080 and
$229,940,273 at December 31, 1999 and 1998, respectively. All reserves are
subject to discretionary withdrawal at market value. All of the Company's
separate accounts are nonguaranteed. The investment risks associated with
market value changes are borne entirely by the contractholder.
S-16
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS (CONTINUED)
11. SEPARATE ACCOUNTS (CONTINUED)
A reconciliation of transfers to (from) separate accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998
------------------------------
<S> <C> <C>
Transfers as reported in the Summary of Operations of
various Separate Accounts:
Transfers to separate accounts $109,574,216 $ 73,993,993
------------------------------------------------------------ ------------ ------------
Transfers from separate accounts (81,318,409) (40,118,042)
------------------------------------------------------------ ------------ ------------
Net transfer to separate accounts as reported in the
Company's NAIC Annual Statement -- Summary of Operations $ 28,255,807 $ 33,875,951
------------------------------------------------------------ ============ ============
</TABLE>
12. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue was complex and affected many aspects of the Company's
business. The Company was particularly concerned with Year 2000 issues that
related to the Company's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners. From 1996
through 1999 the Company redirected a large portion of internal Information
Technology ("IT") efforts and contracted with outside consultants to update
systems to address Year 2000 issues. Experts were engaged to assist in
developing work plans and cost estimates and to complete remediation
activities.
For the year ended December 31, 1999, the Company identified expenditures of
$124,000 to address this issue. This brings the expenditures for 1996
through 1999 to $208,000. Because updating systems and procedures is an
integral part of the Company's on-going operations, most of the expenditures
shown above are expected to continue after all Year 2000 issues have been
resolved. All Year 2000 expenditures have been funded from operating cash
flows.
The scope of the overall Year 2000 program included the following four major
project areas: 1) addressing the readiness of business applications,
operating systems and hardware on mainframe, personal computer and local
area network platforms (IT); 2) addressing the readiness of non-IT embedded
software and equipment (non-IT); 3) addressing the readiness of key business
partners and 4) establishing Year 2000 contingency plans. The Company
completed these projects prior to year-end.
The Company's businesses have not identified any major problems in their
business processing. Minor problems have been resolved quickly. The
Company's businesses have not experienced any significant interruption in
service to clients or business partners or in reporting to regulators.
S-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Lincoln Life & Annuity Company of New York
We have audited the accompanying statutory-basis balance sheets
of Lincoln Life & Annuity Company of New York (a wholly owned
subsidiary of The Lincoln National Life Insurance Company) as of
December 31, 1999 and 1998, and the related statutory-basis
statements of operations, changes in capital and surplus, and
cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company
presents its financial statements in conformity with accounting
practices prescribed or permitted by the New York Insurance
Department, which practices differ from accounting principles
generally accepted in the United States. The variances between
such practices and accounting principles generally accepted in
the United States and the effects on the accompanying financial
statements are described in Note 1.
In our opinion, because of the effects of the matter described
in the preceding paragraph, the financial statements referred to
above do not present fairly, in conformity with accounting
principles generally accepted in the Untied States, the
financial position of Lincoln Life & Annuity Company of New York
at December 31, 1999 and 1998, or the results of its operations
or its cash flows for each of the three years in the period
ended December 31, 1999.
However, in our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Lincoln Life & Annuity Company of New York at
December 31, 1999 and 1998, the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting practices
prescribed or permitted by the New York Insurance Department.
March 10, 2000
S-18
<PAGE>
PART C--OTHER INFORMATION
ITEM 24.
<TABLE>
<C> <S> <C> <C> <C>
(a) LIST OF FINANCIAL STATEMENTS
(1) Part A
The Table of Condensed Financial Information is included in Part A of
this Registration Statement. Not applicable.
(2) Part B
The following financial statements of Account N are included in the
SAI: Not Applicable.
(3) Part B
The following Statutory-Basis Financial Statements of Lincoln Life &
Annuity Company of New York are included in the SAI:
Balance Sheets Statutory-Basis--December 31, 1999 and 1998
Statements of Operations Statutory-Basis--Years ended December 31,
1999, 1998 and 1997
Statements of Changes in Capital and Surplus Statutory-Basis--Years
ended December 31, 1999, 1998 and 1997
Statements of Cash Flows Statutory-Basis--December 31, 1999, 1998
and 1997
Notes to Financial Statements--December 31, 1999
Report of Ernst & Young LLP, Independent Auditors
24(b) LIST OF EXHIBITS
(1) (a) Resolution of Board of Directors and Memorandum authorizing
establishment of Account N. Incorporated herein by reference to
Registration Statement on Form N-4 (333-93875) filed 12-30-99
(b) Amendment to that Certain Memorandum. Incorporated herein by
reference to Registration Statement on Form N-4 (333-93875) filed
12-30-99
(3) (a) Amended and Restated Principal Underwriting Agreement--Lincoln
Financial Advisors/Lincoln Life & Annuity Company of New York.
Incorporated herein by reference to Registration Statement on
Form N-4 (333-93875). filed 12-30-99.
(b) Form of Wholesaling Agreement between Lincoln Life & Annuity
Company of New York, Lincoln Financial Advisors, and Delaware
Distributors, L.P.
(c) Standard Selling Group Agreement
(4) (a) Contract
(5) (a) Application
(6) (a) Articles of Incorporation and By-laws of Lincoln Life & Annuity
Company of New York are incorporated herein by reference to
Registration Statement on Form N-4 (333-10863) filed on 8/27/96.
(8) (a) Form of Service Agreement between Lincoln Life & Annuity Company
of New York and Delaware Management Holdings, Inc.
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
(b) Administrative Services Agreement between Lincoln Life & Annuity
Company of New York and Lincoln National Life Insurance Company
dated 1-1-98 incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registration Statement on Form N-4 (333-38007)
filed on 10/11/99.
(c) Participation Agreement between Lincoln Life & Annuity Company of
New York and AIM Insurance Funds, Inc.
(d) Participation Agreement between Lincoln Life & Annuity Company of
New York and the Capital Research and Management Company. (TO BE
FILED BY AMENDMENT.)
(e) Participation Agreement between Lincoln Life & Annuity Company of
New York and the Delaware Funds.
(f) Participation Agreement between Lincoln Life & Annuity Company of
New York and Variable Insurance Products and Fidelity Insurance
Funds And Fidelity Distributors Corporation
(g) Participation Agreement between Lincoln Life & Annuity Company of
New York and Variable Insurance Products Fund II and Fidelity
Distributors Corporation.
(h) Participation Agreement between Lincoln Life & Annuity Company of
New York and Variable Insurance Products Fund III and Fidelity
Distributors Corporation.
(i) Participation Agreement between Lincoln Life & Annuity Company of
New York and Franklin/Templeton Funds.
(j) Participation Agreement between Lincoln Life & Annuity Company of
New York and MFS Variable Insurance Funds.
(k) Participation Agreement between Lincoln Life & Annuity Company of
New York and Alliance Variable Products Series Fund (TO BE FILED
BY AMENDMENT)
(l) Participation Agreement between Lincoln Life & Annuity Company of
New York and BT Insurance Funds.
(m) Form of Participation Agreement between Lincoln Life & Annuity
Company of New York and the Liberty Variable Investment Trust
Fund
(n) Participation Agreement between Lincoln Life & Annuity Company of
New York and the Lincoln National Bond Fund
(o) Participation Agreement between Lincoln Life & Annuity Company of
New York and the Lincoln National Money Market Fund.
(9) Opinion and Consent of Robert O. Sheppard, Corporate Counsel
(10) Opinion and Consent of Ernst & Young LLP, Independent Auditors
(11) Not applicable.
(13) Schedule of Performance Computation.
(14) Not applicable.
(15) (a) Organizational Chart of Lincoln National Life Insurance Holding
Company System.
(b) Memorandum Concerning Books and Records.
</TABLE>
C-2
<PAGE>
ITEM 25.
The following list contains the officers of Lincoln Life & Annuity Company
of New York who are engaged directly or indirectly in activities relating to the
Lincoln New York Account N for Variable Annuities as well as the contracts,
funded through Account N. The list also shows Lincoln Life & Annuity Company of
New York's executive officers and directors.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
- ---- ---------------------------------------------------------------------
<S> <C>
Joanne B. Collins* ....................... President, Treasurer and Director
Troy D. Panning* ......................... Second Vice President and Chief Financial Officer
Roland C. Baker .......................... Director
1801 S. Meyers Road
Oakbrook Terrace, IL 60161
J. Patrick Barrett ....................... Director
Chairman & CEO
Carpat Investments
4605 Watergap
Manlius, NY 13104
Thomas D. Bell, Jr. ...................... Director
President & CEO
Young & Rubicam Advertising
285 Madison Avenue
New York, NY 10017
Jon A. Boscia*** ......................... Director
Kathleen R. Gorman* ...................... Assistant Vice President
John H. Gotta***** ....................... Director
Barbara S. Kowalczyk*** .................. Director
M. Leanne Lachman ........................ Director
Managing Director
Boston Financial
437 Madison Avenue - 18th Floor
New York, NY 10022
Louis G. Marcoccia ....................... Director
Senior Vice President
Syracuse University
Skytop Office Building
Skytop Road
Syracuse, NY 13244-5300
John M. Pietruski ........................ Director
One Penn Plaza
Suite 3408
New York, NY 10119
Lawrence T. Rowland**** .................. Director
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
- ---- ---------------------------------------------------------------------
<S> <C>
Robert O. Sheppard* ...................... Assistant Vice President and Corporate Counsel
Richard C. Vaughan*** .................... Director
C. Suzanne Womack*** ..................... Secretary
</TABLE>
- ------------------------
* Principal business address of each person is 120 Madison Street, 17th
Floor, Syracuse, New York 13202.
** Principal business address of each person is 1300 S. Clinton Street, Fort
Wayne, Indiana 46802.
*** Principal business address of each person is Centre Square, West Tower,
1500 Market St., Suite 3900, Philadelphia, PA 19102.
**** Principal business address of each person is 1700 Magnovox Way, One
Reinsurance Place, Fort Wayne, Indiana 46804.
***** Principal business address of each person is 350 Church Street, Hartford,
CT 06103.
C-4
<PAGE>
ITEM 26.
PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH THE DEPOSITOR OR REGISTRANT
See Exhibit 15(a): The Organizational Chart of The Lincoln National
Insurance Holding Company System is hereby incorporated herein by this
reference.
ITEM 27.
NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28.
INDEMNIFICATION--UNDERTAKING
(a) Brief description of indemnification provisions.
In general, Article VII Section 2 of the By-Laws of Lincoln Life & Annuity
Co. of NY (LNY) provides that LNY 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
LNY, 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, LNY. Certain additional conditions apply to indemnification in
criminal proceedings.
In particular, separate conditions govern indemnification of directors,
officers, and employees of LNY in connection with suits by, or in the rights
of LNY.
Please refer to Article VII of the By-Laws of LNY (Exhibit No. 6(a) 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.
ITEM 29.
(a) Lincoln Financial Advisors, Inc. is the Principal Underwriter for Lincoln
Life & Annuity Variable Annuity Account H; Lincoln Life & Annuity Variable
Annuity Account L; Lincoln Life & Annuity
C-5
<PAGE>
Flexible Premium Variable Life Account M; LLANY Separate Account R for
Flexible Premium Variable Life Insurance; and LLANY Separate Account S for
Flexible Premium Variable Life Insurance.
(b) OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME & TITLE BUSINESS ADDRESS
- ------------ ----------------
<S> <C> <C>
J. Michael Hemp 350 Church Street
President and Director Hartford, CT 06103-1106
Michael E. McMath 350 Church Street
Sr. Vice Pres. And Director Hartford, CT 06103-1106
Matthew Lynch 350 Church Street
VP & Chief Fin. & Admin. Hartford, CT 06103-1106
Officer & Dir.
Richard C. Boyles 200 East Berry Street
Second Vice Pres. & Fort Wayne, IN 46802-2706
Controller
Jeffrey C. Carleton 350 Church Street
Vice President Hartford, CT 06103-1106
John M. Behrendt 200 East Berry Street
Vice President Fort Wayne, IN 46802-2706
C. Gary Shimmin 180 N. Stetson Avenue,
Vice President Suite 4300
Chicago, IL 60601
Janet C. Chrzan 1500 Market Street,
Vice President & Treasurer Suite 3900
Philadelphia, PA 19102-2112
Susan J. Scanlon 350 Church Street
Second Vice President, Hartford, CT 06103-1106
Compliance
Cynthia A. Rose 1300 South Clinton Street
Secretary Fort Wayne, IN 46802
Gary D. Giller 7720 Rivers Edge Drive,
Director Suite 100
Columbus, OH 43235
</TABLE>
ITEM 30.
LOCATION OF ACCOUNTS AND RECORDS
Exhibit 15(b) is hereby expressly incorporated herein by this reference.
ITEM 31.
Not applicable.
C-6
<PAGE>
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to this
registration statement as frequently as necessary to ensure that the audited
financial statements in the registration statement are never more than 16
months old for so long as payments under the variable annuity contracts may
be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase an Individual Contract offered by the Prospectus, a
space that an applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written communication affixed to
or included in the Prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information and
any financial statement required to be made available under this Form
promptly upon written or oral request to LNY at the address or phone number
listed in the Prospectus.
(d) LNY hereby represents that the fees and charges deducted under the contract,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by LNY.
(e) Registrant hereby represents that it is relying on the American Council of
Life Insurance (avail. Nov. 28, 1988) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements
of Section 403(b) of the Internal Revenue Code, and represents further that
it will comply with the provisions of paragraphs (1) through (4) set forth
in that no-action letter.
C-7
<PAGE>
SIGNATURES
(a) As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant has caused this Amendment to the Registration Statement
to be signed on its behalf, in the City of Syracuse, and State of New York on
this 27th day of April, 2000.
<TABLE>
<S> <C> <C>
Lincoln New York Account N for Variable
Annuities
(Registrant)
By: /s/ Joanne B. Collins
-----------------------------------------
Joanne B. Collins, PRESIDENT
Lincoln Life & Annuity Company of New York
(Depositor)
By: /s/ Joanne B. Collins
-----------------------------------------
Joanne B. Collins, PRESIDENT
</TABLE>
(b) As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed for the Depositor by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOANNE B. COLLINS President, Treasurer and April 27, 2000
------------------------------------------- Director (Principal
Joanne B. Collins Executive Officer)
Second Vice President and April 27, 2000
/s/ TROY D. PANNING Chief Financial Officer
------------------------------------------- (Principal Financial
Troy D. Panning Officer and Principal
Accounting Officer)
/s/ ROLAND C. BAKER
------------------------------------------- Director April 27, 2000
Roland C. Baker
/s/ J. PATRICK BARRETT
------------------------------------------- Director April 27, 2000
J. Patrick Barrett
------------------------------------------- Director April , 2000
Thomas D. Bell, Jr.
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JON A. BOSCIA
------------------------------------------- Director April 27, 2000
Jon A. Boscia
------------------------------------------- Director April , 2000
John H. Gotta
/s/ BARBARA S. KOWALCZYK
------------------------------------------- Director April 27, 2000
Barbara S. Kowalczyk
/s/ M. LEANNE LACHMAN
------------------------------------------- Director April 27, 2000
M. Leanne Lachman
/s/ LOUIS G. MARCOCCIA
------------------------------------------- Director April 27, 2000
Louis G. Marcoccia
------------------------------------------- Director April , 2000
John M. Pietruski
/s/ LAWRENCE T. ROWLAND
------------------------------------------- Director April 27, 2000
Lawrence T. Rowland
/s/ RICHARD C. VAUGHAN
------------------------------------------- Director April 27, 2000
Richard C. Vaughan
</TABLE>
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<PAGE>
WHOLESALING AGREEMENT
AGREEMENT dated as of October , 1999 by and among LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK ("LNY"), a New York insurance corporation, LINCOLN FINANCIAL
ADVISORS CORPORATION ("LFA"), an Indiana corporation, in its capacity as
principal underwriter for one or more of LNY's life insurance and/or annuity
separate accounts, and DELAWARE DISTRIBUTORS, L.P., a Delaware limited
partnership (hereinafter referred to as "DELAWARE").
WITNESSETH:
WHEREAS, LNY issues and sells certain variable annuity and variable life
insurance contracts and uses LFA as its principal underwriter for such
contracts; and WHEREAS, LNY, LFA and DELAWARE desire to establish an arrangement
whereby DELAWARE will act as a wholesaler for such variable annuity and variable
life insurance contracts and, as such, will recruit business firms to distribute
such contracts; NOW, THEREFORE, in consideration of their mutual promises, LNY,
LFA and DELAWARE hereby agree as follows:
1. DEFINITIONS
a. 1933 ACT - The Securities Act of 1933, as amended.
b. 1934 ACT - The Securities Exchange Act of 1934, as amended.
c. 1940 ACT - The Investment Company Act of 1940, as amended.
d. ACCOUNT - Each and any separate account established by LNY and listed
on Schedule 1.d to this Agreement, as amended from time to time in
accordance with Section 2.e of this Agreement. The phrase "Account
supporting the Contracts" or "Account supporting a class of Contracts"
shall mean the separate account identified in such Contracts as the
separate account to which the Purchase Payments made, net of any
front-end charges, under such Contracts are allocated and as to which
income, gains ad losses, whether or not realized, from assets
allocated to such separate account, are, in accordance with such
Contracts, credited to or charged against such separate account
without regard to other income, gains, or losses of LNY or any other
separate account established by LNY.
e. ASSOCIATED PERSON - This term as used in this Agreement shall have the
meaning assigned to it in the 1934 Act.
f. BROKER - An entity registered as a broker-dealer and licensed as a
life insurance agency or associated with an entity so licensed in
accordance with any applicable SEC no-action letter, and recruited by
DELAWARE and subsequently authorized by LNY to distribute the
Contracts pursuant to the sales agreement with LFA entered into in
accordance with Section 3 of this Agreement.
g. CONTRACTS - The variable annuity contracts or variable life insurance
contracts described more specifically on Schedule 1.g to this
Agreement, as amended from time to time pursuant to Section 2.e. The
term "Contracts" shall include any riders to such contracts and any
other contracts offered in connection therewith or any contracts for
which such Contracts may be exchanged or converted. The
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phrase "a class of Contracts" shall mean those variable annuity contracts
or variable life insurance contracts, as the case may be, issued on the
same policy form or forms and covered by the same Registration Statement,
as shown on Schedule 1.g to this Agreement.
h. DISTRIBUTOR - LINCOLN FINANCIAL ADVISORS CORPORATION, principal
underwriter for the Contracts.
i. FUND - any fund or series thereof in which an Account supporting the
Contracts invests. (Plural, "Funds")
j. FUND PROSPECTUS - At any time while this Agreement is in effect, the
prospectus for a Fund most recently filed with the SEC pursuant to
Rule 485 or Rule 497 under the 1933 Act. (For purposes of Section 11
of this Agreement, however, the term "Fund Prospectus" means any
document that is or at any time was a Fund Prospectus within the
meaning of this Section 1.j.)
k. FUND REGISTRATION STATEMENT - At any time while this Agreement is in
effect, the currently effective registration statement of a fund filed
with the SEC under the 1933 Act, or currently effective post-effective
amendment thereto, for shares of a fund. (For purposes of Section 11
of this Agreement, however, the term "Fund Registration Statement"
means any document that is or at any time was a Fund Registration
Statement within the meaning of this Section 1.k.)
l. NASD - Collectively, The National Association of Securities Dealers,
Inc. ("Association") and NASD Regulation, Inc. ("NASDR").
m. PARTICIPATION AGREEMENT - an agreement between LNY and a Fund relating
to the investment of assets of LNY separate accounts in such Fund.
n. PROCEDURES - The administrative procedures prepared and distributed by
LNY or LFA, as such may be amended or supplemented from time to time,
relating to the solicitation, sale, issue and delivery of the
Contracts.
o. PROSPECTUS - At any time while this Agreement is in effect, the
current prospectus relating to the Contracts most recently filed with
the SEC pursuant to Rule 485 or Rule 497 of the 1933 Act. (For
purposes of Sections 5.a and 11 of this Agreement, however, the term
"any Prospectus" means any document that is or at any time was a
Prospectus within the meaning of this Section 1.o.)
p. PREMIUM PAYMENT - a payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
q. REGISTRATION STATEMENT - At any time while this Agreement is in effect
the pending or currently effective registration statement (including
post-effective amendments) filed with the SEC under the 1933 Act, as
applicable, relating to a class of Contracts, including financial
statements included in, and all exhibits to, such registration
statement or post-effective amendment. (For purposes of Sections 5.a
and 11 of this Agreement, however, the term "Registration Statement"
means any document that is or at any time was a Registration Statement
within the meaning of this Section 1.q.)
r. REGULATIONS - The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act, and the rules and
regulations of the NASD, as in effect at the time this Agreement is
executed or thereafter promulgated, and as they may be amended from
time to time.
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s. REPRESENTATIVE - An Associated Person of DELAWARE or a Broker
registered with the NASD as a registered representative or principal
of DELAWARE or Broker, as the case may be.
t. SEC - The Securities and Exchange Commission.
u. STATE - Any state or commonwealth of the United States, the District
of Columbia or any other territory of the United States.
v. TERRITORY - Any State or territory of the United States (including the
District of Columbia) where the contracts have been filed and approved
for sale by the appropriate regulatory authorities.
w. WHOLESALER - DELAWARE, when it performs the functions assigned to it
in this agreement (including, but not by way of limitation, those
functions set forth in Sections 2, 3 and 4 hereof).
2. APPOINTMENT AND WHOLESALING DUTIES
a. LNY and LFA hereby authorize DELAWARE under applicable securities laws
to engage in the activities contemplated in this Agreement relating to
the wholesaling of the Contracts for which LFA acts as principal
underwriter.
b. DELAWARE undertakes to use its best efforts to contact, recruit,
screen, and recommend Brokers in accordance with Section 3 of this
Agreement, consistent with market conditions and compliance with its
responsibilities under the federal securities laws and regulations.
c. (1) The appointment and authorization of DELAWARE to engage in
wholesaling activities pursuant to this Agreement is exclusive as to
the Contracts listed on Schedule 1.g, as amended from time to time in
accordance with Section 2.e of this Agreement. LNY and LFA shall not
authorize any other person to engage in wholesaling activities with
respect to the Contracts or to recruit business firms to engage in
wholesaling activities with respect to the Contracts (other than
business firms recommended by DELAWARE pursuant to Section 3 of this
Agreement) without DELAWARE's prior written consent, nor shall LNY
and LFA separately engage in wholesaling or distribution activities
relating to the Contracts. Nothing in this Agreement, however, shall
preclude or limit LFA's ability to distribute the Contracts through
its own registered representative.
(2) To the extent that any Contract offers a general account option,
LNY shall, if required by the SEC, register that option under the 1933
Act.
(3) LNY shall register each Account with the SEC. The subaccounts of
each Account available under the Contracts or a class of Contracts are
listed on Schedule 1.a to this Agreement, as amended form time to time
in accordance with Section 2.e of this Agreement.
d. LNY shall obtain appropriate authorizations, to the extent necessary,
whether by Registration, qualification, approval or otherwise, for the
issuance and sale of the Contracts in any State. From time to time LNY
shall notify DELAWARE in writing of all States other than New York in
which each class of Contract may then lawfully be offered.
e. The parties to this Agreement may amend Schedules 1.d and 1.g to this
Agreement from time to time by mutual agreement to reflect changes in
or relating to the Contracts and the Accounts and to add new classes
of variable
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annuity contracts and variable life insurance contracts to
be issued by LNY for which DELAWARE will act as wholesaler. The
provisions of this Agreement shall be equally applicable to each such
class of Contracts, unless the context otherwise requires. Schedule
9.a to this Agreement may be amended only by mutual agreement of the
parties to this Agreement pursuant to Section 9 of this Agreement.
f. Either party may recommend the addition of funding options for one or
more Accounts. DELAWARE will have final approval of fund additions
(including additions pursuant to substitutions) as long as each such
addition satisfies LNY's then current selection criteria.
3. RECRUITMENT OF BROKERS AND RELATED RESPONSIBILITIES
a. LNY hereby authorized DELWARE to contact, recruit, screen, and
recommend to LNY and LFA business firms appropriate to act as Brokers
for the sale of the Contracts, and DELAWARE agrees to do so. DELAWARE
will use its best efforts, upon diligent inquiry, to recruit only
Brokers. LNY shall have the right to reject any such recommendation,
but shall not do so arbitrarily or unreasonably.
b. LNY shall have the responsibility for and bear the cost of:
(i) executing appropriate sales agreements with the business firms
recommended by DELAWARE; and (ii) appointing and renewing appointments
for, such business firms, and/or Associated Persons of such firms, as
insurance agents of LNY in those states where such business firms
and/or Associated Persons possess insurance agent licenses (except as
provided in Section 9.c hereof). DELAWARE shall provide LNY with such
information as LNY requests for this process. Neither DELAWARE nor LFA
nor LNY shall have responsibility for, or bear the cost of, any
registration or licensing of Brokers or any of their Associated
Persons with the SEC, NASD or any state insurance governmental or
regulatory agency. LNY shall maintain the appointment records of all
agents appointed by LNY to distribute the Contracts contemplated by
this Agreement.
c. Any sales agreement entered into by LFA with a Broker shall provide
that:
(1) The Broker (or an affiliated person duly registered as a
broker-dealer with the SEC) shall train, supervise, and be solely
responsible for the conduct of, all of its Associated Persons in the
proper method of solicitation, sale and delivery of the Contracts for
the purpose of complying on a continuous basis with the NASD Conduct
Rules and with federal and state securities and insurance law
requirements applicable in connection with the offering and sale of
the Contracts;
(2) Premium Payments shall be made payable to LNY and shall be
delivered together with all applications and related information in
accordance with the Procedures;
(3) The Broker shall be solely responsible for all compensation paid
to its Representatives and all related tax reporting that may be
required under applicable law;
(4) The Broker and its Representatives shall not use, develop or
distribute any promotional, sales or advertising material that has not
been approved in writing by LNY and filed with the appropriate
governmental or regulatory agencies; and
(5) The Broker shall not have authority, on behalf of LNY, LFA or
DELAWARE, to make , alter or discharge any Contract or other contract
entered
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<PAGE>
into pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any Premium Payment; to
receive any monies or Premium Payments (except for the sole purpose of
promptly forwarding monies or Premium Payments to LNY); or to expend,
or contract for the expenditure of, funds of LNY, LFA or DELAWARE.
d. DELAWARE shall provide assistance to LNY at a level acceptable to LNY,
to facilitate the appointment of Brokers and their Representatives.
e. DELAWARE shall train, supervise, and be solely responsible for the
conduct of, all of its Associated Persons (but not Brokers or their
Representatives unaffiliated with DELAWARE), for the purpose of
complying on a continuous basis with the NASD Conduct Rules and with
federal securities laws and state securities and insurance laws
applicable to the wholesaling activities contemplated in this
Agreement. DELAWARE shall be responsible for the maintenance and
updating of broker-dealer or agent registrations that they determine
to be necessary for themselves and/or their Associated Persons
pursuant to any federal or state securities law or state insurance
law.
f. DELAWARE, LFA and LNY will have no supervisory responsibility (as such
supervision is contemplated by the 1934 Act or the NASD's Conduct
Rules) with respect to Brokers or their Representatives. Under no
circumstances will DELAWARE be responsible for Brokers' or Broker's
Representatives' failure to comply with the Procedures.
g. DELAWARE shall not have authority on behalf of LNY or LFA to make,
alter or discharge any Contract or other contract entered into to
extend the time of paying any Premium Payment; or to receive any
monies or Purchase Payments. DELAWARE shall not expend, nor contract
for the expenditure of, funds of LNY or LFA; nor shall DELAWARE
possess or exercise any authority on behalf of LNY or LFA other than
that expressly conferred on DELAWARE by this Agreement.
h. DELAWARE shall act as an independent contractor in the performance of
its duties and obligations under this Agreement, and nothing contained
in this Agreement shall constitute DELAWARE or its respective
Associated Persons employees of LNY or LFA in connection with the
wholesaling activities contemplated by this Agreement or otherwise.
i. DELAWARE shall not purchase Contracts from, nor sell Contracts for,
LNY, nor shall it have any direct or indirect participation in such
undertakings, and nothing contained in this Agreement shall constitute
DELAWARE an "underwriter" or a "principal underwriter" of any of the
Contracts, as those terms are defined in the 1933, 1934 or 1940 Acts.
j. The Distributor of the Contracts, as the term "Distributor" is
customarily used in the variable insurance products industry, shall be
LFA. LNY shall be identified as such in all sales, promotional, and
advertising materials for the Contracts.
4. MARKETING AND SALES MATERIAL
a. (1) DELAWARE shall be responsible for drafting and designing all
promotional, sales and advertising materials to be developed for
filing pursuant to section 4(a)(3). LNY and LFA will cooperate with
DELAWARE in the
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development of these materials. No such materials
shall be used without the prior approval of LNY and LFA, which
approval shall not be unreasonably withheld.
(2) LNY/LFA shall be responsible for maintaining that portion of any
World Wide Web site(s) relating to the Contracts and their
distribution. DELAWARE will not, without prior authorization in
writing from LNY or LFA, establish direct or indirect hyperlinks or
other electronic connections between the Web site(s) described in the
preceding sentence and any current or future Web site(s) in use or to
be used for or in connection with any other products or services.
(3) (a) DELAWARE shall be responsible for filing with the NASD, as
required, all promotional, sales and advertising material developed
for use with the Contracts, and shall be responsible for doing any
necessary followup with the NASD . LFA shall provide DELAWARE with
final copies of all such material developed it or by LNY, and shall
not use such material until DELAWARE has informed LFA that such
material has been filed with and where appropriate, reviewed by, the
NASD. LFA and DELAWARE agree to cooperate in implementing requests for
changes received from the NASD.
(b) LNY shall be responsible for filing, as required, all
promotional, sales and advertising material, developed for use with
the Contracts, with any other federal or state governmental or
regulatory agencies, including any state insurance governmental or
regulatory agencies.
(4) With respect to all promotional, sales and advertising material
developed by DELAWARE, LFA and LNY shall have a reasonable period of
time, not to exceed five full business days, for review of each of
such material. In response to this material, LFA may provide to
DELAWARE: (1) changes, if any, which LFA deems mandatory; and (2)
changes which LFA deems optional. DELAWARE will make the mandatory
changes. In addition, DELAWARE may make the optional changes, at its
discretion. Once DELAWARE has completed the processing of all changes,
DELAWARE will provide proof copy to LFA for LFA's final approval
before the materials are filed with the NASD and disseminated to
Brokers and/or to the public.
b. DELAWARE acknowledges that LNY shall have the unconditional right to
reject, in whole or in part, any application for a Contract. In the
event an application is rejected, any Premium Payment submitted will
be returned by or on behalf of LNY. In that event, LNY or LFA on its
behalf will use its best efforts to so notify DELAWARE when it
notifies the Broker/Dealer which submitted the Premium Payment.
In the event that a purchaser exercises the free look right under the
Contract, any amount to be refunded as provided in such Contract will
be so refunded to the purchaser by or on behalf of LNY. LNY will
follow the same notification procedure that it uses for rejected
applications.
c. (1) DELAWARE will bear the cost of printing and mailing:
(a) all preliminary and definitive Contract Prospectuses used for
sales purposes; and
(b) all preliminary and definitive Fund Prospectuses used for
sales purposes, except to the extent that these expenses are borne by
a Fund pursuant to the relevant Fund Participation Agreement.
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(2) LNY will bear the cost of:
(a) preparing, printing and mailing all preliminary and
definitive Contract Prospectuses used for other than sales
purposes; and
(b) printing and mailing all preliminary and definitive Fund
Prospectuses used for other than sales purposes, except to the
extent that these expenses are borne by a Fund pursuant to the
relevant Fund Participation Agreement.
d. DELAWARE will pay the following expenses contemplated by this
Agreement for: (i) the compensation, if any, of its Associated
Persons; (ii) expenses associated with the initial and ongoing NASD
licensing and training of its Associated Persons involved in the
wholesaling activities; (iii) the drafting, design, printing and
mailing of all promotional, sales or advertising material developed by
DELAWARE for use in connection with the distribution of the Contracts;
(iv) expenses associated with telecommunications with LNY and LFA at
the sites of DE LAWARE or its Associated Persons, including site
installations and purchases, leases or rentals of modems, terminals
and other hardware, and lease line telephone charges for their
Associated Persons; (v) continuing education courses sponsored by
DELAWARE for all Brokers and relating to the contracts; (vi) fees
associated with NASD filings of promotional, sales or advertising
material developed by DELAWARE; (vii) development and maintenance of
DELAWARE's Internet Web sites and related functions; (viii) media
advertising and promotion (e.g., broker trade journals) for use in
connection with the distribution of the Contracts; and (ix) any other
expenses incurred by DELAWARE or its Associated Persons for the
purpose of carrying out the obligations of DELAWARE hereunder.
e. LNY will pay all expenses in connection with: (i) the preparation and
filing with appropriate governmental or regulatory agencies of the
Registration Statement and each preliminary Prospectus and definitive
Prospectus; (ii) the preparation and issuance of the Contracts; (iii)
any authorization, registration, qualification or approval of the
Contracts required under the securities, blue-sky laws or insurance
laws of the States; (iv) registration fees for the Contracts payable
to the SEC or to any other governmental or regulatory agency; (v) the
mailing of Prospectuses for the Contracts and Fund Prospectuses and
any supplements thereto, as required by federal securities laws, and
proxy soliciting materials and periodic reports relating to a Fund or
the Accounts to Contractowners; (vi) the printing of applications, the
Procedures and any other administrative forms utilized in connection
with the servicing of the Contracts; (vii) compensation as provided in
Section 9 hereof; (viii) the design and maintenance of any
product-specific Web site for the contracts, if LNY determines that
such a Web site is necessary or advisable; and (ix) any other expenses
related to the distribution of the Contracts except as provided in
Sections 4.c and 4.d of this Agreement.
f. Except to the extent for which DELAWARE is responsible under section
6.5 hereof, LNY alone shall be responsible for and bear the cost of
administration of the Contracts following their issue, including all
Contractowner service and communication activities.
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g. LFA will confirm to each owner of a Contract, in accordance with Rule
10b-10 under the 1934 Act, LNY's acceptance of Premium Payments and
such other transactions as are required by Rule 10b-10 or
administrative interpretations thereunder and in accordance with
Release 8389 under the 1934 Act. Except for material which is required
by law to accompany these confirmations, nothing shall be included
with them that has not been approved in advance by LNY or LFA and
DELAWARE.
5. REPRESENTATIONS AND WARRANTIES
a. LNY represents and warrants to DELAWARE, as of the effective date of
each Registration Statement for the Contracts (or class of Contracts)
and at each time that a Contract is sold, as follows:
(1) The Registration Statement has been declared effective by the SEC
or has become effective in accordance with the Regulations.
(2) The Registration Statement and the Prospectus each comply in all
material respects with the provisions of the 1933 Act and the 1940 Act
and the Regulations, and neither the Registration Statement nor the
Prospectus contains an untrue statement of a material fact or omits to
state 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, however, that none of
the representations and warranties in this Section 5.a(2) shall apply
to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to LNY in writing by DELAWARE expressly for use in the
Registration Statement.
(3) LNY has not received notice from the SEC with respect to the
Registration Statement or the Account supporting the Contracts
described in the Registration Statement pursuant to Section 8(e) of
the 1940 Act and no stop order under the 1933 Act has been issued and
no proceeding therefor has been instituted or threatened by the SEC.
(4) The accountants who certified the financial statements included
the Registration Statement and Prospectus are independent public
accountants as required by the 1933 Act, the 1940 Act and the
Regulations.
(5) The financial statements included in the Registration Statement
for the Account and for LNY present fairly the respective financial
positions of LNY and the Account supporting the Contracts described in
the Registration Statement as of the dates indicated; and, for the
Account, such financial statements have been prepared in conformity
with generally accepted accounting principles in the United States
applied on a consistent basis, and for LNY, such financial statements
have been prepared in conformity with statutory accounting principles
in the United States applied on a consistent basis.
(6) Subsequent to the respective dates as of which information is
given in the Registration Statement or the Prospects, there has not
been any material adverse change in the condition, financial or
otherwise, of LNY or the Account supporting the Contracts described in
the Registration Statement that would cause such information to be
materially misleading.
(7) LNY has been duly organized and is validly existing as a
corporation in good standing under the laws of New York, with full
power and authority to own,
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lease and operate its properties and conduct its business in the
manner described in the Prospectus, is duly qualified to transact the
business of a life insurance company and is validly existing or in
good standing in each State in which the Contracts are or will be
offered.
(8) Each Account supporting the Contracts described in the
Registration Statement has been duly authorized and established and is
validly existing as an insurance company separate account under the
laws of New York and is duly registered with the SEC as a unit
investment trust under the 1940 Act.
(9) The form of the Contracts has been (or, before it is offered for
sale, will be) approved to the extent required by the New York
Superintendent of Insurance and by the governmental agency responsible
for regulating insurance companies in each other state in which the
Contracts are offered.
(10) The execution and delivery of this Agreement and the consummation
of the transactions contemplated in this Agreement have been duly
authorized by all necessary corporate action by LNY and when so
executed and delivered this Agreement will be the valid and binding
obligation of LNY enforceable in accordance with its terms.
(11) LNY has filed with the SEC all statements and other documents
required for registration under the provisions of the 1940 Act and the
Regulations thereunder for the Account supporting the Contracts
described in the Registration Statement, and such registration is (or,
prior to being offered to the public, will be) effective; there are no
agreements or documents required by the 1933 Act, the 1940 Act or the
Regulations to be filed with the SEC as exhibits to the Registration
Statement that have not been so filed; and LNY has obtained all
exemptive or other orders of the SEC necessary to make the public
offering and consummate the sale of the Contracts pursuant to this
Agreement and to permit the operation of the Account supporting the
Contracts described in the Registration statement, as contemplated in
the Prospectus.
(12) The Contracts have been duly authorized by LNY and conform to the
descriptions thereof in the Registration Statement and the Prospectus
and, when issued as contemplated by the Registration Statement, will
constitute legal, validly issued and binding obligations of LNY in
accordance with their terms.
b. DELAWARE represents and warrants to LNY and LFA on the date hereof
as follows:
(1) DELAWARE has been duly organized and is validly existing as a
limited partnership in good standing under the laws of Delaware with
full power and authority to own, lease and operate its properties and
conduct its business as a broker-dealer registered with the SEC and
with the securities commission of every State where such registration
is required, and is a member in good standing of the NASD.
(2) DELAWARE has taken all action including, without limitation, those
necessary under its limited partnership agreement, by-laws and
applicable state law, necessary to authorize the execution, delivery
and performance of this Agreement and all transactions contemplated
hereunder.
(3) DELAWARE is and during the term of this Agreement shall remain
duly registered as a broker-dealer under the 1934 Act, a member in
good standing with
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the NASD, and duly registered as a broker-dealer under applicable
state securities laws.
c. LFA represents and warrants to DELAWARE in the date hereof as follows:
(1) DELAWARE has been duly organized and is validly existing as a
limited partnership in good standing under the laws of Indiana with
full power and authority to own, lease and operate its properties and
conduct its business as a broker-dealer registered with the SEC and
with the securities commission of every State where such registration
is required, and is a member in good standing of the NASD.
(2) DELAWARE has taken all action including, without limitation, those
necessary under its charter, by-laws and applicable state law,
necessary to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereunder.
(3) DELAWARE is and during the term of this Agreement shall remain
duly registered as a broker-dealer under the 1934 Act, a member in
good standing with the NASD, and duly registered as a broker-dealer
under applicable state securities laws.
6. ADDITIONAL RESPONSIBILITIES OF LNY
a. LNY shall:
(1) maintain the registration of the Contracts with the SEC and any
state securities commissions of any State where the securities or
blue-sky laws of such State require registration of the Contracts,
including without limitation using its best efforts to prevent a stop
order from being issued or if a stop order has been issued using its
best efforts to cause such stop order to be withdrawn;
(2) maintain the approval or other authorization of the Contract forms
where required under the insurance laws and regulations of any State;
(3) keep such registration, approval and authorization in effect
thereafter so long as the Contracts are outstanding, to the extent
required by law; and
b. During the term of this Agreement, LNY shall take all action required
to cause each class of Contracts to comply, and to continue to comply,
as annuity contracts or life insurance contracts, as the case may be,
and to cause the Registration Statement and the Prospectus for each
class of Contracts to comply, and to continue to comply, with all
applicable federal laws and regulations and all applicable laws and
regulations of each State.
c. LNY, during the term of this Agreement, shall notify DELAWARE
immediately:
(1) When each Registration Statement (or amendment or supplement to
it) has become effective;
(2) Of the initiation of any legal proceeding commenced by any
regulatory body or by any third party alleging that any material
statement made in a Registration Statement or a Prospectus is untrue
in any material respect or results in a material omission in a
Registration Statement or Prospectus;
(3) Of the issuance by the SEC of any stop order with respect to a
Registration Statement or any amendment thereto; or the initiation by
the SEC of any proceedings for that purpose or for any other purpose
relating to the registration and/or offering of the Contracts (or
class of Contracts);
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<PAGE>
(4) Of all those States in which registration of the Contracts (or
class of Contracts) is required under the securities or blue-sky laws,
and the date on which such registrations have become effective.
d. LNY shall furnish to DELAWARE without charge, promptly after filing,
on copy of each Registration Statement as originally filed, including
financial statements and all exhibits (including exhibits incorporated
therein by reference).
e. LNY shall file in a timely manner all reports, statements and
amendments required to be filed by or for each Account or class of
Contracts under the 1933 Act and/or the 1940 Act or the Regulations.
f. LNY shall provide DELAWARE access to such records, officers and
employees of LNY and of each Account at reasonable times as is
necessary to enable DELAWARE to fulfill its obligations under the
federal securities laws, Regulations and NASD rules.
6.5 ADDITIONAL RESPONSIBILITIES OF DELAWARE
DELAWARE shall:
a. assist LNY with certain administrative activities relating to the
Contracts, to the extent agreed upon from time to time by LNY and
DELAWARE.
b. provide LNY and LFA access to such of its records, officers and
employees at reasonable times as is necessary to enable each of
LNY and LFA to fulfill its obligations under the federal
securities laws and the Regulations.
c. be responsible for duplication and distribution of illustration
and asset allocation software programs originated by LNY.
7. CONFIDENTIALITY AND INTELLECTUAL PROPERTY RIGHTS OF DELAWARE, LNY AND LFA
a. LNY acknowledges that the names and addresses of all customers and
prospective customers (for purposes of this Section 7.a, the terms
"customers" and "prospective customers" shall not mean Brokers) of any
Broker that may come to the attention of LNY or LFA as a result of its
relationship with any Broker and not from any independent source, are
confidential and shall not be used by LNY or LFA for any purpose
whatsoever, except (1) as agreed upon between LNY or LFA and any
Broker; and (2) as may be necessary in connection with the
administration of the Contracts sold by the Brokers, including
responses to specific requests made to LNY for service by
Contractowners or efforts to prevent the replacement of such Contracts
or to encourage the exercise of options under the terms of the
Contracts. The restrictions set forth in the previous sentence do not
apply if and to the extent a Broker knowingly discloses the names and
addresses of its customers or prospective customers to LNY or LFA
outside the operation of this Agreement. In no event shall the names
and addresses of such customers and prospective customers be furnished
by LNY to any other person not affiliated with LNY or LFA. The intent
of this paragraph is that LNY and LFA shall not utilize or permit to
be utilized (other than as provided above) its knowledge of any
Broker, derived as a result of the relationship created through the
funding and sale of the Contracts, for the solicitation of sales of
any product or
11
<PAGE>
service other than the Contracts. This paragraph shall
remain operative and in full force and effect regardless of the
termination of this Agreement, and shall survive any such termination.
b. The intellectual property rights of the parties are set forth in
Exhibit A to this Agreement, which is hereby incorporated herein by
this reference.
8. RECORDS
LNY, LFA and DELAWARE each shall maintain such accounts, books and
other documents as are required to be maintained by each of them by
applicable laws and regulations and shall preserve such accounts,
books and other documents for the periods prescribed by such laws and
regulations. The accounts, books and records of LNY, the Account, LFA
and DELAWARE as to all transactions hereunder shall be maintained so
as to clearly and accurately disclose the nature and details of the
transactions, including such accounting information as necessary to
support the reasonableness of the amounts paid by LNY hereunder. Each
party shall have the right to inspect and audit such accounts, books
and records of the other party during normal business hours upon
reasonable written notice to each other party. Each party shall keep
confidential all information obtained pursuant to such an inspection
or audit, and shall disclose such information to third parties only
upon receipt of written authorization from the other party, except as
required under compulsion of law.
9. COMPENSATION
a. BASIS.
(1) LNY shall compensate DELAWARE for sales of the Contracts by the
Brokers pursuant to Schedule 9.a to this Agreement, as such Schedule
may be amended from time to time upon mutual agreement of the parties
to this Agreement. Such compensation shall be based on Premium
Payments received and accepted by LNY for all Contracts issued on
applications obtained by the Brokers or any of their respective
Representatives. LNY will pay compensation due DELAWARE in accordance
with the procedures set forth on Schedule 9.a. The compensation
provided for in this Section 9 shall cease after the termination date
of the Agreement.
(2) If LNY informs DELAWARE that any State, by insurance rule,
regulation or statue, prohibits any payment of compensation by LNY to
a class of business entities including DELAWARE, DELAWARE shall
designate in writing a business entity or natural person, including an
insurance agency affiliate of DELAWARE meeting the requirements of
such State, to receive any amounts that may otherwise be payable to
DELAWARE hereunder, and LNY shall have the right to rely upon the
legality of all such designations. DELAWARE may change such
designation from time to time, upon prior written notice to LNY. Any
payments made by LNY to any person or entity so designated by DELAWARE
shall discharge LNY's liability to DELAWARE hereunder.
(3) If a purchaser rescinds a Contract or exercises a right to
surrender a contract for return of all Premium Payments, DELAWARE will
repay to LNY, on demand, the amount of any compensation it received on
the Premium Payments returned.
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<PAGE>
b. INDEBTEDNESS. Nothing in this Agreement shall be construed as giving
DELAWARE the right to incur any indebtedness on behalf of LNY.
c. RENEWAL APPOINTMENT FEES FOR LOW-PRODUCING FIRMS AND ASSOCIATED
PERSONS. LNY shall consult with DELAWARE prior to any refusal by LNY,
on grounds of insufficient production of premium income for LNY
products, to renew the appointment of any firm or Associated Person
appointed to LNY under Section 3.b above. DELAWARE shall not
unreasonably object to any such non-renewal.
d. REPORTING. DELAWARE shall be responsible for all tax reporting
information DELAWARE is required to provide under applicable tax law
to its Associated Persons with respect to the Contracts. Nothing
contained in this Agreement or any sales agreement with a Broker is to
be construed to require DELAWARE to provide any tax reporting
information directly or indirectly to any unaffiliated Broker or its
Representatives.
10. INVESTIGATION AND PROCEEDINGS
a. LNY, LFA and DELAWARE will cooperate fully in any securities or
insurance regulatory investigation or proceeding, or judicial
proceeding brought by any regulatory authority, arising in connection
with the offering, sale or distribution of the Contracts for which
DELAWARE acts as wholesaler pursuant to this Agreement. Without
limiting the foregoing, each party agrees to furnish to the other
party any official notices received about these proceedings.
(1) In the case of a complaint involving the terms of the Contract,
DELAWARE will provide LNY and LFA with all available information and
will cooperate fully in LNY's and LFA's investigation of the
complaint.
(2) In the case of a complaint involving DELAWARE, LNY or LFA will
provide DELAWARE with all available information and will cooperate
fully in DELAWARE's investigation of the complaint.
11. INDEMNIFICATION
a. LNY shall indemnify and hold harmless DELAWARE and any officer,
director, employee or agent of DELAWARE, against any and all losses,
claims, damages or liabilities (including reasonable investigative and
legal expenses incurred in connection with any action, suit or
proceeding, or any amount paid in settlement thereof with the prior
approval of LNY), to which DELAWARE and/or any such person may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(1) arise out of or are based upon: (a) any untrue statement or allege
untrue statement of a material fact contained in (i) any Registration
Statement, Prospectus, Blue-Sky application or other document executed
by LNY specifically for the purpose of qualifying any or all of the
Contracts for sale under the securities laws of the United States or
any State; (ii) any promotional, sales or advertising material for the
Contracts; (iii) the Contracts themselves; or (iv) any amendment or
supplement to any of the foregoing; or (b) 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
case of (a) or (b) above this obligation to indemnify shall not apply
if such untrue statement or
13
<PAGE>
omission or such alleged untrue statement or alleged omission was made
in reliance upon ad in conformity with information furnished in
writing to LNY by DELAWARE specifically for use in the preparation of
any such Registration Statement, Prospectus or Blue-Sky application or
other document, material, or Contract (or any such amendment or
supplement thereto),
(2) arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission of a material fact
by or on behalf of LNY (other than statements or representations
contained in any Fund Registration Statement, Fund Prospectus or
promotional, sales or advertising material of a Fund that were not
supplied by LNY or by persons under its control) or the gross
negligence or intentional misconduct of LNY or persons under its
control with respect to the sale or distribution of the Contracts;
or (3) result because of the terms of any Contract or because of
any material breach by LNY of any terms of this Agreement or of any
Contracts or that proximately result from any activities of LNY's
officers, directors, employees or agents or their failure to take
action in connection with the sale of a Contract, to the extent of
LNY's obligations under the Agreement or otherwise, or the
processing or administration of the Contracts.
This indemnification obligation will be in addition to any
liability that LNY may otherwise have; provided, however, that
DELAWARE shall not be entitled to indemnification pursuant to this
Section 11.a if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by DELAWARE.
b. DELAWARE shall indemnify and hold harmless LNY and LFA and any
officer, director, employee or agent of LNY or LFA, against any and
all losses, claims, damages or liabilities (including reasonable
investigative and legal expenses incurred in connection with, any
action, suit or proceeding or any amount paid in settlement thereof
wit the prior approval of DELAWARE), to which LNY and/or any such
person may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon:
(1) (a) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or Blue-Sky
application or other document executed by LNY specifically for the
purposes of qualifying any or all of the Contracts for sale under the
securities law of any state (or any amendment or supplement to the
foregoing), or (b) omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, in light of the
circumstances in which they were made; in the case of (a) and (b) to
the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with information furnished in writing
to LNY by DELAWARE specifically for use in the preparation of any such
Registration Statement, Prospectus, such Blue-Sky application or other
document (or any such amendment or supplement thereto); or
(2) any use of promotional, sales or advertising material for the
Contracts not authorized by LNY or LFA pursuant to Section 4.a of this
Agreement or any
14
<PAGE>
verbal or written misrepresentations or any unlawful sales practices
concerning the Contracts by DELAWARE under federal securities laws or
NASD regulations (but not including state insurance laws, compliance
with which is a responsibility of LNY under this Agreement or
otherwise); or
(3) claims by agents, representatives or employees of DELAWARE for
commissions or other compensation or remuneration of any type; or
(4) any material breach by DELAWARE of any provision of this
Agreement. This indemnification obligation will be in addition to any
liability that DELAWARE may otherwise have; provided, however, that
LNY shall not be entitled to indemnification pursuant to this Section
11.b if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty
by LNY
c. After receipt by a party entitled to indemnification ("indemnified
party") under this Section 11 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 Section 11 ("indemnifying party"), such indemnified party will
notify the indemnifying party will not relieve it from any liability
under this Section 11, 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 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 counsel would be inappropriate due to 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
shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
d. The indemnification provisions contained in this Section 11 shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of LNY or by or on behalf of any
controlling or affiliated person thereof, (ii) delivery of any
Contracts and Purchase Payments therefore, or (iii) any termination of
this Agreement. A successor by law of DELAWARE, LFA or LNY, as the
case may be, shall be entitled to the benefits of the indemnification
provisions contained in this Section 11.
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<PAGE>
12. TERMINATION
a. This Agreement may be terminated at the option of any party upon 90
calendar days advance written notice to the other party;
b. This Agreement shall terminate automatically if it is assigned;
provided, however, that a transaction will not be deemed an assignment
if it does no result in a change of actual control or management of a
party. This Agreement may be terminated at the option of one party
upon the other party's material breach of any provision of this
Agreement.
c. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (i) the obligation to settle accounts
hereunder, including incurred compensation; and (ii) the provisions
contained in Sections 7 and 11 of this Agreement.
13. RIGHTS, REMEDIES, ETC. ARE 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, which the
parties to this Agreement are entitled to under state and federal laws.
Failure of one party to insist upon strict compliance by an other party
with any of the conditions of this Agreement in any one instance shall not
be construed as a waiver of any of the conditions for any subsequent
instance, but the same shall remain in full force and effect. No waiver of
any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
14. NOTICES. All notices hereunder are to be in writing and shall be given, if
to LNY, to:
Michael Antrobus
Annuities Product Management
Lincoln Life & Annuity Company of New York
c/o Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46802
And
Robert O. Sheppard, Esq.
Lincoln Life & Annuity Company of New York
120 Madison Street
Suite 1700
Syracuse, New York 13202
If to DELAWARE:
Daniel J. O'Brien
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
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<PAGE>
Any party may specify another name and/or address in writing. Each
such notice to a party shall be hand-delivered; or transmitted by
postage prepaid registered or certified United States mail, with
return receipt requested; or sent by an overnight courier service.
15. INTERPRETATION, JURISDICTION, ETC.
a. This Agreement constitutes the whole agreement among the parties to
this Agreement relating to the wholesaling activities contemplated in
this Agreement, and supersedes all prior oral or written negotiations
among the parties to this Agreement with respect to the subject matter
of this Agreement. The parties acknowledge that LNY and the Funds have
entered into Participation Agreements and that it may be necessary to
construe the terms of such Participation Agreements and this Agreement
together. This Agreement shall be construed and the provisions of this
Agreement interpreted under and in accordance with the internal laws
of the State of New York without giving effect to its principles of
conflict of laws.
b. Anything in this Agreement to the contrary notwithstanding, (i) in no
event will DELAWARE, in performing its services for LNY under this
Agreement, interpose itself into the contractual relationship between
LNY and any of its contractowners; and (ii) in no event will DELAWARE,
in performing its services for LNY or LFA under this Agreement,
intervene in the relationship between LNY or LFA and any of its
Brokers and/or Brokers' Associated Persons in such a manner as to
directly or indirectly cause any Broker(s) to breach its/their Selling
Group Agreement(s) with LNY or LFA.
16. HEADINGS. The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of
this Agreement or otherwise affect their construction or effect.
17. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
18. SEVERABILITY. This is a severable agreement and in the event that any part
or parts of this Agreement shall be held to be unenforceable to its or
their full extent, then it is the intention of the parties to this
Agreement that such part or parts shall be enforced to the extent permitted
under the law, and, in any event, that all other parts of this Agreement
shall remain valid and duly enforceable as if the unenforceable part or
parts had never been a part of this Agreement.
19. REGULATION. This Agreement shall be subject to all applicable provisions of
state law and to the 1933 Act; 1934 Act; 1940 Act; and the Regulations and
the rules and regulations of the NASD, from time to time in effect;
including such exemptions from the 1940 Act as the SEC may grant. The terms
of this Agreement shall be interpreted and construed in accordance
therewith. Without limiting the generality of the foregoing, the term
"assigned" shall not include any transaction exempted from Section 15(b)(2)
of the 1940 Act.
IN WITNESS WHEREOF, each party hereto represents that the officer signing
this Agreement on the party's behalf is duly authorized to execute this
Agreement; and each party has caused this Agreement to be duly executed by
such authorized officer as of the date first set forth above.
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<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
LINCOLN FINANCIAL ADVISORS
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.
(General Partner)
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
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<PAGE>
EXHIBIT A
Intellectual Property Rights of the Parties
I. DELAWARE. Delaware Management Holdings, Inc. owns all right, title and
interest, including the good will associated therewith, in and to the marks
DELAWARE, DELAWARE GROUP, DELAWARE INVESTMENTS and DELAWARE GROUP PREMIUM FUND,
which may be used in connection with one or more of the underlying investment
media for the Contracts, and in and to the name DELAWARE in whatever manner used
in connection with the performance of this Agreement (such marks are hereinafter
referred to as "Delaware Licensed Marks"). Delaware Management Holdings, Inc.
has granted to DELAWARE the right and license to use the Delaware Licensed Marks
and the right to sublicense to others. DELAWARE hereby grants to LNY a
revokable, nonexclusive license to use the Delaware Licensed Marks in connection
with the Contracts and LNY's performance of the services as set forth under this
Agreement.
A. TERM. The grant of limited license as specified in this Exhibit A shall
terminate with respect to Delaware Licensed Marks on the earlier of the
following events:
1. A change of name of such Delaware Licensed Mark to a name that does
not include the term "Delaware"; or
2. Solely at the option of DELAWARE, with respect to any or all
Delaware Licensed Marks and respecting only new business, upon a
termination of this Agreement. In the case of existing business, the grant
of limited license as specified in this Exhibit A shall survive the
termination of the Agreement, but only to the extent necessary to allow the
continuance of any business written prior to such termination wherein the
Delaware Licensed Marks were previously used, and so long as such use was
made in conformity and continue to conform with the terms of this
Agreement.
Upon termination of the grant of limited license, LNY shall, within ten (10)
business days of the effective termination date, cease to issue new Contracts or
to use or disseminate any promotional, sales or advertising material relating to
the Contracts or service existing Contracts except as provide in A.2 above under
such Delaware Licensed Mark, and shall likewise cease any new business activity
that suggests that it has any right under such Delaware Licensed Mark or that it
has any association with DELAWARE in connection with any such Contracts with
respect to such Delaware Licensed Mark. In addition, LNY shall cease to use the
Mark DELAWARE-LNY CHOICPLUS, except to the extent permitted for DELAWARE
Licensed Markers under A.2 above.
B. PRE-RELEASE APPROVAL OF TRADEMARK-BEARING MATERIALS.
1. LNY agrees that it will display the Delaware Licensed Marks only
in such form and manner as are specifically approved by DELAWARE and that
it will cause them to appear on all promotional, sales or advertising
material used in connection with the Contracts or related services with
such legends, markings and notices as DELAWARE may request in order to give
appropriate notice of service mark registration when effected. All such
materials will be submitted by LNY to DELWARE for the purpose of service
mark reviews and approval at least ten (10) business days before their
intended use by LNY.
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<PAGE>
2. During the term of this limited license, DELAWARE may request that
LNY submit samples of any material bearing any of the Delaware Licensed
Marks that were previously approved by DELAWARE or that were not previously
approved in the manner set forth above. If, on reconsideration or on
initial review, respectively, any such sample fails to meet with the
written approval of DELAWARE, then LNY shall immediately cease using or
disseminating such disapproved material. LNY shall obtain the prior written
approval of DELAWARE for the use of any new material developed to replace
the disapproved material, in the manner set forth above. All costs
associated with any such reconsideration will be borne by LNY.
C. ASSIGNMENT. This limited license is personal to LNY and may not be
assigned without the prior written consent of DELAWARE.
D. BREACH. If LNY shall violate or fail to perform any of its obligations
under this limited license, DELAWARE shall have the right to terminate this
limited license upon thirty (30) days written notice, and such notice of
termination shall become effective unless LNY shall completely remedy the
default within such 30-day period. Termination of the license under the
provisions of this paragraph shall be without prejudice to any other rights
that DELAWARE may have against LNY.
E. DELAWARE'S RIGHTS. All rights in the Delaware Licensed Marks other than
those specifically granted herein are reserved by DELAWARE for its own use
and benefit. LNY shall at any time, whether during or after the term of
this limited license, execute any documents reasonably required by DELAWARE
to confirm DELAWARE's ownership of all such rights.
II. LINCOLN. Lincoln National Corporation owns all right, title and interest,
including the good will associated therewith, in and to the marks LINCOLN
NATIONAL, LINCOLN SILHOUETTE DESIGN, and LINCOLN FINANCIAL GROUP which may
be used in connection with one or more of the underlying investment media
for the contracts, and in and to the name LINCOLN in whatever manner used
in connection with the performance of this Agreement (such marks are
hereinafter referred to as "LNC Marks"). Lincoln National Corporation has
granted to LINCOLN the right and license to use the LNC Marks and the right
to sublicense to others. In addition, LINCOLN owns all right, title and
interest, including the good will associated therewith, in and to the
marks, LINCOLN LIFE, A. LINCOLN Signature Design, and DELAWARE-LINCOLN
CHOICEPLUS (such marks are hereinafter referred to as "Lincoln Marks"). For
the purpose of this Agreement, the LNC Marks and the Lincoln Marks shall be
collectively referred to as the "Lincoln Licensed Marks". LINCOLN hereby
grants to DELAWARE a revokable, nonexclusive limited license to use the
Lincoln Licensed Marks in connection with the Contracts and DELAWARE's
performance of the services as set forth under this Agreement.
A. TERM. The grant of limited license as specified in this Exhibit A
shall terminate with respect to Lincoln Licensed Marks on the earlier
of the following events:
1. A change of name of such Lincoln Licensed Marks to a name that
does not include the term "LINCOLN"; or
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<PAGE>
2. Solely at the option of LINCOLN, with respect to any or all Lincoln
Licensed Marks and respecting only new business, upon a termination of this
Agreement. In the case of existing business, the grant of limited license
as specified in this Exhibit A shall survive the termination of the
Agreement, but only to the extent necessary to allow the continuance of any
business written prior to such termination wherein the Lincoln Licensed
Marks were previously used, and so long as such use was made in conformity
and continues to conform with the terms of this Agreement.
Upon termination of the grant of limited license, DELAWARE shall,
within ten (10) business days of the effective termination date, cease its
wholesaling activities hereunder and suspend all dissemination of
promotional, sales and advertising material relating to the Contracts or
service existing Contracts except as provided in A.2 above under such
Lincoln Licensed Marks, and shall likewise cease any new business activity
that suggests that it has any right under such Lincoln Licensed Marks or
that it has any association with LINCOLN in connection with any such
Contracts with respect to such Lincoln Licensed Marks.
B. PRE-RELEASE APPROVAL OF TRADEMARK-BEARING MATERIALS.
1. DELAWARE agrees that it will display the Lincoln Licensed Marks
only in such form and manner as are specifically approved by LINCOLN and
that it will cause them to appear on all promotional, sales or advertising
material used in connection with the Contracts or related services with
such legends, markings and notices as LINCOLN may request in order to give
appropriate notice of service mark registration when effected. All such
materials will be submitted by DELAWARE to LINCOLN for the purpose of
service mark reviews and approval at least ten business days before their
intended use by DELAWARE.
2. During the term of this limited license, LINCOLN may request that
DELAWARE submit samples of any material bearing any of the Lincoln Licensed
Marks that were previously approved by LINCOLN or that were not previously
approved in the manner set forth above. If, on reconsideration or on
initial review, respectively, any such sample fails to meet with the
written approval of LINCOLN, then DELAWARE shall immediately cease using or
disseminating such disapproved material. DELAWARE shall obtain the prior
written approval of LINCOLN for the use of any new material developed to
replace the disapproved material, in the manner set forth above. All costs
associated with any such reconsideration will be borne by DELAWARE.
C. ASSIGNMENT. This limited license is personal to DELAWARE and may not be
assigned without the prior written consent of LINCOLN.
D. BREACH. If DELAWARE shall violate or fail to perform any of its
obligations under this limited license. LINCOLN shall have the right to
terminate this limited license upon thirty (30) days written notice, and such
notice of termination shall become effective unless DELAWARE shall completely
remedy the default within such 30-day period. Termination of the license under
the provisions of this paragraph shall be without prejudice to any other rights
that LINCOLN may have against DELAWARE.
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<PAGE>
E. LINCOLN'S RIGHTS. All rights in the Lincoln Licensed Marks other than
those specifically granted herein are reserved by LINCOLN for its own use and
benefit. DELAWARE shall at any time, whether during or after the term of this
limited license, execute any documents reasonably required by LINCOLN to confirm
LINCOLN's ownership of all such rights.
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<PAGE>
Schedule 1.d
Separate Account Subaccounts
To be available under the Contracts
Subject to the Wholesaling Agreement
Effective __________________
<TABLE>
<CAPTION>
Name of Separate Account Subaccounts
- ------------------------ -----------
<S> <C>
Lincoln New York Separate Account N AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Equity Fund
AIM V.I. Capital Appreciation Fund
Alliance Growth and Income Portfolio
Alliance Growth Portfolio
Alliance Premium Growth Portfolio
Alliance Technology Portfolio
AFIS Global Small Capitalization Fun
AFIS Growth Fund
AFIS International Fund
AFIS Growth Income Fund
BT Equity 500 Index Fund
Delaware Premium Growth & Income Series
Delaware Premium High Yield Series
Delaware Premium Emerging Markets Series
Delaware Premium Select Growth Series
Delaware Premium REIT Series
Delaware Premium Small Cap Value Series
Delaware Premium Social Awareness Series
Delaware Premium Trend Series
Franklin Small Cap Securities Fund
Franklin Mutual Shares Securities Fund
Templeton Growth Securities Fund
Templeton International Securities Fund
Newport Tiger Fund
Lincoln National Bond Fund
Lincoln National Money Market Fund
MFS Emerging Growth Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
Fidelity VIP Equity Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Fidelity VIP III Growth Opportunities Portfolio
</TABLE>
<PAGE>
Schedule 1.g
Contracts Subject to Wholesaling Agreement
Effective ______________, 2000
<TABLE>
<CAPTION>
Marketing Policy SEC ('33 Act) Name of
Name of Contract Form No. Registration No. Separate Account
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lincoln New Choice Plus AN425-LL* 333-40937 Lincoln New
York Separate
Account N for
Variable
Annuities
</TABLE>
<PAGE>
SCHEDULE 9.a
COMPENSATION SCHEDULE
EFFECTIVE JULY 1, 2000
COMPENSATION PAYABLE BY LINCOLN TO DELAWARE FOR WHOLESALING ACTIVITIES
The Lincoln ChoicePlus wholesaling allowance payable to Delaware will vary by
broker/dealer. The attached chart shows both the minimum and maximum amounts
which may be payable, based on year of deposit.
<TABLE>
<CAPTION>
Year of Deposit Minimum Maximum
<S> <C> <C>
2000 .40% 1.41%
2001 .40% 1.00%
2002 .40% .75%
and after
</TABLE>
The amount paid in conjunction with deposits from a particular broker/dealer is
a function of the amount paid to the broker/dealer. In cases where higher gross
dealer concessions are provided to the broker/dealer, the wholesaling efforts
required are reduced and Delaware will be paid a reduced allowance corresponding
to the additional allowance provided to the broker/dealer. In cases where the
standard gross dealer concession is paid to a broker/dealer, Delaware will be
paid a maximum allowance of 1.41% in 2000, 1.00% in 2001, and .75% beginning
in 2002.
The wholesaling allowance will be paid to Delaware according to the then current
Lincoln practice, but no less frequently than weekly.
<PAGE>
AGREEMENT
Effective_________________, 20_______ Lincoln Life & Annuity Company of New
York, (LNY) and/or Lincoln Financial Advisors Corp. (LFA), member, NASD (BOTH
hereinafter "Lincoln", unless otherwise indicated) appoints
- -------------------------------------------------------------------------------
Name of Representative or Entity
of (or incorporated under the laws of)
-----------------------------------------
City, State or State
in the following manner: with LNY as ____________________________; with LFA as
__________________ (hereinafter collectively referred to as "Representative").
1. DEFINITIONS
a. BROKER: An individual appropriately licensed and appointed to sell
the fixed insurance products or non-registered variable products
described herein;
b. REGISTERED REPRESENTATIVE: An individual who, as a result of passing
the appropriate examinations of the National Association of Securities
Dealers (NASD) or other appropriate self-regulatory organizations
(SRO), and also appropriately licensed and appointed to sell insurance
products may sell the insurance products described herein;
c. CORPORATE INSURANCE BROKER: A corporation appropriately licensed
to sell the fixed insurance products or non-registered variable
products described herein.
d. BROKER/DEALER: An individual, partnership, corporation or other
legal entity admitted to membership in the National Association of
Securities Dealers (NASD) and appropriately licensed and/or appointed
to sell the insurance products described herein; or an organization
such as a bank, which pursuant to statutory or regulatory authority,
may act as a broker/dealer without being a member of the NASD, but is
appropriately licensed and appointed to sell the insurance products as
described herein.
2. LIMITATIONS ON APPOINTMENT
The Representative is authorized to solicit applications for those
contracts named in the Compensation Schedules attached to this
Agreement, and the Representative agrees to do so. However, he/she/it
shall do so only while properly licensed by and/or registered with the
appropriate governmental agency or authority for that specific type of
product. All fees for such licensing shall be borne by the
Representative along with any administrative charges associated with
such licensing.
a. In no event is the Representative authorized to offer Lincoln
contracts outside of the state of New York.
<PAGE>
3. NASD MEMBERSHIP (IF APPLICABLE)
Each party to this Agreement, if acting as a Broker/Dealer, represents that
it is a member of the National Association of Securities Dealers, Inc.
("NASD"). Each party further agrees to comply with all applicable state and
federal law, rules, and regulations. Broker/Dealer's expulsion from the
NASD shall automatically terminate this Agreement without notice.
Broker/Dealer's suspension will terminate this Agreement immediately upon
written or oral notice from Lincoln received by Broker/Dealer.
4. LIMITATIONS OF AUTHORITY
The Representative has no authority to incur any obligations or debts for
or on behalf of Lincoln without its express written consent; to make,
modify, or discharge any contract on behalf of Lincoln by any statement,
promise, representation or transaction; to waive, alter, modify or change
any of the terms, rates, or conditions of the Lincoln contracts; or to
receive any monies or Purchase Payments (except for the sole purpose of
forwarding monies or Purchase Payments to Lincoln).
5. RELATIONSHIP OF PARTIES
In the performance of all of his/her/its duties under this Agreement, the
relationship of the Representative to Lincoln is that of an independent
contractor and none other. Neither party shall be deemed to be an employee
or partner of the other party for any purpose, and nothing herein shall be
construed to create the relationship of master and servant, employer and
employee, or joint venturers between the Representative and Lincoln.
6. COMPENSATION
Upon submission of applications for Lincoln contracts by the
Representative, or appropriately licensed agents of the Representative,
conforming to such rules and procedures for the conduct of the business of
Lincoln as are now established and as may be reasonably established by
Lincoln in the future, and upon issuance of contracts by Lincoln, the
Representative shall be entitled, subject to the terms and conditions of
the Agreement, to the applicable service fees set forth in the attached
Compensation Schedule(s) or revisions of such Compensation Schedule(s) and
all amendments, changes, and replacements thereof, as may be made at the
exclusive discretion of Lincoln. These Compensation Schedule(s) are made a
part of this Agreement. Revised Compensation Schedules shall apply to
policies issued and service fees earned after the date that said schedules
are adopted by Lincoln. In the case of any violation of any of the terms of
this Agreement, Lincoln shall be allowed to retain service fees earned but
not yet paid by Lincoln. Lincoln has the right to deduct damages and
expenses from such retained commissions. If Representative sells in an
unauthorized market, or without pre-approval of Lincoln where necessary,
such Representative forfeits all compensation under this Agreement from
such unauthorized sale.
The representative shall be solely responsible for all compensation paid to
its agents and all related tax reporting that may be required under
applicable law.
<PAGE>
7. EXCLUSIVE RIGHTS OF SOLICITATION AND SERVICE
a. Where the Representative establishes a relationship with an
organization for the purpose of selling Lincoln contracts TO THE
ORGANIZATION, no other entity with SELLING authorization FROM Lincoln
may approach, solicit, or otherwise contact such organization for the
purpose of selling or servicing Lincoln contracts as long as the
Representative is actively and effectively selling and servicing
Lincoln contracts, subject to the terms of Section 7(d).
b. The Representative may not establish a relationship with an
organization for the purpose of selling or servicing Lincoln contracts
if another entity with authorization from Lincoln has already
established such relationship with said employer. Any exceptions to
this must be requested by the Representative and reviewed and approved
in writing by an officer of Lincoln.
c. Notwithstanding anything to the contrary contained in (a) or (b)
above, the parties expressly agree that the Representative may
represent any other insurance carriers and offer any other insurance,
lines, products, or business, whether or not such other carrier lines,
products or business compete directly or indirectly with Lincoln.
d. Lincoln shall be the sole arbitrator in these matters, and further,
reserves the right to withdraw the exclusive rights of any entity, at
the complete discretion of Lincoln.
8. ADVERTISING AND MARKETING MATERIAL
a. The Representative shall cooperate with Lincoln in preparing
advertising, solicitation brochures, and other marketing materials to
be used by Representative to sell Lincoln contracts. No promotional
and marketing material shall be used by Representative to sell Lincoln
contracts unless such material has received the prior written approval
of Lincoln and has been filed with the appropriate governmental and
regulatory agencies. No promotional and marketing material shall be
disseminated or used in any manner unless Lincoln's express written
approval has been given hereto.
b. The Representative shall train and supervise all of his/her/its
employees, agents and other third parties involved in the
solicitation, sale and delivery of the contracts.
c. The Representative agrees to indemnify and hold Lincoln harmless from
any liability resulting from the negligent, improper, unauthorized, or
illegal use of sales, marketing, solicitation, or other materials.
d. Upon termination of this Agreement, all records, unused supplies,
Lincoln provided software, and all other material furnished by Lincoln
in the Representative's possession shall be returned to Lincoln upon
request.
9. PROSPECTUS (IF APPLICABLE)
a. Lincoln agrees to deliver to the Representative current LNY
prospectuses. The Representative agrees to destroy and dispose of all
prior prospectuses immediately upon receipt of the current
prospectuses.
<PAGE>
b. LNY shall be liable for all statements contained in the current
prospectus. The Representative shall be liable for all statements made
by the Representative, his/her/its agents, or employees, if
applicable, which are not contained in the current prospectus.
10. PURCHASE PAYMENTS
All initial Purchase Payments shall be made payable to LNY and shall be
delivered together with all applications and related information in
accordance with procedures established by Lincoln.
Any subsequent Purchase Payments received by the Representative on behalf
of LNY shall be forwarded promptly, but under no circumstances in more than
two (2) business days, in gross amount, to LNY.
11. INDEMNIFICATION
a. The Representative shall be solely responsible for the malicious,
intentional, reckless, knowing, or negligent acts or omissions of
himself or of his/her/its employees, officers, agents, and sales
persons for the business covered under this Agreement and shall
indemnify and hold harmless Lincoln from any claims, demands,
liabilities, actions, judgements, loss, cost or expense, including
attorney fees, court costs, and punitive damages incurred by Lincoln
by reason of such acts or omissions.
b. Lincoln shall be solely responsible for the negligent acts or
omissions of its employees, officers, agents, and sales persons for
the business covered under this Agreement and shall indemnify and hold
harmless the Representative from any claims, demands, liabilities,
actions, judgements, loss, cost, or expense, including attorney fees
and court costs incurred by the Representative which are caused by or
arise out of any negligent acts or omissions of Lincoln, its
employees, officers, agents, or sales persons.
c. The Representative, not Lincoln, is solely responsible for all
statements, written or oral, acts, or representations, whether
expressed or implied, made by his/her/its agents, or employees and is
responsible for notifying his/her/its agents or employees of the terms
and conditions of this Agreement.
d. The Representative, (unless acting for Lincoln in its capacity as a
Broker/Dealer) not Lincoln, is solely responsible as to the
suitability of sale of the Lincoln contracts to individual persons.
e. The Representative is solely responsible for performing the Maximum
Exclusion Allowance calculations for any 403(B) sales.
f. The Representative shall immediately notify Lincoln of any and all
complaints about Lincoln contracts received by the Representative.
12. ASSIGNMENTS/MODIFICATIONS
a. Lincoln and the Representative shall make no assignment or transfer of
this Agreement or of any benefits or obligations hereunder, either in
whole or in part, without the prior written consent of the other. Any
such assignee or transferee shall be properly licensed, including
pursuant to Section 1 of this Agreement, to perform its function under
this Agreement prior to the assignment to transfer. All terms and
conditions of this Agreement are applicable to any assignment or
transfer.
<PAGE>
b. This Agreement embodies the entire Agreement of the parties relative
to the matters with which it deals and is intended to be the entire
and exclusive embodiment thereof. Neither the Representative nor
Lincoln shall be bound by any promise, agreement, understanding, or
representation heretofore or hereafter made relative to the subject
matter of this Agreement except for any amendment under this paragraph
12.b. or a change, revision, or addition to the attached Compensation
Schedule(s) as provided in Section 6.
This Agreement may be amended or revised at any time by Lincoln, upon
notice to the REPRESENTATIVE and, unless THE REPRESENTATIVE notifies
us in writing to the contrary within 10 calendar days of the mailing
date of any such amendment, REPRESENTATIVE will be deemed to have
accepted that amendment or modification
13. INDEBTEDNESS OF REPRESENTATIVE
Lincoln shall have first lien on all service fees and other compensation
payable hereunder for any debt due from the Representative to Lincoln or
any of its affiliates, including charges relating to certain cancellations,
rejections, or reissues of contracts. Lincoln may at this time deduct or
set off from any moneys payable under this Agreement, or from any other
source, any such debt or debts at the legal rate. This lien shall not be
extinguished by the termination of the Representative's authority. This
provision shall not be construed in any way to limit any indebtedness of
the Representative to the value of the service fees and other compensation
payable under this Agreement. In the event of the termination of the
Representative's authority, the unpaid balance of the Representative's
indebtedness shall be immediately due and payable without demand or notice.
14. TERMINATION OF AGREEMENT
The Representative or Lincoln may terminate the Representative's
appointment under this Agreement, with or without cause, by notice sent by
ordinary mail to the last known address of the other party. Terminations of
appointment as used in this Agreement shall mean termination of authority
either through cancellation of the appropriate license or registration as
required by this paragraph or through termination of this entire Agreement.
However, Lincoln reserves the right, rather than to completely terminate
this Agreement, to suspend the right of the Representative to sell new
business, including taking applications on existing contracts, but still
allow the representative to service existing business. This right shall
exist provided that it does not violate any applicable state or federal law
or regulation. Lincoln will provide evidence of servicing relationship in
writing to representative. Lincoln reserves the right to terminate the
service agreement pursuant to the terms of this Agreement.
If the Representative's right to sell new business, including taking
applications on existing contracts, is suspended by Lincoln while still
allowing representative to service existing business, then all compensation
as provided by this agreement shall continue to be payable to
Representative as long as Representative remains broker of record and
unless otherwise provided in this agreement.
15. FORBEARANCE
Forbearance or neglect of Lincoln to insist upon performance of this
Agreement shall not constitute a waiver of its rights and privileges.
<PAGE>
16. CHOICE OF LAW
The Representative and Lincoln expressly agree that in the case of any
disputes arising under this Agreement, said Agreement shall be construed
under New York Law.
LINCOLN LIFE & ANNUITY COMPANY REPRESENTATIVE
OF NEW YORK
By: BY:
---------------------------- -----------------------------
Assistant Secretary Broker/Dealer or Company
BY:
-----------------------------
(Authorized Officer)
---------------------------
Tax Identification Number
LINCOLN FINANCIAL ADVISORS
By:
----------------------------
Assistant Secretary
<PAGE>
CHOICE PLUS B-SHARE CONTRACT Abraham Lincoln
3/30/2000 CORRECTED VERSION XX-0123456
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
A Stock Company
Home Office: 120 Madison Street, Suite 1700, Syracuse, New York 13202
Servicing Office: 1300 South Clinton Street, P.0. Box 7866,
Fort Wayne, IN 46802 1-888-868-2583
VARIABLE ANNUITY CONTRACT
Lincoln Life & Annuity Company of New York (the Company) agrees to provide the
benefits and other rights described in this Contract in accordance with its
terms.
RIGHT TO EXAMINE CONTRACT. Within 10 days after this Contract is first received,
it may be cancelled for any reason without penalty (e.g., no withdrawal charges
will be deducted) by delivering or mailing it to the representative through whom
it was purchased, or to our Servicing Office. When the Contract is received at
the Servicing Office, the Company will return the value of the Variable Account
and/or the value of the Fixed Account of the Contract as of the date of
cancellation where permitted by law. If this Contract is issued as an IRA, then
the entire amount of Premium Payments made shall be returned.
The contract is governed by the laws of the State of New York; it is issued and
accepted subject to the terms set forth on this page and on the following pages
which are made a part of this contract. In consideration of the application for
it, and the Premium Payment(s) as provided this contract is executed by the
Company as of its Date of Issue.
/s/ Jeanne B. Collins
PRESIDENT
PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT ARE SUBJECT TO A MARKET VALUE
ADJUSTMENT FORMULA, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS PAYABLE TO THE OWNER, INCLUDING WITHDRAWALS AND
TRANSFERS. PAYMENTS MADE FROM THE FIXED ACCOUNT PURSUANT TO AN ELECTION WHICH
BECOMES EFFECTIVE AT THE END OF A GUARANTEED PERIOD AND PAYMENTS MADE UNDER THE
"ANNUITY BENEFIT" PROVISIONS AND UNDER THE "PENALTY-FREE ANNUITIZATION"
PROVISION ARE NOT SUBJECT TO THE MARKET VALUE ADJUSTMENT. PAYMENTS MADE UNDER
THE "DEATH BENEFIT" PROVISIONS ARE NOT SUBJECT TO ANY MARKET VALUE ADJUSTMENT.
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON INVESTMENT
EXPERIENCE OF THE VARIABLE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT. WITH THE CONTRACT ASSET CHARGES OF 1.40%, THE SMALLEST ANNUAL
RATE OF INVESTMENT RETURN WHICH WOULD HAVE TO BE EARNED ON THE ASSETS OF THE
SEPARATE ACCOUNT SO THAT THE DOLLAR AMOUNT OF VARIABLE ANNUITY PAYMENTS WILL NOT
DECREASE IS 5.40%.
USE OF CONTRACT. This contract is available for retirement and deferred
compensation plans, some of which may qualify for special tax treatment under
various sections of the Internal Revenue Code.
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
WITH FIXED AND VARIABLE ACCOUNTS - NONPARTICIPATING
THIS IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY
READ YOUR CONTRACT CAREFULLY.
AN426NY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
CONTRACT SPECIFICATIONS 3
DEFINITIONS 4
PREMIUM PAYMENT PROVISIONS 5
Premium Payments
Allocation of Premium Payments
Annuity Account Continuation
Minimum Value Requirements
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS 6
Owner
Rights of Owner
Transfer of Ownership
Assignment
Beneficiary
Change of Beneficiary
FIXED AND VARIABLE ACCOUNTS PROVISIONS 7
Fixed Account and Sub-Accounts
Variable Account and Sub-Accounts
Investment Risk
Investments of the Variable Account Sub-Accounts
Substituted Securities
CONTRACT VALUES DURING
ACCUMULATION PERIOD PROVISIONS 8
Part A - Fixed Account Value
Guaranteed Periods
Guaranteed Interest Rates
Fixed Accumulation Value
Minimum Surrender Value
Part B - Variable Account Value
Acquisition and Redemption of Variable Accumulation Units
Variable Accumulation Unit Value
Variable Accumulation Value
Net Investment Factor
Part C - General
Annuity Account
Transfer Privilege
Transfer Fee
CASH WITHDRAWALS, WITHDRAWAL CHARGES
AND MARKET VALUE ADJUSTMENT PROVISIONS 11
Cash Withdrawals
Withdrawal Charges
Market Value Adjustment
AN426NY
<PAGE>
PENALTY-FREE WITHDRAWALS, TRANSFERS
AND ANNUITIZATION PROVISIONS 12
Penalty-Free Partial Withdrawals or Transfers
Full or Partial Withdrawals and Transfers at the End of a Guaranteed Period
Waiver of Withdrawal Charge and Market Value Adjustment on Death or Annuity Date
Penalty-Free Surrender on Disability Penalty-Free
Annuitization
BENEFIT PROVISIONS 13
Annuity Benefit
Annuity Date
Election and Effective Date of Election with Respect to Annuity Benefit
Determination of Amount
Income Payment Benefits
Death Benefits
Election and Effective Date of Election with Respect to Death Benefit
Payment of Death Benefit
Amount of Death Benefit
Section 72(s)
SETTLEMENT OPTIONS 15
GENERAL PROVISIONS 18
The Contract
Modification of Contract
Non-Participation
Loans
Determination of Values
Endorsement of Income Payments
Misstatement of Age and/or Sex
Claims of Creditors
Periodic Reports
</TABLE>
AN426NY
<PAGE>
CONTRACT SPECIFICATIONS
<TABLE>
<CAPTION>
CONTRACT NUMBER: XX-0123456 DATE OF ISSUE: 04/01/1999
ANNUITANT: Abraham Lincoln ANNUITY DATE: APRIL 1, 2067
AGE AT ISSUE: 35
FORM BENEFIT INITIAL PREMIUM PAYMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C>
AN426NY FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY $50,000
WITH FIXED AND VARIABLE ACCOUNTS
INITIAL PREMIUM PAYMENT ALLOCATION PERCENTAGE
FIXED ACCOUNT - SUB-ACCOUNTS
GUARANTEED MINIMUM INTEREST RATE: 3.00%
PERCENTAGE ADJUSTMENT TO INDEX RATE "B': 0.25%
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [1 YEAR/ 5.00%] [25%]
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [3 YEARS/] %
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [5 YEARS/] %
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [7 YEARS/] %
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [10 YEARS/] %
DOLLAR COST AVERAGING FIXED ACCOUNT
INITIAL GUARANTEED INTEREST PERIOD/INTEREST RATE: [6 MONTHS]/[4.00%]
VARIABLE ACCOUNT - SUB-ACCOUNTS (FUNDS):
[AIM Capital Appreciation Fund]
[AIM Growth Fund]
[AIM International Fund]
[AIM Value Fund] [25%]
[Alliance Premier Growth Portfolio - Class B]
[Alliance Growth and Income Portfolio - Class B]
[Alliance Growth Portfolio - Class B]
[Alliance Technology Portfolio - Class B]
[AVIS Global Small Capitalization Fund - Class 2]
[AVIS Growth Fund - Class 2]
[AVIS International Fund - Class 2]
[AVIS Growth and Income Fund - Class 2]
[BT Equity 500 Index Fund] [25%]
[Delaware Premium Aggressive Growth Series]
[Delaware Premium Delchester Series]
[Delaware Premium Emerging Markets Series]
[Delaware Premium Growth and Income Series]
[Delaware Premium REIT Series]
[Delaware Premium SmallCap Value Series]
[Delaware Premium Trend Series]
[Fidelity VIP Equity and Income Fund - Initial Class]
[Fidelity VIP Growth Fund - Initial Class]
[Fidelity VIP III Growth Opportunities Fund - Initial Class] [25%]
[Fidelity VIP Overseas Fund - Initial Class]
[Franklin SmallCap Investments Fund - Class 2]
[Franklin Mutual Shares Investments Fund - Class 2]
[Templeton International Fund - Class 2]
[Templeton Global Growth Fund - Class 2]
[Liberty Newport Tiger Fund]
[Lincoln National Bond Fund]
[Lincoln National Money Market Fund]
[MFS Emerging Growth Series]
[MFS Research Series]
[MFS Total Return Series]
[MFS Utilities Series]
----------------------------------------------------------------------------------
TOTAL 100%
</TABLE>
AN426NY Page 3
<PAGE>
Limitations on transfers from fixed accounts (other than dollar cost averaging
Fixed Account): in each contract year, an Owner is allowed to make one or more
transfers from each Fixed Account Sub-account, and the amount(s) transferred in
aggregate may not exceed more than 15% of the then current value of the
applicable Fixed Account Sub-account(s).
THIS CONTRACT IS FOR USE WITH "LNY ACCOUNT N FOR VARIABLE ANNUITIES".
OWNER: Abraham Lincoln
BENEFICIARY: The person(s) designated by the Owner and recorded by
the Company
MINIMUM SUBSEQUENT PREMIUM PAYMENTS:
$2,000 PER FIXED ACCOUNT GUARANTEED PERIOD
$ 100 PER VARIABLE ACCOUNT SUB-ACCOUNT
SCHEDULE OF CHARGES AND FEES
----------------------------
Withdrawal Charges: The Withdrawal charges applicable under this contract are as
follows.
<TABLE>
<CAPTION>
Withdrawal Charge Number of
Against Premium Contract Anniversaries
Payment Withdrawn Since Premium Payment
----------------- ---------------------
<S> <C>
6% 0
6% 1
5% 2
4% 3
3% 4
2% 5
1% 6
0% 7+
</TABLE>
Each Subsequent Premium Payment will be subject to its own 7-year period.
Any Withdrawal from the Fixed Account prior to the end of a Guaranteed Period
may also be subject to a Market Value Adjustment as described on page 12 which
may increase, decrease, or have no effect on the applicable account value(s). A
Market Value Adjustment would not apply to a withdrawal effective at the end of
a Guaranteed Period.
Penalty-free Partial Withdrawal Charges: The Withdrawal charges are not
applicable to certain partial withdrawals of 15% or less of Premium Payments
annually (see page 12). Withdrawal charges and a Market Value Adjustment are not
applicable to annuitization of the contract at any time. Withdrawal charges and
a Market Value Adjustment are not applicable to payment of the Death Benefit.
(See "Penalty-Free Withdrawals, Transfers and Annuitization Provisions.")
AN426NY Page 3.1
<PAGE>
Asset Charges: The Company imposes a mortality and expense ("M&E") risk charge
and an administrative expense charge, each of which is calculated as a
percentage of asset value of each Variable Account Subaccount, to cover
mortality and expense risk and other administrative costs. The percentages
applied to asset value to determine these charges are the Daily M&E Rate and the
Daily Administrative Rate. These charges are deducted from each Variable Account
Sub-Account by reducing the Variable Accumulation Unit Value at the end of each
Valuation Period. The Daily M&E Rate is equal to the daily rate equivalent of
the annual rate of 1.25% and the Daily Administrative Rate is equal to the daily
rate equivalent of the annual rate of 0.15%.
In addition, Daily Fund Operating Expenses will be applied by each Fund as a
percent of the daily fund balance as set forth in the prospectus for the
applicable Fund(s).
Taxes: Premium tax equivalents (including any related retaliatory taxes), if
any, and any other taxes due under this contract will be deducted if applicable.
It is currently the Company's practice to deduct such taxes, if any, at the time
the Annuity Account Value, or any portion thereof, becomes payable. (Refer to
Definition of 'Annuity Account Value'.)
AN426NY Page 3.2
<PAGE>
DEFINITIONS
ACCUMULATION PERIOD. The period from the Date of Issue to (a) the Annuity Date,
(b) the date on which the Death Benefit becomes payable, or (c) the date on
which the contract is surrendered or annuitized, whichever is earliest.
ANNUITANT(S). The person or persons on whose life the first Income Payment is to
be made upon the annuitization of the contract. The Annuitant(s) on the Date of
Issue is/are the person(s) designated in the Contract Specifications and will
remain the Annuitant(s) under the contract unless the Owner exercises the right
to change the Annuitant(s) as set forth in the "Rights of Owner" provision. If
prior to the Annuity Date, the Annuitant predeceases the Owner, the Owner will
then become the Annuitant until such time as the Owner exercises the right to
designate a new Annuitant as set forth in the "Rights of Owner" provision.
(Provided that the Owner is a natural person.) If joint Annuitants are named and
if one of the Annuitants predeceases the Owner prior to the Annuity Date, the
contract will thereupon become an annuity contract on the surviving Annuitant
until such time that the Owner exercises the right to designate another joint
Annuitant as set forth in the "Rights of Owner" provision. A request for change
of Annuitant(s) must be in writing to the Company at its Servicing Office; once
received by the Company, the change will be effective as of the date the request
was signed.
ANNUITY ACCOUNT. The account which is comprised of the Fixed and Variable
Accounts with respect to this contract.
ANNUITY ACCOUNT VALUE. The account value which at any time equals the sum of all
the then current values of the Fixed and Variable Accounts with respect to this
contract. Applicable premium taxes, if any, will be deducted when the Annuity
Account Value amount to be applied under the Annuity Benefit, Death Benefit,
Cash Withdrawals or Penalty-Free Withdrawal and Annuitization provisions is
determined.
ANNUITY DATE. The date on which Income Payments begin upon annuitization of the
contract.
THE COMPANY. Lincoln Life & Annuity Company of New York, issuer of the variable
annuity contract.
CONTRACT YEARS AND CONTRACT ANNIVERSARIES. All Contract Years and Contract
Anniversaries are 12 month periods measured from the Date of Issue.
DAILY M&E RATE. The rate applied by the Company as a percentage of each Variable
Account Sub-Account's asset value to determine the M&E charge for its assumption
of mortality and expense risks for a 24-hour period.
DATE OF ISSUE. The date on which the contract becomes effective. The Date of
Issue is shown in the Contract Specifications.
DUE PROOF OF DEATH. An original certified copy of an official death certificate,
an original certified copy of a decree of a court of competent jurisdiction as
to the finding of death, or any other written proof of death satisfactory to the
Company.
EXPIRATION DATE(S). The date(s) on which Guaranteed Period(s), if any, end.
FIXED ACCOUNT. The term 'Fixed Account' under this contract means all
Sub-Account(s) associated with Guaranteed Period(s) and Guaranteed Interest
Rate(s). Fixed Account assets are general assets of the Company and are
distinguishable from those allocated to a separate account of the Company.
FUND(S). The Variable Account Sub-Accounts in which Premium Payments, or
Transfers in accordance with the "Transfer Privilege" provision, may be
invested.
GUARANTEED PERIOD. The Guaranteed Period is the period for which interest, at
either an initial or subsequent Guaranteed Interest Rate will be credited to an
amount under a Fixed Account Sub-Account.
HOME OFFICE. The term 'Home Office' means Lincoln Life & Annuity Company of New
York, 120 Madison Street, Suite 1700, Syracuse, NY 13202.
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IN WRITING. The term "in writing' means in a written form satisfactory to the
Company and received by the Company at its Servicing Office.
INCOME PAYMENTS. Income Payments are the amounts payable under this contract as
determined by the "Settlement Options" provisions of the contract.
OWNER. The person or entity designated in the Contract Specifications.
PAYOUT PERIOD. The period during which Income Payments are made under this
contract.
SEC. The Securities and Exchange Commission.
SERVICING OFFICE. The Servicing Office of Lincoln Life & Annuity Company of New
York is located at 1300 S. Clinton Street, P. 0. Box 7866, Fort Wayne, Indiana
46801.
SUB-ACCOUNT. That portion of the Fixed Account associated with specific
Guaranteed Period(s) and Guaranteed Interest Rate(s) and that portion of the
Variable Account which invests in shares of a specific Fund.
VALUATION DATE. Any day on which the New York Stock Exchange ("NYSE") is open
for business, except a day during which trading on the NYSE is restricted or on
which an emergency exists as a result of which the valuation or disposal of
securities is not reasonably practicable.
VALUATION PERIOD. The period beginning immediately after the close of business
on a Valuation Date and ending at the close of business on the next Valuation
Date.
VARIABLE ACCOUNT. The term "Variable Account" under this contract means all
Sub-Account(s) associated with investments in the Fund(s). Variable Account
assets are separate account assets of the Company, the investment performance of
which is kept separate from that of the general assets of the Company and are
not chargeable with general liabilities of the Company.
VARIABLE ANNUITY UNITS. A unit of measure used in the calculation of the value
of the variable portion of the Annuity Account during the Payout Period.
VARIABLE ACCUMULATION UNIT. A unit of measure used in the calculation of the
value of the variable portion of the Annuity Account before the Payout Period.
PREMIUM PAYMENT PROVISIONS
PREMIUM PAYMENTS. Premium Payments are payable to the Company at its Servicing
Office or to an authorized agent of the Company. A Company receipt will be
furnished upon request. The Initial Premium Payment is the amount paid to the
Company as consideration for the benefits provided under the contract on the
Date of Issue. (The Dollar Cost Averaging Option may be utilized with the
Initial Premium Payment). Subsequent Premium Payments may be paid to the Company
from time to time after the Date of Issue and prior to the Annuity Date. No
premium payments after the Initial Premium Payment are required. The minimum
annual amount of subsequent Premium Payments is $100 per Variable Account
Sub-account, or $2,000 per Fixed Account Guaranteed Period. The minimum payment
at any one time must be at least $25 if transmitted electronically; otherwise
the minimum amount is $100. The Company reserves the right to limit aggregate
Premium Payments to $2 million. (The Dollar Cost Averaging Option may be
utilized with a Subsequent Premium Payment if it is sufficient). All Premium
Payments must meet the allocation requirements specified under the "Allocation
of Premium Payments" provision. The payment of any amount under the contract
which is derived, all or in part, from any Premium Payments made by check or
draft may be postponed until such check or draft has been honored by the
financial institution upon which it is drawn.
The Initial Premium Payment attributable to the contract is shown on the
Contract Specifications page.
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ALLOCATION OF PREMIUM PAYMENTS. Upon receipt by the Company at its Servicing
Office, each Premium Payment will be added to the Annuity Account established
under the contract. The Annuity Account is described under the "Annuity Account"
provision and is comprised of Fixed Account Sub-Account(s) and Variable Account
Sub-Account(s). The Initial Premium Payment will be allocated to one or more
such Sub-Accounts in accordance with the allocation percentages specified by the
Owner and shown in the Contract Specifications, provided such allocations to
Fixed and/or Variable Accounts conform to the Company's minimum deposit
requirements in effect as of the Date of Issue. (The Dollar Cost Averaging
Option may be utilized with the Initial Premium Payment).
Subsequent Premium Payments will be allocated as directed by the Owner. If no
direction is given, the allocation percentages will be that which has been most
recently directed for payments by the Owner. If a portion of the most recent
previous Premium Payment was allocated to the Fixed Account and the allocation
percentages when applied to a Subsequent Premium Payment does not produce an
amount which meets the Fixed Account minimum requirements, the Company will
promptly seek further instructions from the Owner regarding allocation of the
premium or otherwise return the applicable portion of such Premium Payment as
provided by law. (The Dollar Cost Averaging Option may be utilized with a
Subsequent Premium Payment if it is sufficient).
Each Premium Payment allocated to the Fixed Account is treated separately for
purposes of guaranteed interest rates, withdrawal charges, specified time
intervals, and guaranteed benefit dates.
DOLLAR COST AVERAGING. All or part of the Initial Premium Payment may be
allocated to the Dollar Cost Averaging Fixed Account or any other Sub-Account
made available for the purpose of Dollar Cost Averaging. Any amount so allocated
will be transferred from the Sub-Account used for Dollar Cost Averaging to the
designated variable Sub-Accounts in monthly installments over a period chosen by
the Owner. Transfers will occur on the same day each month until the end of the
chosen period or, if sooner, until the account value in the Sub-Account used for
Dollar Cost Averaging has been exhausted. Transfers from the Dollar Cost
Averaging Fixed Account are not subject to any Market Value Adjustment.
ANNUITY ACCOUNT CONTINUATION. The Annuity Account shall be continued
automatically in full force from the Date of Issue until the Annuity Date or
until the contract is surrendered or annuitized, the Death Benefit is paid, or
the Annuity Account Value no longer meets the requirements specified in the
"Minimum Value Requirements" provision, whichever occurs first.
MINIMUM VALUE REQUIREMENTS. If no Premium Payments have been made for three
consecutive years and the Annuity Account Value decreases to less than $2,000
during that period, or if any partial withdrawal decreases the Annuity Account
Value to less than $2,000, the Company reserves the right to cancel the contract
and pay to the Owner an adjusted value of the Annuity Account as would be
calculated under the "Determination of Amount" provision. The Company will,
however, provide at least 30 days advance notice to the Owner of its intended
action. During the notification period an additional Premium Payment may be made
to meet the minimum value requirements.
OWNERSHIP, ASSIGNMENT AND BENEFICIARY PROVISIONS
OWNER. The Owner on the Date of Issue will be the person designated in the
Contract Specifications. If no Owner is designated, the Annuitant(s) will be the
Owner.
RIGHTS OF OWNER. The Owner may exercise all rights and privileges under the
contract including the right to: (a) agree with the Company to any change in or
amendment to the contract, (b) transfer all rights and privileges to another
person, (c) change the Beneficiary, (d) change the Annuitant(s) any time prior
to the Annuity Date or name a new Annuitant if the Annuitant, or one of the
Annuitants named under a joint life annuity, predeceases the Owner, (e) name the
payee to whom Income Payments are to be directed, and (f) assign the contract.
All rights and privileges of the Owner may be exercised without the consent of
any designated transferee, or any Beneficiary if the Owner has reserved the
right to change the Beneficiary.
TRANSFER OF OWNERSHIP. The Owner may transfer all rights and privileges of
ownership. On the effective date of transfer, (a) the transferee will become the
Owner and will have all the rights and privileges of the Owner, and (b) the
amount of Death Benefit applicable under the contract will change as set forth
under the "Amount of Death Benefit" provision. The Owner may revoke any transfer
prior to its effective date.
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Unless provided otherwise, a transfer will not affect the interest of any
Beneficiary designated prior to the effective date of the transfer.
A transfer of Ownership, or a revocation of transfer, must be in writing to the
Company at its Servicing Office. A transfer or a revocation will not take effect
until received in writing by the Company at its Servicing Office. When a
transfer or revocation has been so received, it will take effect as of the
effective date specified by the Owner. Any payment made or any action taken or
allowed by the Company before the transfer or the revocation is received will be
without prejudice to the Company.
ASSIGNMENT. The contract may not be sold, assigned, discounted, or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose.
BENEFICIARY. The Beneficiary is the person who has the right to receive the
Death Benefit set forth in the contract and, for Non-Qualified Contracts, who is
the 'designated beneficiary' for purposes of Section 72(s) of the Internal
Revenue Code in the event of the Owner's death. The Beneficiary on the Date of
Issue will be the person designated in the Contract Specifications.
Unless provided otherwise, the interest of any Beneficiary who dies before the
Owner will vest in the Owner or the Owner's administrators or assigns.
CHANGE OF BENEFICIARY. A new Beneficiary may be designated from time to time. A
request for change of Beneficiary must be in writing to the Company at its
Servicing Office. The request must be signed by the Owner. The request must also
be signed by the Beneficiary if the right to change the Beneficiary has not been
reserved to the Owner.
A change of Beneficiary will not take effect until received by the Company. When
a change of Beneficiary has been so received, whether or not the Owner is then
alive, it will take effect as of the date the request was signed. Any payment
made or any action taken or allowed by the Company before the change of
Beneficiary is received will be without prejudice to the Company.
Unless provided otherwise, the right to change any Beneficiary is reserved by
the Owner.
FIXED AND VARIABLE ACCOUNTS PROVISIONS
FIXED ACCOUNT AND SUB-ACCOUNTS. Fixed Account assets are general assets of the
Company and are distinguishable from those allocated to a separate account of
the Company. Any portion of Premium Payments allocated by the Owner to a Fixed
Account Sub-Account will become part of the Fixed Account.
VARIABLE ACCOUNT AND SUB-ACCOUNTS. The Variable Account to which the variable
accumulation values, if any, under this contract relate is shown in the Contract
Specifications. It was established pursuant to a resolution of its Board of
Directors as a 'separate account' under governing law of New York, the Company's
state of domicile, and registered as a unit investment trust under the 1940 Act.
Under New York law, the Variable Account assets (except assets in excess of its
reserves and other contract liabilities) cannot be charged with the general
liabilities from any other business of the Company and the income, gains or
losses from the Variable Account assets are credited or charged against the
Variable Account without regard to the income, gains or losses of the Company.
The Variable Account assets are owned and controlled exclusively by the Company,
and the Company is not a trustee with respect to those assets.
The Variable Account is divided into Sub-Accounts. Each Variable Account
Sub-Account's assets are invested in shares of a particular Fund made available
as a funding vehicle under this contract. For each Variable Account Sub-Account,
the Company maintains Variable Accumulation Units whose values reflect the
investment performance of the Fund whose shares are held in that Sub-Account.
Subject to any vote by persons having the right under the 1940 Act to vote
thereon, the Company may elect to operate the Variable Account as a management
company rather than a unit investment trust under the 1940 Act, or, if
registration is no longer required, to deregister the Variable Account. In such
event, the Company may endorse this contract to reflect such change and any
necessary or appropriate action taken to effect the change. Any changes in
Variable Account investment policy shall have been approved by the New York
Superintendent of Insurance.
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INVESTMENT RISK. Each Variable Account Sub-Account's assets are always fully
invested in the shares of the particular Fund purchased for that Sub-Account.
Each Variable Account Sub-Account's investment performance reflects the
investment performance of the Fund. Fund share values fluctuate, reflecting the
risks of changing economic conditions and the ability of a Fund's investment
advisor 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.
INVESTMENTS OF THE VARIABLE ACCOUNT SUB-ACCOUNTS. All amounts allocated to a
Variable Account Sub-Account will be used to purchase shares of a specific Fund.
The Funds available on the Date of Issue are shown in the Contract
Specifications; more may be subsequently added. The Fund is an open-end
management investment company registered under the Investment Company Act of
1940. Any and all distributions made by the Fund(s) will be reinvested to
purchase additional shares of that Fund at net asset value. Deductions from the
Variable Account Sub-Accounts will, in effect, be made by redeeming a number of
Fund shares at net asset value equal in total value to the amount to be
deducted. Assets of Variable Account Sub-Accounts will be fully invested in Fund
shares at all times.
SUBSTITUTED SECURITIES. Shares corresponding to a particular Fund may not always
be available for purchase or the Company may decide that further investment in
such Fund is no longer appropriate in view of the purposes of the Variable
Account, or in view of legal, regulatory or federal income tax restrictions. In
such event, shares of another registered open-end investment company or unit
investment trust may be substituted both for Fund shares already purchased
and/or as the securities to be purchased in the future, provided that these
substitutions meet applicable Internal Revenue Service diversification
guidelines and have been approved by the Securities and Exchange Commission and
such other regulatory authorities as may be necessary. In the event of any
substitution pursuant to this provision, the Company may make appropriate
endorsement(s) to this contract to reflect the substitution. Any substitution
shall be subject to the approval of the Superintendent of Insurance of the State
of New York.
CONTRACT VALUES DURING ACCUMULATION PERIOD PROVISIONS
Any paid-up annuity, cash surrender value, or death benefits available under
this contract shall not be less than the minimum benefits required by the New
York Insurance Law.
PART A - FIXED ACCOUNT VALUE
GUARANTEED PERIODS. The Initial Guaranteed Period(s), if any, are selected by
the Owner and are shown in the Contract Specifications. The duration of the
Initial Guaranteed Period(s) will affect the Initial Guaranteed Interest
Rate(s). Any Premium Payment or the portion thereof (or amount transferred in
accordance with the "Transfer Privilege" provision described below) allocated to
a particular Guaranteed Period will earn interest at the specified Guaranteed
Interest Rate during the Guaranteed Period. Initial Guaranteed Periods begin on
the date a Premium Payment is accepted (or, in the case of a transfer, on the
effective date of the transfer) and end on the Expiration Date for each duration
selected.
Any portion of the Annuity Account Value comprising a particular Fixed Account
Sub-Account (including interest earned thereon) will be referred to in this
contract as the "Guaranteed Period Amount." As a result of renewals, Subsequent
Payments, and transfers of portions of the Annuity Account Value, Guaranteed
Amounts for Guaranteed Periods of the same duration may have different
Expiration Dates, and each Guaranteed Period Amount will be treated separately
for purposes of determining any Market Value Adjustment.
The Company will automatically notify the Owner in writing at least 15 but not
more than 45 days prior to the Expiration Date of a Guaranteed Period with
respect to a Fixed Account Sub-Account of the guaranteed period durations
available and the then currently quoted interest rates. A subsequent Guaranteed
Period of the same duration will begin automatically at the end of the previous
Guaranteed Period unless the Company receives, in writing at its Servicing
Office within the 60-day period immediately preceding the end of such Guaranteed
Period, an election by the Owner of a different Guaranteed Period from among
those being offered by the Company at such time, or instructions to transfer all
or a portion of the applicable Guaranteed Period Amount to one or more Fixed
Account or Variable Account Sub-Accounts in accordance with the 'Transfer
Privilege' provision.
GUARANTEED INTEREST RATES. The Company will establish the applicable Guaranteed
Interest Rate that will be used to determine the interest with respect to a
Fixed Account Sub-Account for each Guaranteed Period at the beginning of the
Guaranteed Period. This rate will be guaranteed for the duration of the
applicable Guaranteed Period. The Initial or
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Subsequent Guaranteed Interest Rate will never be less than 3% per year,
compounded annually. Subsequent Guaranteed Interest Rate(s) will also be
determined at the beginning of Guaranteed Period(s) and may be higher or lower
than the previous rate, but will never be less than 3% per year, compounded
annually. (See "Minimum Surrender Value" provision.) The Company will
automatically notify the Owner of the new Guaranteed Interest Rate as soon as
possible after the beginning of each subsequent Guaranteed Period.
FIXED ACCUMULATION VALUE. Upon receipt of a Premium Payment by the Company at
its Servicing Office, all or that portion, if any, of the Premium Payment which
is allocated to the Fixed Account will be credited to the Fixed Account and
allocated to the Fixed Account Sub-Accounts selected by the Owner. The Fixed
Accumulation Value, if any, at any time, is equal to the sum of the then current
values of all Guaranteed Period Amounts with respect to this contract.
MINIMUM SURRENDER VALUE. The Minimum Surrender Value for the Fixed Account for a
given contract year will be determined by: crediting an effective annual rate of
interest of 3.0% on the sum of the values of the Fixed Account Subaccounts at
the end of each Valuation Period during the Contract Year at a daily rate
adjusted for the number of days in each Valuation Period; less the applicable
withdrawal charge(s), any prior withdrawals or transfers out of the Fixed
Account, and premium taxes (if any).
PART B - VARIABLE ACCOUNT VALUE
ACQUISITION AND REDEMPTION OF VARIABLE ACCUMULATION UNITS. Any dollar amounts
allocated to a Variable Account Sub-Account shall be converted into Variable
Accumulation Units and credited to the Variable Account Sub-Account on a unit
basis. The number of Variable Accumulation Units into which a dollar amount
would be converted is calculated by dividing the dollar amount by the Variable
Accumulation Unit Value for the particular Sub-Account. Any redemption of units
from a Variable Account Sub-Account will be processed at the end of a Valuation
Period, including any units redeemed to fund a monthly deduction, and shall
result in the redemption and cancellation of Variable Accumulation Units having
an aggregate dollar value equal to the amount of such withdrawal.
VARIABLE ACCUMULATION UNIT VALUE. The Variable Accumulation Unit Value at the
beginning of the first Valuation Period of each Variable Account Sub-Account was
established at $10.00. The Variable Accumulation Unit value in any later
Valuation Period is equal to the net asset value per unit of the particular
Sub-Account as of the end of such Valuation Period.
VARIABLE ACCUMULATION VALUE. The Variable Accumulation Value of the Annuity
Account, if any, for any Valuation Period is equal to the sum of the value of
all Variable Accumulation Units of each Variable Account Sub-Account credited to
the Variable Account with respect to this contract at the end of such Valuation
Period. The Variable Accumulation Value of each Variable Account Sub-Account is
determined by multiplying the number of Variable Accumulation Units, if any,
credited to each Variable Account Sub-Account with respect to this contract at
the end of a Valuation Period, by the Variable Accumulation Unit Value of the
particular Variable Account Sub-Account for such Valuation Period.
NET INVESTMENT FACTOR. An index, calculated as described below, that provides a
measure of the investment performance of a Variable Account Sub-Account for each
Valuation Period. The Net Investment Factor is equal to
A+B-C minus E
-----
D
where:
A is the net asset value per unit of the Fund held in the Variable
Account Sub-Account (such net asset value being determined as described
in the prospectus for the Fund) as of the end of the Valuation Period;
B is the per unit amount of any dividend or other distribution payable
with respect to units held of record during the Valuation Period;
C is the per unit amount of any tax determined by the Company to be
attributable to the operation of the Variable Account Sub-Account during
such Valuation Period;
D is the net asset value of each unit of the Fund as of the close of
business on the Valuation Date immediately preceding the Valuation
Period; and
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E is the sum of the Daily M&E Rate plus the Daily Administrative Rate,
multiplied by the number of 24-hour periods included in the Valuation
Period.
The Net Investment Factor may be 1.0 or may be greater or less than 1.0,
reflecting the possibility that the Variable Accumulation Unit Value of a
particular Variable Account Sub-Account may remain the same, increase or
decrease.
PART C - GENERAL
ANNUITY ACCOUNT. The Company will establish an Annuity Account under the
contract and will maintain the Annuity Account during the Accumulation Period.
The Annuity Account Value at any time equals the sum of all the then current
values of the Fixed and Variable Accounts with respect to this contract.
TRANSFER PRIVILEGE. At any time during the Accumulation Period, other than
during the "Right to Examine Contract" period, the Owner may transfer all or
part of the Annuity Account Value to one or more of the Fixed or Variable
Account Sub-Accounts then available under the contract, subject to the
provisions set forth below. Transfer requests must be made in writing. Transfer
requests must be received at the Company's Servicing Office prior to the time of
day set forth in the prospectus, and provided the New York Stock Exchange 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 New York Stock Exchange is open for business.
Transfers involving Variable Account 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 Account
Sub-Account. The purchase or cancellation of such units shall be made using
Variable Accumulation Unit Values of the applicable Variable Account Sub-Account
at the end of the Valuation Period for which the transfer is effective.
Transfers to a Fixed Account Sub-Account will result in a new Guaranteed Period
for the amount being transferred. Any such Guaranteed Period will begin on the
effective date of the transfer. The amount transferred into such Fixed Account
Sub-Account will earn interest at the Guaranteed Interest Rate declared by the
Company for that Guaranteed Period as of the effective date of the transfer.
Transfers shall be subject to the following conditions: (a) Not more than 12
transfers may be made per Contract Year (including the frequency limitation
shown in the Contract Specifications with respect to transfers from the Fixed
Account), unless otherwise authorized in writing by the Company. (b) No
withdrawal charge will be imposed on transferred amounts; however, transfers of
all or a portion out of a Fixed Account Sub-Account may be subject to the Market
Value Adjustment set forth below unless such transfer is made in accordance with
the "Full or Partial Withdrawals and Transfers at the End of a Guaranteed
Period" provision. (c) The amount being transferred may not be less than $100
unless the entire value of the Fixed or Variable Account Sub-Account is being
transferred. (d) The amount being transferred may not exceed the Company's
maximum amount limit then in effect. (e) The amount transferred to any Fixed
Account Sub-Account may not be less than $2,000, or $100 to a Variable
Sub-Account. (f) Unless a transfer out of a Fixed Account Sub-Account is made in
accordance with the "Full or Partial Withdrawals and Transfers at the End of a
Guaranteed Period" provision, the amount transferred from each Fixed Account
Sub-Account during any Contract Year may not exceed the limits shown in the
Contract Specifications. (g) Any value remaining in a Fixed Account Sub-Account
may not be less than $2,000, or a Variable Account Sub-Account may not be less
than $50. (h) The Company reserves the right to defer transfers of amounts from
the Fixed Account for a period not to exceed six months from the date the
request for such transfer is received by the Company in writing at its Servicing
Office. (i) Transfers involving Variable Account Sub-Account(s) shall be subject
to such terms and conditions as may be imposed by the Funds.
TRANSFER FEE. The Company reserves the right to charge a fee up to $10 for each
transfer prior to the Annuity Date if there have been more than twelve transfers
made in the Contract Year.
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CASH WITHDRAWALS, WITHDRAWAL CHARGES AND
MARKET VALUE ADJUSTMENT PROVISIONS
CASH WITHDRAWALS. At any time before the Annuity Date, the Owner may elect to
receive a cash withdrawal payment from the Company by filing with the Company at
its Servicing Office a written election in such form as the Company may require.
Any such election shall specify the amount of the withdrawal and will be
effective on the date that it is received at the Company's Servicing Office. Any
cash withdrawal payment will be paid within seven days of the Company's receipt
of such request, except as the Company may be permitted to defer the payment of
amounts withdrawn from the Variable Account in accordance with the Investment
Company Act of 1940. The Company reserves the right to defer the payment of
amounts withdrawn from the Fixed Account for a period not to exceed six months
from the date written request for such withdrawal is received by the Company at
its Servicing Office. If payment from the Fixed Account is deferred for more
than 10 working days from the date the request is received, the Company will pay
annual interest on the amount deferred in accordance with the interest rate then
required by law from the date the Company receives the request.
The amount of the cash withdrawal payment may be for any amount not to exceed
the Annuity Account Value at the end of the Valuation Period during which the
election becomes effective, plus or minus any applicable Market Value
Adjustment, and less any applicable withdrawal charge and premium taxes. In the
case of a full surrender, the Annuity Account will be canceled and the contract
will terminate. A partial withdrawal will result in a decrease in the Annuity
Account Value by an amount with an aggregate dollar value equal to the dollar
amount of the cash withdrawal payment, plus or minus any applicable Market Value
Adjustment, any applicable withdrawal charge and premium taxes. This will also
result in a pro rata reduction in any Death Benefit payable under this Contract.
In the case of a partial withdrawal, the Owner must instruct the Company as to
the amounts to be withdrawn from each Fixed and/or Variable Account Sub-Account.
If not so instructed, the Company will effect such withdrawal from each Fixed
and/or Variable Sub-Account in proportion to the then current Sub-Account
values. Partial withdrawals cannot reduce any Fixed Account Sub-Account below
$2,000 or any Variable Account Sub-Account below $50. Such partial withdrawals
will be treated as a full surrender of that Sub-Account and the balance will be
transferred to the largest Variable Account Sub-Account, if any. Partial
withdrawals may not reduce the total Annuity Account Value below $1,000. (See
"Minimum Value Requirements" provision.) Such partial withdrawals may be treated
as a full surrender.
Cash withdrawals from a Variable Account Sub-Account will result in the
cancellation of Variable Accumulation Units attributable to the Annuity Account
with an aggregate value on the effective date of the withdrawal equal to the
total amount by which the Variable Account Sub-Account is reduced. The
cancellation of such units will be based on the Variable Accumulation Unit
values of the Variable Account Sub-Account at the end of the Valuation Period
during which the cash withdrawal is effective.
All cash withdrawals or transfers of any portion of Fixed Account Sub-Accounts,
except those specified otherwise under "Penalty-Free Withdrawals, Transfers and
Annuitization Provisions," will be subject to the Market Value Adjustment
described below.
WITHDRAWAL CHARGES. If a cash withdrawal is made, a withdrawal charge may be
assessed by the Company. The length of time between the Company acceptance of
the Premium Payment(s) and the receipt of a withdrawal request determines the
withdrawal charge. For this purpose each withdrawal is deemed to represent a
withdrawal of a Premium Payment previously accepted (or a portion thereof).
Premium Payments will be deemed to have been withdrawn in the order in which the
Premium Payments were received by the Company (i.e., oldest premium first).
After all Premium Payments have been deemed withdrawn, the Company will deem
further withdrawals to be from net investment results attributable to such
Premium Payments, if any. The schedule of withdrawal charges is set forth in the
"Schedule of Charges, Expenses and Fees." On withdrawal, any applicable Market
Value Adjustment will be deducted before application of any withdrawal charge.
Withdrawal charges are deducted proportionately from the Fixed and/or Variable
Account Sub-Account(s) from which the withdrawal is to be made, provided such
Sub-Account(s) have sufficient account value(s) for making such deduction(s). If
any of the account value(s) of such Sub-Account(s), however, are insufficient,
its remaining withdrawal charges will be deducted on a pro rata basis from all
Fixed and/or Variable Account Sub-Accounts in proportion to the then-current
account value(s) of such Sub-Account(s).
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See "Penalty-Free Withdrawals, Transfers and Annuitization Provisions" for
situations in which a withdrawal charge is not imposed.
For the purpose of any qualified plan riders which may be attached to this
contract, the term 'Surrender Charge' wherever referenced therein, shall mean
'withdrawal charge' as set forth above.
MARKET VALUE ADJUSTMENT. Any cash withdrawal or transfer from a Fixed Account
Sub-Account, except those specified otherwise under the "Full or Partial
Withdrawals and Transfers at the End of a Guaranteed Period" provision, will be
increased or decreased by a Market Value Adjustment described in the following
paragraphs.
The amount of the Market Value Adjustment is calculated by multiplying the
dollar amount of such cash withdrawal or transfer by the following amount:
n n
1 subtracted from the result of (1 + a) divided by (1 + b)
where:
a = The yield rate for a Treasury security with time to maturity equal
to the Guaranteed Period, determined at the beginning of the
Guaranteed Period.
b = The yield rate for a Treasury security with time to maturity equal
to Guaranteed Period, determined at the time of transfer or
withdrawal plus (if yield rates 'a' and 'b' differ by more than
0.25%) 0.25%.
As used herein, 'The yield rate for a Treasury security' means the applicable
yield rate based on the Treasury Constant Maturity Series published by the
Federal Reserve. If such yields are no longer published, the Company will
substitute an appropriate index of publicly traded obligations subject to
approval by the Superintendent of Insurance of the State of New York.
Straight-line interpolation is used for periods to maturity not quoted.
n = The number of years, including fractional years, remaining in the
Guaranteed Period (e.g. 1 year and 73 days = 1 + (73 divided by
365) = 1.2 years)
A positive Market Value Adjustment increases the cash withdrawal or transfer
while a negative Market Value Adjustment decreases the cash withdrawal or
transfer.
PENALTY-FREE WITHDRAWALS, TRANSFERS
AND ANNUITIZATION PROVISIONS
PENALTY-FREE PARTIAL WITHDRAWALS OR TRANSFERS. Upon request in writing, the
Owner may, during any Contract Year prior to the Annuity Date, withdraw up to
15% of the Premium Payment(s) or portion remaining thereof, without incurring a
withdrawal charge. For this purpose each withdrawal is deemed to represent a
withdrawal of a portion of a Premium Payment previously accepted. Premium
Payments will be deemed to be withdrawn in the order in which they were received
by the Company (i.e., the oldest premium first). Any such withdrawal from a
Fixed Account Sub-Account may be subject to a Market Value Adjustment unless the
withdrawal is made at the end of a Guaranteed Period as set forth below. The
Owner must specify from which Fixed and/or Variable Account Sub-Accounts the
withdrawal is to be made, otherwise the Company may effect such withdrawal on a
proportionate basis from all Fixed and/or Variable Account Sub-Accounts in which
the Annuity Account is invested.
Such partial withdrawals may be either taken as a lump sum or, upon consent of
the Company, paid in equal installments.
No withdrawal charge will be imposed on any withdrawal with respect to a Premium
Payment after the end of the seventh Contract Anniversary following the
Company's acceptance of that Premium Payment.
The Owner may also transfer amounts within the Annuity Account during the
Accumulation Period without the application of a withdrawal charge; however, any
transfers would be subject to any terms and conditions as may be imposed under
the "Transfer Privilege" provision.
AN426NY Page 12
<PAGE>
FULL OR PARTIAL WITHDRAWALS AND TRANSFERS AT THE END OF A GUARANTEED PERIOD. No
Market Value Adjustment will be imposed on a full or partial withdrawal or
transfer made from a Fixed Account Sub-Account which becomes effective at the
end of the applicable initial or subsequent Guaranteed Period. In such event,
the Owner's proper request for withdrawal or transfer must be received at the
Company's Servicing Office within a 45-day period immediately preceding the end
of such Guaranteed Period.
WAIVER OF WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT ON DEATH OR ANNUITY
DATE. No withdrawal charge or Market Value Adjustment will be imposed upon
payments made under the Annuity Benefit or Death Benefit provisions of this
contract.
PENALTY-FREE SURRENDER ON DISABILITY. No withdrawal charge or Market Value
Adjustment will be imposed on a partial withdrawal or full surrender made as a
result of "permanent and total disability" of the Owner. Such disability must:
(i) prevent the Owner from engaging in any occupation for remuneration or
profit; (ii) have started prior to the 65th birthday of the Owner; and (iii)
have existed continuously for a period of at least 12 months. Written proof of
disability must be provided to the Company at its Servicing Office.
PENALTY-FREE ANNUITIZATION. At any time the Owner may request in writing payment
of the then current Annuity Account Value in accordance with any one of the
settlement options set forth in this contract. In such event, no withdrawal
charge or Market Value Adjustment will be imposed at the time such settlement is
made. Such annuitization will automatically result in a change in the Annuity
Date to the date Income Payments commence under the settlement option elected.
BENEFIT PROVISIONS
ANNUITY BENEFIT. On the Annuity Date the Company will pay all or a part of the
adjusted value of the Annuity Account (as set forth below) or apply it in
accordance with the settlement option(s) elected by the Owner. However, if the
amount to be applied under any settlement option is less than $5,000, or if the
first Income Payment payable in accordance with such option is less than $50,
the Company will pay the adjusted value in a single payment to the payee
designated by the Owner.
If the Owner dies on or after the Annuity Date and before the entire interest in
the Contract has been distributed, then the remaining portion of the Annuity
Account must be distributed to the Beneficiary at least as rapidly as under the
settlement option chosen. If the Beneficiary is the surviving spouse of the
Owner, then the beneficiary will be treated as the new Owner of the Contract.
ANNUITY DATE. The Annuity Date selected by each Owner is shown in the Contract
Specifications. The Annuity Date may be changed from time to time by the Owner
by notifying the Company in writing. The notice must be received at the
Company's Servicing Office at least 45 days prior to the Annuity Date then in
effect. The new Annuity Date selected must be at least 30 days after the
effective date of the change and not later than the Annuitant's 90th birthday
(if more than one annuitant is named, the 90th birthday of the oldest
annuitant).
After the Annuity Date, no change of a settlement option is permitted, no
payments may be requested under the "Cash Withdrawals" provision of the
contract, and no Death Benefit is payable under the contract except as otherwise
specified under the settlement option selected.
ELECTION AND EFFECTIVE DATE OF ELECTION WITH RESPECT TO ANNUITY BENEFIT. During
the lifetime of the Owner and prior to the Annuity Date, the Owner may elect to
have the adjusted value of the Annuity Account applied on the Annuity Date under
one or more of the settlement options set forth in this contract, or under any
other settlement option as agreed to by the Company. The Owner may also change
any election, but any election or change of election must be received at the
Company's Servicing Office at least 45 days prior to the Annuity Date. The
election or change of election may be made by filing with the Company at its
Servicing Office written notice in such form as the Company may require. If no
such election is in effect on the 30th day prior to the Annuity Date, the
adjusted value of the Annuity Account will be applied under a Life Annuity with
120 months guaranteed.
In such situation, the portion of the adjusted value of the Annuity Account to
be applied for a Fixed Life Annuity under the Second Option and/or a Variable
Life Annuity under Option II will be determined on a pro rata basis from the
composition of the Annuity Account on the Annuity Date.
AN426NY Page 13
<PAGE>
DETERMINATION OF AMOUNT. On the Annuity Date the Annuity Account will be
canceled and the adjusted value of the Annuity Account to be applied under the
settlement options provisions shall be equal to the Annuity Account Value for
the Valuation Period which ends immediately preceding the Annuity Date, minus
any applicable premium or similar tax. For the purposes of any qualified plan
riders which may be attached to this contract, the term 'Annuity Value,'
wherever referenced therein, shall mean the 'adjusted value of the Annuity
Account' as defined above.
INCOME PAYMENT BENEFITS. On the Annuity Date, the adjusted value of the Annuity
Account as determined under the "Determination of Amount" provision may be
applied, as elected by the Owner, under one or more of the settlement options
set forth in the contract to effect: (a) a Fixed Income Payment Benefit or a
Variable Income Payment Benefit; or (b) a combination of the Fixed Income
Payment Benefit and the Variable Income Payment Benefit. If a combination Fixed
and Variable Income Payment Benefit is elected, the Owner may specify the amount
to be allocated to the Fixed Income Payment Benefit and the amount to be
allocated to the Variable Income Payment Benefit. Such election and allocation
may also be made by a Beneficiary to the extent provided in the "Election and
Effective Date of Election with Respect to Death Benefit Provision".
DEATH BENEFIT. If the Owner dies before the Annuity Date, the Company will pay
the Death Benefit to the Beneficiary upon receipt of due proof of the death of
the Owner in accordance with the "Payment of Death Benefit" provision. If there
is no designated Beneficiary living on the date of death of the Owner, the
Company will pay the Death Benefit, upon receipt of due proof of the death of
both the Owner and the designated Beneficiary, in one lump sum to the estate of
the Owner. If the death of the Owner occurs on or after the Annuity Date, no
death benefit will be payable under the contract except as may be provided under
the settlement option elected.
ELECTION AND EFFECTIVE DATE OF ELECTION WITH RESPECT TO DEATH BENEFIT. During
the lifetime of the Annuitant and prior to the Annuity Date, the Owner may elect
one or more of the settlement options set forth in this contract to effect an
annuity for the Beneficiary as payee after the death of the Owner. This election
may be made or subsequently revoked by filing with the Company at its Servicing
Office a written election or revocation of an election in such form as required
by the Company.
Any election or revocation of an election of a method of settlement of the Death
Benefit will become effective on the date it is received by the Company at its
Servicing Office.
Unless otherwise specified in writing by the Owner, the Beneficiary may elect
(a) to receive the Death Benefit as a lump sum cash payment, in which event the
Annuity Account will be canceled, or (b) to have the Death Benefit applied under
one or more of the settlement options set forth under the contract. This
election may be made by filing with the Company a written request in a form as
required by the Company. Any written request for an election of a settlement
option for the Death Benefit by the Beneficiary will become effective on the
later of (a) the date the request is received by the Company at its Servicing
Office; or (b) the date due proof of the death of the Owner is received by the
Company at its Servicing Office. If a written request for a settlement option by
the Beneficiary is not received by the Company within 60 days following the date
due proof of the death of the Owner is received by the Company, the Beneficiary
shall be deemed to have elected a lump sum cash payment as of the last day of
the 60-day period.
Notwithstanding the above, the Owner or Beneficiary may only elect a settlement
option which provides for the distribution of the entire Death Benefit to the
Beneficiary within five years of the Owner's death unless: (a) the entire
interest in the contract is distributed over the life of the Beneficiary, with
distributions beginning within one year of the Owner's death; (b) the entire
interest in the contract is distributed over a period not extending beyond the
life expectancy of the Beneficiary, with distributions beginning within one year
of the Owner's death; or (c) the Beneficiary is the deceased Owner's spouse and
elects to continue the contract and become the new Owner, but in no event may
such an election be made under the contract more than once.
For purposes of Section 72(s) of the Internal Revenue Code, if any Owner is not
an individual, the death or change of any Annuitant is treated as the death of a
Owner, and if the Owner is a grantor trust within the meaning of the Internal
Revenue Code, the death of the grantor of such trust is also treated as the
death of a Owner.
AN426NY Page 14
<PAGE>
PAYMENT OF DEATH BENEFIT. If the Death Benefit is to be paid in cash to the
Beneficiary, payment will be made within 7 days of the date the election becomes
effective or is deemed to become effective, provided due proof of the death of
the Owner is received by the Company at its Servicing Office, except as the
Company may be permitted to defer any such payment of amounts derived from the
Variable Account in accordance with the Investment Company Act of 1940. If the
Death Benefit is to be paid in one sum to the estate of the deceased Owner,
payment will be made within 7 days of the date due proof of the death of the
Owner and/or Beneficiary is received by the Company at its Servicing Office,
except as the Company may be permitted to defer any such payment of amounts
derived from the Variable Account in accordance with the Investment Company Act
of 1940. If settlement under the settlement option provisions is elected, the
Income Payments will commence 30 days following the effective date or the deemed
effective date of the election and the Annuity Account will be maintained in
effect until such Income Payments commence.
AMOUNT OF DEATH BENEFIT. The Death Benefit is determined as of the effective
date or deemed effective date of the Death Benefit election and is equal to the
greatest of:
(a) the Annuity Account Value for the Valuation Period during which
the Death Benefit election is effective or is deemed to become
effective;
(b) the sum of all the Premium Payment(s) made under the contract
adjusted for any partial withdrawals (see Example 1 below); or
(c) the highest Annuity Account Value ever attained on a Contract
Anniversary Date, occurring on or before the then Owner's 80th
birthday (or the Annuitant's 80th birthday in the case of a
non-natural Owner), with adjustments for any subsequent Premium
Payments, partial withdrawals made since such Contract Anniversary
Date, provided that if there has been a transfer of ownership, the
highest Annuity Account Value must occur on a Contract Anniversary
Date after the date of such transfer of ownership (see Example 2
below).
<TABLE>
<CAPTION>
Example 1: Example 2:
---------- ----------
<S> <C> <C> <C>
Premium Payments 280 Highest A.A.V. 300
A.A.V. before withdrawal 200 A.A.V. before withdrawal 200
Partial withdrawal 50 Partial withdrawal 50
A.A.V. after withdrawal 150 A.A.V. after withdrawal 150
Death Benefit 210 Death Benefit 225
</TABLE>
NOTE: A.A.V. == ANNUITY ACCOUNT VALUE, AS DEFINED IN THIS CONTRACT.
However, the Death Benefit on or after the then current Owner's 90th birthday
(if a natural person) is the greater of (a) the Annuity Account Value for the
Valuation Period during which the Death Benefit election is effective or is
deemed to become effective, or (b) the sum of all the Premium Payment(s) with
adjustments for any partial withdrawals made under the contract since the Date
of Issue.
SECTION 72(s). The provisions above will be interpreted so as to comply with the
requirements of Section 72(s) of the Internal Revenue Code.
SETTLEMENT OPTIONS
ANNUITY PAYMENTS
An election to receive payments under a Settlement Option must be made by the
Annuity Date.
If a Settlement Option is not chosen prior to the Annuity Date, payments will
commence to the Owner on the Annuity Date under the Settlement Option providing
a Life Annuity with annuity payments guaranteed for 10 years. If no election is
made, the value of the Owner's Variable Account shall be used to provide a
variable annuity payment, and the value of the Owner's Fixed Account shall be
used to provide a fixed annuity payment.
The Annuity Date is set forth in each Contract. Upon written request by the
Owner and any Beneficiary who cannot be changed, the Annuity Date may be
deferred. However, the Annuity Date may not be deferred past the Annuitant's age
90. Purchase Payments may be made until the new Annuity Date.
AN426NY Page 15
<PAGE>
CHOICE OF SETTLEMENT OPTION
By Owner
Prior to the Annuity Date, the Owner may choose or change any Option. For a 100%
fixed annuity payment, the Annuity Date must be at least thirty days prior to
the time Income Payments are to begin.
By Beneficiary
At the time proceeds are payable to a Beneficiary, a Beneficiary may choose or
change any Settlement Option that meets the requirements of Code Section 72(s)
or 401(a)(9) if proceeds are available to the Beneficiary in a lump sum. The
Beneficiary then becomes the Annuitant.
A choice or change must be in writing to the Company at its Servicing Office.
Once Income Payments have begun, no surrender of the Annuity Account Value can
be made and the Annuitant(s) cannot be changed, nor can the settlement option be
changed.
SETTLEMENT OPTIONS
a. Life Annuity / Life Annuity with Guaranteed Period -- Payments will be made
for the lifetime of the Annuitant with no certain period, or life and a 10
year certain period, or life and a 20 year certain period.
b. Unit Refund Life Annuity -- Payments will be made for the lifetime of the
Annuitant with the guarantee that upon death a payment will be made of the
value of the number of Variable Annuity Units equal to the excess, if any,
of (a) over (b) where (a) is the total amount applied under the option
divided by the Annuity Unit Value at the Annuity Date and (b) is the
product of the number of Variable Annuity Units represented by each payment
and the number of payments paid prior to death.
c. Joint Life Annuity / Joint Life Annuity with Guaranteed Period -- Payments
will be made during the joint life of the Annuitant and a Joint Annuitant
of the Owner's choice. Payments will be made for life with no certain
period, or life and a 10 year certain period, or life and a 20 year certain
period. Payments continue for the life of the survivor at the death of the
Annuitant or Joint Annuitant.
d. Other options may be available as agreed upon in writing by the Company.
At the time a Settlement Option is selected, the Owner may elect to have the
total Value applied to provide a variable annuity payment, a fixed annuity
payment, or a combination fixed and variable annuity payment. If no election is
made, the value of the Owner's Variable Account shall be used to provide a
variable annuity payment, and the value of the Owner's Fixed Account shall be
used to provide a fixed annuity payment.
At the time Income Payments commence, they will not be less than those that
would be provided by a specific amount for any single premium immediate annuity
contract offered by the Company at the time to the same class of annuitants. The
specific amount is the greater of the surrender value or 95% of the accumulation
value.
The amount of Income Payment will depend on the age and sex (except in cases
where unisex rates are required) of the Annuitant as of the Annuity Date. A
choice may be made to receive payments once each month, four times each year,
twice each year, or once each year. The Annuity Account Value used to effect
benefit payments will be calculated as of the Annuity Date.
Table 1 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the first monthly payment under a
variable annuity settlement option. The tables show the dollar amount of the
first monthly payment which can be purchased with each $1,000 of Annuity Account
Value, after deduction of any applicable premium taxes. Amounts shown in Table 1
use an Individual Annuity Mortality Table on file with the New York
Superintendent of Insurance, with an assumed rate of return of 4% per year.
AN426NY Page 16
<PAGE>
Table 2 of this Contract illustrates the minimum payment amounts and the age
adjustments which will be used to determine the monthly payments under a fixed
annuity settlement option. The tables show the dollar amount of the guaranteed
monthly payments which can be purchased with each $1,000 of Annuity Account
Value, after deduction of any applicable premium taxes. Amounts shown in Table 2
use an Individual Annuity Mortality Table on file with the New York
Superintendent of Insurance, with an interest rate of 2.75% per year.
The minimum payment amounts shown for Joint and Survivor Annuities under both
Tables 1 and 2 are for Joint Ages; that is, for a male and a female both of the
same age. Minimum payment amounts for other age and sex combinations on Joint
and Survivor Annuities are available, but are not illustrated in Tables 1 and 2.
DETERMINATION OF THE AMOUNT OF VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
The first variable annuity payment is sub-divided into components each of which
represents the product of: (a) the percentage elected by the Owner of a specific
Sub-account the performance of which will determine future variable annuity
payments, and (b) the entire first variable annuity payment. Each variable
annuity payment after the first payment attributable to a specific Sub-account
will be determined by multiplying the Variable Annuity Unit value for that
Sub-account for the date each payment is due by a constant number of Variable
Annuity Units. This constant number for each specific Sub-account is determined
by dividing the component of the first payment attributable to such Sub-account
as described above by the Variable Annuity Unit value for that Sub-account on
the Annuity Date. The total variable annuity payment will be the sum of the
payments attributable to each Sub-account.
The Variable Annuity Unit value for any Valuation Period for any Sub-account is
determined by multiplying the Variable Annuity Unit value for the immediately
preceding Valuation Period by the product of (a) 0.9998926 raised to a power
equal to the number of days in the current Valuation Period and (b) the Net
Investment Factor of the Sub-account for the Valuation Period for which the
Variable Annuity Unit value is being determined.
The valuation of all assets in the Sub-account shall be determined in accordance
with the provisions of applicable laws, rules, and regulations. The method of
determination by the Company of the value of an Annuity Unit will be conclusive
upon the Owner and any Beneficiary.
The Company guarantees that the dollar amount of each installment after the
first shall not be affected by variations in mortality experience from mortality
assumptions on which the first installment is based nor by expenses actually
incurred, other than taxes on investment income.
After the Annuity Date, if any portion of the annuity payment is a variable
annuity payment, the Owner may direct a transfer of assets from one Sub-account
to another Sub-account or to a fixed annuity payment. Such transfers will be
limited to three (3) times per Contract Year. Assets may not be transferred from
a fixed annuity payment to a variable annuity payment.
A transfer from one Sub-account to another Sub-account will result in the
purchase of Variable Annuity Units in one Sub-account and the redemption of
Variable Annuity Units in the other Sub-account. Such a transfer will be
accomplished at relative Variable Annuity Unit values as of the Valuation Date
the transfer request is received. The valuation of Variable Annuity Units is
described above. A transfer from one Sub-account to a fixed annuity payment will
result in the redemption of Annuity Units in one Sub-account and the purchase of
a minimum fixed annuity payment based on Table 2.
PROOF OF AGE
Payment will be subject to proof of age that the Company will accept such as a
certified copy of a birth certificate.
MINIMUM ANNUITY PAYMENT REQUIREMENTS
If the Annuity Payment Option chosen results in payments of less than $50 per
Sub-account, the frequency will be changed so that payments will be at least
$50.
For the purposes of this Section, the fixed annuity payment of the Contract is
considered a Sub-account.
AN426NY Page 17
<PAGE>
EVIDENCE OF SURVIVAL
The Company has the right to ask for proof that the person on whose life the
payment is based is alive when each payment is due.
CHANGE IN ANNUITY PAYMENT OPTION
The Annuity Payment Option may not be changed after the Annuity Commencement
Date.
GENERAL PROVISIONS
THE CONTRACT. The contract and the application therefore constitute the entire
contract between the Company and the Owner.
Only the President, a Vice President, an Assistant Vice President, or a
Secretary, of the Company may make or modify this contract.
The Contract is executed at the Company's Home Office.
MODIFICATION OF CONTRACT. The Company reserves the right to modify this contract
to meet the requirements of applicable state and federal laws or regulations.
Any changes are subject to the prior approval of the New York Insurance
Department. The Company will notify the Owner in writing of any changes.
NON-PARTICIPATION. The contract is not entitled to share in surplus
distribution.
LOANS. Loans are not permitted under this contract.
DETERMINATION OF VALUES. The method of determination by the Company of the Net
Investment Factor and the number and value of Accumulation Units and Annuity
Units shall be conclusive upon the Owner, and any Beneficiary or payee. Any
paid-up annuity, cash surrender or death benefits that may be available under a
contract will not be less than the minimum benefits required by any statute of
the state in which the is delivered.
ENDORSEMENT OF INCOME PAYMENTS. The Company will make each Income Payment at the
Home Office by check. Each check must be personally endorsed by the
payee/Annuitant, or the Company may require that proof of the payee/ Annuitant's
survival be furnished.
MISSTATEMENT OF AGE AND/OR SEX. If the age and/or sex of an Annuitant is
misstated, the amount payable under the contract will be adjusted to be the
amount of Income which the actual premium paid would have purchased for the
correct age and/or sex according to the Company's rates in effect on the Date of
Issue. Any overpayment by the Company, with interest at the rate of 6% per year,
compounded annually, will be charged against the payments to be made next
succeeding the adjustment. Any underpayment by the Company will be paid in a
lump sum, with interest at the rate of 6% per year, compounded annually.
CLAIMS OF CREDITORS. To the extent permitted by law, no amounts payable under
this contract will be subject to the claims of creditors of any payee.
PERIODIC REPORTS. At least once each calendar year, the Company will furnish the
Owner a report as required by law showing the Annuity Account Value at the end
of the preceding year, all transactions during the year, the current Annuity
Account Value, the number of Accumulation Units in each Variable Accumulation
Account, the applicable Accumulation Unit Value as of the date of the report and
the interest rate credited to the Fixed Account Sub-Account(s). The Company will
also send such statements reflecting transactions in the Annuity Account as may
be required by applicable laws, rules and regulations and any other information
required by the Superintendent of Insurance.
AN426NY Page 18
<PAGE>
ANNUITY PURCHASE RATE TABLE 1
-----------------------------
SEPARATE FILE
<PAGE>
ANNUITY PURCHASE RATE TABLE 2
-----------------------------
SEPARATE FILE
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
SYRACUSE, NEW YORK
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
WITH FIXED AND VARIABLE ACCOUNTS - NON-PARTICIPATING
AN426NY
<PAGE>
TABLE 1
ANNUITY PURCHASE RATES UNDER A VARIABLE SETTLEMENT OPTION
<TABLE>
<CAPTION>
+--------------------------------------------------------------------------------+
| DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS |
| PURCHASED WITH EACH $1,000 APPLIED |
+--------------------------------------------------------------------------------+
| SINGLE LIFE ANNUITIES |
+---------+-----------------+------------------+------------------+--------------+
| |No Period Certain|120 Months Certain|240 Months Certain| Cash Refund |
| Age | Male Female | Male Female | Male Female | Male female |
+---------+-----------------+------------------+------------------+--------------+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| 60 | $5.29 $4.78| $5.18 $4.73 | $4.83 $4.56 | $4.88 $4.56|
| 61 | 5.41 4.87| 5.28 4.81 | 4.89 4.63 | 4.96 4.63|
| 62 | 5.54 4.97| 5.39 4.90 | 4.95 4.69 | 5.05 4.71|
| 63 | 5.68 5.07| 5.50 5.00 | 5.01 4.75 | 5.14 4.78|
| 64 | 5.82 5.19| 5.63 5.10 | 5.06 4.82 | 5.23 4.87|
| | | | | |
| 65 | 5.98 5.30| 5.75 5.21 | 5.12 4.88 | 5.32 4.95|
| 66 | 6.15 5.43| 5.88 5.32 | 5.17 4.95 | 5.42 5.04|
| 67 | 6.33 5.57| 6.02 5.44 | 5.22 5.01 | 5.53 5.14|
| 68 | 6.53 5.72| 6.16 5.56 | 5.27 5.08 | 5.64 5.24|
| 69 | 6.74 5.88| 6.31 5.70 | 5.32 5.14 | 5.75 5.34|
| | | | | |
| 70 | 6.96 6.05| 6.46 5.84 | 5.36 5.20 | 5.87 5.46|
| 71 | 7.19 6.23| 6.61 5.99 | 5.40 5.26 | 5.99 5.57|
| 72 | 7.44 6.44| 6.77 6.14 | 5.44 5.31 | 6.12 5.69|
| 73 | 7.71 6.66| 6.93 6.30 | 5.47 5.36 | 6.25 5.82|
| 74 | 7.99 6.89| 7.09 6.47 | 5.50 5.40 | 6.39 5.96|
| 75 | 8.30 7.15| 7.25 6.65 | 5.53 5.44 | 6.53 6.10|
+---------+-----------------+------------------+------------------+--------------+
| |
| |
<CAPTION>
+--------------------------------------------------------------------------------+
| JOINT AND SURVIVOR ANNUITIES |
+--------------------------------------------------------------------------------+
| Joint and Full to Survivor | | Joint and Two-Thirds Survivor |
+-----------------------------------+--------+-----------------------------------+
| Certain Period | | Certain Period |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
| | | | Joint | | | |
| None | 120 | 240 | Age | None | 120 | 240 |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
<S> <C> <C> <C> <C> <C> <C>
| $4.37 | $4.37 | $4.34 | 60 | $4.78 | $4.74 | $4.57 |
| 4.44 | 4.44 | 4.40 | 61 | 4.88 | 4.82 | 4.63 |
| 4.52 | 4.51 | 4.46 | 62 | 4.97 | 4.91 | 4.69 |
| 4.60 | 4.59 | 4.53 | 63 | 5.08 | 5.00 | 4.76 |
| 4.68 | 4.68 | 4.60 | 64 | 5.19 | 5.10 | 4.82 |
| | | | | | | |
| 4.77 | 4.77 | 4.67 | 65 | 5.31 | 5.21 | 4.88 |
| 4.87 | 4.86 | 4.74 | 66 | 5.44 | 5.32 | 4.95 |
| 4.98 | 4.96 | 4.82 | 67 | 5.57 | 5.44 | 5.01 |
| 5.09 | 5.07 | 4.89 | 68 | 5.72 | 5.56 | 5.08 |
| 5.21 | 5.19 | 4.96 | 69 | 5.87 | 5.69 | 5.14 |
| | | | | | | |
| 5.34 | 5.31 | 5.04 | 70 | 6.04 | 5.83 | 5.20 |
| 5.47 | 5.44 | 5.11 | 71 | 6.22 | 5.97 | 5.25 |
| 5.62 | 5.58 | 5.18 | 72 | 6.42 | 6.12 | 5.31 |
| 5.78 | 5.73 | 5.24 | 73 | 6.62 | 6.28 | 5.36 |
| 5.96 | 5.88 | 5.30 | 74 | 6.85 | 6.44 | 5.40 |
| 6.14 | 6.05 | 5.36 | 75 | 7.09 | 6.61 | 5.44 |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
</TABLE>
AGE ADJUSTMENT TABLE
<TABLE>
<CAPTION>
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
----- ----------------- ------------- -----------------
<S> <C> <C> <C>
Before 1920 + 2 1970-1979 - 4
1920-1929 + 1 1980-1989 - 5
1930-1939 0 1990-1999 - 6
1940-1949 - 1 2000-2009 - 7
1950-1959 - 2 2010-2019 - 8
1960-1969 - 3 After 2019 - 9
</TABLE>
AN426NY
<PAGE>
TABLE 2
ANNUITY PURCHASE RATES UNDER A FIXED PAYMENT OPTION
<TABLE>
<CAPTION>
+--------------------------------------------------------------------------------+
| DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS |
| PURCHASED WITH EACH $1,000 APPLIED |
+--------------------------------------------------------------------------------+
| SINGLE LIFE ANNUITIES |
+---------+-----------------+------------------+------------------+--------------+
| |No Period Certain|120 Months Certain|240 Months Certain| Cash Refund |
| Age | Male Female | Male Female | Male Female | Male female |
+---------+-----------------+------------------+------------------+--------------+
<S> <C> <C> <C> <C> <C> <C> <C> <C>
| 60 | $4.91 $4.37| $4.81 $4.33 | $4.47 $4.17 | $4.47 $4.13|
| 61 | 5.03 4.47| 4.92 4.42 | 4.53 4.24 | 4.56 4.21|
| 62 | 5.17 4.58| 5.04 4.52 | 4.60 4.31 | 4.65 4.29|
| 63 | 5.32 4.69| 5.16 4.62 | 4.67 4.38 | 4.75 4.38|
| 64 | 5.48 4.81| 5.30 4.73 | 4.73 4.46 | 4.85 4.46|
| | | | | |
| 65 | 5.64 4.94| 5.43 4.85 | 4.80 4.53 | 4.95 4.56|
| 66 | 5.82 5.08| 5.58 4.97 | 4.86 4.61 | 5.06 4.66|
| 67 | 6.01 5.22| 5.72 5.10 | 4.92 4.68 | 5.18 4.76|
| 68 | 6.22 5.38| 5.88 5.24 | 4.97 4.75 | 5.30 4.87|
| 69 | 6.44 5.55| 6.04 5.39 | 5.03 4.82 | 5.43 4.98|
| | | | | |
| 70 | 6.68 5.73| 6.20 5.54 | 5.08 4.89 | 5.56 5.11|
| 71 | 6.92 5.93| 6.37 5.70 | 5.12 4.95 | 5.70 5.23|
| 72 | 7.18 6.14| 6.54 5.87 | 5.16 5.02 | 5.84 5.37|
| 73 | 7.47 6.38| 6.72 6.04 | 5.20 5.07 | 6.00 5.51|
| 74 | 7.77 6.63| 6.90 6.23 | 5.23 5.12 | 6.16 5.66|
| 75 | 8.09 6.90| 7.08 6.42 | 5.26 5.17 | 6.32 5.82|
+---------+-----------------+------------------+------------------+--------------+
| |
| |
<CAPTION>
+--------------------------------------------------------------------------------+
| JOINT AND SURVIVOR ANNUITIES |
+--------------------------------------------------------------------------------+
| Joint and Full to Survivor | | Joint and Two-Thirds Survivor |
+-----------------------------------+--------+-----------------------------------+
| Certain Period | | Certain Period |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
| | | | Joint | | | |
| None | 120 | 240 | Age | None | 120 | 240 |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
<S> <C> <C> <C> <C> <C> <C>
| $3.96 | $3.95 | $3.98 | 60 | $4.38 | $4.34 | $4.22 |
| 4.03 | 4.08 | 4.05 | 61 | 4.48 | 4.47 | 4.29 |
| 4.12 | 4.16 | 4.12 | 62 | 4.58 | 4.57 | 4.36 |
| 4.21 | 4.25 | 4.19 | 63 | 4.69 | 4.67 | 4.43 |
| 4.30 | 4.34 | 4.26 | 64 | 4.81 | 4.78 | 4.50 |
| | | | | | | |
| 4.40 | 4.43 | 4.34 | 65 | 4.94 | 4.89 | 4.57 |
| 4.51 | 4.54 | 4.42 | 66 | 5.08 | 5.01 | 4.64 |
| 4.62 | 4.64 | 4.50 | 67 | 5.22 | 5.13 | 4.71 |
| 4.74 | 4.76 | 4.58 | 68 | 5.38 | 5.27 | 4.78 |
| 4.87 | 4.88 | 4.66 | 69 | 5.55 | 5.41 | 4.85 |
| | | | | | | |
| 5.01 | 5.01 | 4.74 | 70 | 5.73 | 5.55 | 4.91 |
| 5.16 | 5.15 | 4.82 | 71 | 5.92 | 5.70 | 4.98 |
| 5.32 | 5.30 | 4.89 | 72 | 6.12 | 5.86 | 5.03 |
| 5.49 | 5.45 | 4.96 | 73 | 6.34 | 6.03 | 5.09 |
| 5.68 | 5.62 | 5.03 | 74 | 6.58 | 6.20 | 5.14 |
| 5.88 | 5.79 | 5.09 | 75 | 6.84 | 6.38 | 5.18 |
+-----------+-----------+-----------+--------+-----------+-----------+-----------+
</TABLE>
AGE ADJUSTMENT TABLE
<TABLE>
<CAPTION>
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
----- ----------------- ------------- -----------------
<S> <C> <C> <C>
Before 1920 + 2 1970-1979 - 4
1920-1929 + 1 1980-1989 - 5
1930-1939 0 1990-1999 - 6
1940-1949 - 1 2000-2009 - 7
1950-1959 - 2 2010-2019 - 8
1960-1969 - 3 After 2019 - 9
</TABLE>
AN426NY
<PAGE>
<TABLE>
<CAPTION>
<S><C>
LINCOLN LIFE & ANNUITY
[LOGO] VARIABLE ANNUITY APPLICATION COMPANY OF NEW YORK
HOME OFFICE SYRACUSE, NEW YORK
- -------------------------------------------------------------------------------------------------------------------------
Instructions: Please type or print. ANY ALTERATIONS TO THIS APPLICATION MUST BE INITIALED BY THE CONTRACT
OWNER.
- -------------------------------------------------------------------------------------------------------------------------
1a CONTRACT OWNER
- -------------------------------------------------------------------------------------------------------------------------
Social Security number/TIN / / / / - / / / - / / / / /
----------------------------------------------------
Full legal name or trust name*
Date of birth / / / / / / / / / / / Male / / Female
---------------------------------------------------- Month Day Year
Street address
Home telephone number / / / / / / / / - / / / / /
----------------------------------------------------
City State ZIP
Date of trust* / / / / / / / / / Is trust revocable?*
---------------------------------------------------- Month Day Year / / Yes / / No
Trustee name*
NOTE: MAXIMUM AGE OF CONTRACT OWNER IS 89. *This information is required for trusts.
- -------------------------------------------------------------------------------------------------------------------------
1b JOINT CONTRACT OWNER
- -------------------------------------------------------------------------------------------------------------------------
Social Security number / / / / - / / / - / / / / /
----------------------------------------------------
Full legal name Date of birth / / / / / / / / / / / Male / / Female
NOTE: MAXIMUM AGE OF JOINT CONTRACT OWNER IS 89. Month Day Year / / Spouse / / Non-spouse
- -------------------------------------------------------------------------------------------------------------------------
2a ANNUITANT (if no Annuitant is specified, the Contract Owner, or Joint Owner if younger, will be the Annuitant.)
- -------------------------------------------------------------------------------------------------------------------------
Social Security number / / / / - / / / - / / / / /
----------------------------------------------------
Full legal name
Date of birth / / / / / / / / / / / Male / / Female
---------------------------------------------------- Month Day Year
Street address
Home telephone number / / / / / / / / - / / / / /
----------------------------------------------------
City State ZIP
NOTE: MAXIMUM AGE OF ANNUITANT IS 89.
- -------------------------------------------------------------------------------------------------------------------------
2b CONTINGENT ANNUITANT
- -------------------------------------------------------------------------------------------------------------------------
Social Security number / / / / - / / / - / / / / /
----------------------------------------------------
Full legal name
NOTE: MAXIMUM AGE OF ANNUITANT IS 89.
- -------------------------------------------------------------------------------------------------------------------------
3 BENEFICIARY(IES) OF CONTRACT OWNER (List additional beneficiaries on separate sheet. If listing children, use
full legal names.)
- -------------------------------------------------------------------------------------------------------------------------
%
---------------------------------------------------- ----------------------------------- ----------------- --------
Primary: Full legal name or trust name* Relationship to Contract Owner SSN/TIN
%
---------------------------------------------------- ----------------------------------- ----------------- --------
Primary: Full legal name Relationship to Contract Owner SSN/TIN
%
---------------------------------------------------- ----------------------------------- ----------------- --------
Contingent: Full legal name or trust name Relationship to Contract Owner SSN/TIN
------------------------------------------- Date of trust* / / / / / / / / / Is trust revocable?*
Trustee name* Month Day Year / / Yes / / No
*This information is required for trusts
TO SPECIFY AN ANNUITY PAYMENT OPTION FOR YOUR BENEFICIARY, PLEASE COMPLETE THE BENEFICIARY PAYMENT OPTIONS
FORM (29953CP).
- -------------------------------------------------------------------------------------------------------------------------
4 TYPE OF VARIABLE ANNUITY CONTRACT
- -------------------------------------------------------------------------------------------------------------------------
NONQUALIFIED: / / Initial Contribution OR / / 1035 Exchange
TAX-QUALIFIED (MUST COMPLETE PLAN TYPE): / / Initial Contribution, Tax Year _____ OR / / Transfer OR / / Rollover
PLAN TYPE (CHECK ONE): / / Roth IRA / / Traditional IRA
FORM 29365NY 8/99 Page 1 CP-APPNY
<PAGE>
- ----------------------------------------------------------- | -----------------------------------------------------------
5a ALLOCATION (This section must be completed.) | 5a DOLLAR COST AVERAGING (Complete only if electing DCA.)
- ----------------------------------------------------------- | -----------------------------------------------------------
Initial minimums: |
Nonqualified $10,000 Qualified $ 2,000 | $2,000 minimum required.
|
FUTURE CONTRIBUTIONS WILL FOLLOW THE ALLOCATION | Total amount to DCA: $
BELOW. IF DCA OPTION IS SELECTED, THE ENTIRE AMOUNT | -----------------------
OF EACH FUTURE CONTRIBUTION WILL FOLLOW THE | OR
ALLOCATION IN SECTION 5b. | MONTHLY amount to DCA: $
| -----------------------
If no allocations are specified in Section 5a or 5b, | -----------------------------------------------------------
the entire amount will be allocated to the Money |
Market Fund pending instructions from the contract | OVER THE FOLLOWING PERIOD: -----------------------
owner. | MONTHS (6-60)
- ----------------------------------------------------------- | -----------------------------------------------------------
Total initial | FROM THE FOLLOWING HOLDING ACCOUNT (check one):
contribution amount $ |
--------------------------- | / / 1 Year Fixed Account (Only available for 12 months
Total DCA amount $ | or less.)
--------------------------- | / / Delaware Delchester Series
(ENTER AMOUNT IN SECTION 5b) | / / Lincoln National Money Market *The DCA holding
| / / Lincoln National Bond Fund account and the
Remaining amount to be | DCA fund elected
allocated $ | cannot be the same.
--------------------------- |
- ----------------------------------------------------------- | -----------------------------------------------------------
INTO THE FUND(S) BELOW | INTO THE FUND(S) BELOW
- ----------------------------------------------------------- | -----------------------------------------------------------
USE WHOLE PERCENTAGES | USE WHOLE PERCENTAGES
|
% Delaware Delchester Series | % Delaware Delchester Series
---------- | ----------
% Delaware Emerging Markets Series | % Delaware Emerging Markets Series
---------- | ----------
% Delaware Growth & Income Series | % Delaware Growth & Income Series
---------- | ----------
% Delaware REIT Series | % Delaware REIT Series
---------- | ----------
% Delaware Select Growth Series | % Delaware Select Growth Series
---------- | ----------
% Delaware Small Cap Value Series | % Delaware Small Cap Value Series
---------- | ----------
% Delaware Social Awareness Series | % Delaware Social Awareness Series
---------- | ----------
% Delaware Trend Series | % Delaware Trend Series
---------- | ----------
% AIM V.I. Capital Appreciation Fund | % AIM V.I. Capital Appreciation Fund
---------- | ----------
% AIM V.I. Growth Fund | % AIM V.I. Growth Fund
---------- | ----------
% AIM V.I. International Fund | % AIM V.I. International Fund
---------- | ----------
% AIM V.I. Value Fund | % AIM V.I. Value Fund
---------- | ----------
% Alliance Capital Growth | % Alliance Capital Growth
---------- | ----------
% Alliance Capital Growth and Income | % Alliance Capital Growth and Income
---------- | ----------
% Alliance Capital Premier Growth | % Alliance Capital Premier Growth
---------- | ----------
% Alliance Capital Technology | % Alliance Capital Technology
---------- | ----------
% AVIS Global Small Cap | % AVIS Global Small Cap
---------- | ----------
% AVIS Growth | % AVIS Growth
---------- | ----------
% AVIS Growth and Income | % AVIS Growth and Income
---------- | ----------
% AVIS International | % AVIS International
---------- | ----------
% Bankers Trust Equity 500 Index | % Bankers Trust Equity 500 Index
---------- | ----------
% Liberty Newport Tiger | % Liberty Newport Tiger
---------- | ----------
% Fidelity VIP Equity Income Portfolio | % Fidelity VIP Equity Income Portfolio
---------- | ----------
% Fidelity VIP Growth Portfolio | % Fidelity VIP Growth Portfolio
---------- | ----------
% Fidelity VIP Growth Opportunities Portfolio | % Fidelity VIP Growth Opportunities Portfolio
---------- | ----------
% Fidelity VIP Overseas Portfolio | % Fidelity VIP Overseas Portfolio
---------- | ----------
% Lincoln National Bond Fund | % Lincoln National Bond Fund
---------- | ----------
% Lincoln National Money Market Fund | % Lincoln National Money Market Fund
---------- | ----------
% MFS Emerging Growth Series | % MFS Emerging Growth Series
---------- | ----------
% MFS Research Series | % MFS Research Series
---------- | ----------
% MFS Total Return Series | % MFS Total Return Series
---------- | ----------
% MFS Utilities Series | % MFS Utilities Series
---------- | ----------
% Templeton Franklin Small Cap | % Templeton Franklin Small Cap
---------- | ----------
% Templeton Global Growth | % Templeton Global Growth
---------- | ----------
% Templeton International | % Templeton International
---------- | ----------
% Templeton Mutual Shares | % Templeton Mutual Shares
---------- | ----------
Fixed Account: ______ % 5 years | % TOTAL (must = 100%)
______ % 1 year ______ % 7 years | ----------
______ % 3 years ______ % 10 years | ----------
| -----------------------------------------------------------
% TOTAL (must = 100%) | FUTURE CONTRIBUTIONS WILL NOT AUTOMATICALLY START A NEW
---------- | DCA PROGRAM. INSTRUCTIONS MUST ACCOMPANY EACH DCA
---------- | CONTRIBUTION.
- ----------------------------------------------------------- | -----------------------------------------------------------
Page 2
<PAGE>
- -------------------------------------------------------------------------------------------------------------------------
5c CROSS-REINVESTMENT OR PORTFOLIO REBALANCING
- -------------------------------------------------------------------------------------------------------------------------
To elect either of these options, please complete the Cross-Reinvestment form (28051CP) or the Portfolio Rebalancing
form (28887CP).
- -------------------------------------------------------------------------------------------------------------------------
6 AUTOMATIC WITHDRAWALS
- -------------------------------------------------------------------------------------------------------------------------
NOTE: WITHDRAWALS EXCEEDING 15% OF PREMIUM PAYMENTS PER YEAR MAY BE SUBJECT TO CONTINGENT DEFERRED SALES CHARGES.
---------------------------------------------------------------------------------------------
/ / Please provide me with automatic withdrawals totaling ______% (may be between 1-15%)
of premium payments payable as follows:
/ / Monthly / / Quarterly / / Semiannually / / Annually
Begin withdrawals in / / / / / /
Month Year
---------------------------------------------------------------------------------------------
OR
---------------------------------------------------------------------------------------------
/ / Please provide me with automatic withdrawals of $_________________________
/ / Monthly / / Quarterly / / Semiannually / / Annually
Begin withdrawals in / / / / / /
Month Year
---------------------------------------------------------------------------------------------
NOTE: IF NO TAX WITHHOLDING SELECTION IS MADE, FEDERAL TAXES WILL BE WITHHELD AT A RATE OF 10%.
ELECT ONE: / / Do withhold taxes
Amount to be withheld $___________________ OR _________%
/ / Do not withhold taxes
ELECT ONE: / / Send check to address of record OR / / Send check to the following alternate address:
/ / Direct deposit
For direct deposit into your bank account, ------------------------------------------------------
the Electronic Fund Transfer Authorization
form (27326CP) must be completed and ------------------------------------------------------
submitted with a VOIDED check or a savings
deposit slip. ------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
7 AUTOMATIC BANK DRAFT
- -------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------- -----------------------------------------------------
Print account holder name(s) EXACTLY as shown on bank records
ATTACH VOIDED CHECK
------------------------------------------------------------------------------------------------
Bank name ABA number
----------------------------------------------------------------------------------------------------------------------
Bank street address City State ZIP
Automatic bank draft start date: / / / / / / / / / $
Month Day (1-28) Year ------------------------------- ------------------
Checking account number Monthly amount
I/We hereby request and authorize you to pay and charge to my/our accounts, checks or electronic fund debits processed
by and payable to the order of Lincoln Life & Annuity Company of New York, P.O. Box 7866, Fort Wayne, IN 46801-7866,
provided there are sufficient collected funds in said account to pay the same upon presentation. It will not be
necessary for any officer or employee of Lincoln Life & Annuity Company of New York to sign such checks. I/We agree
that your rights in respect to each such check shall be the same as if it were a check drawn on you and signed
personally by me/us. This authority is to remain in effect until revoked by me/us, and until you actually receive
such notice I/we agree that you shall be fully protected in honoring any such check or electronic fund transfer
debit. I/We further agree that if any such check or electronic fund transfer debit be dishonored, whether with or
without cause and whether intentionally or inadvertently, you shall be under no liability whatsoever even though such
dishonor results in the forfeiture of insurance investment loss to me/us.
- -------------------------------------------------------------------------------------------------------------------------
8 REPLACEMENT Will the proposed contract replace any existing annuity or life insurance contract?
- -------------------------------------------------------------------------------------------------------------------------
ELECT ONE: / / NO / / YES IF YES, COMPLETE THE 1035 EXCHANGE OR QUALIFIED RETIREMENT ACCOUNT TRANSFER FORM.
(Attach a replacement form.)
----------------------------------------------------------------------------------------------------------------------
Company name
----------------------------------------------------------------------------------------------------------------------
Plan name Year issued
Page 3
<PAGE>
- -------------------------------------------------------------------------------------------------------------------------
9 SIGNATURES
- -------------------------------------------------------------------------------------------------------------------------
All statements made in this application are true to the best of my/our knowledge and belief, and I/we agree to all
terms and conditions as shown. I/We acknowledge receipt of current prospectuses for Delaware - Lincoln ChoicePlus-SM-
and verify my/our understanding that ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF THE FUNDS IN THE SERIES, ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT. I/We understand that all
payments and values based on the fixed account are subject to a market value adjustment formula that may increase or
decrease the value of any transfer, partial surrender, or full surrender from the fixed account made prior to the end
of a guaranteed period. Under penalty of perjury, the Contract Owner(s) certifies that the Social Security (or
taxpayer identification) number(s) is correct as it appears in this application.
---------------------------------------------------------------------------------------
Signed at (city) State Date / / / / / / / / /
Month Day Year
--------------------------------------------- ---------------------------------------
SIGNATURE OF CONTRACT OWNER JOINT CONTRACT OWNER (IF APPLICABLE)
---------------------------------------------------------------------------------------
Signed at (city) State Date / / / / / / / / /
Month Day Year
---------------------------------------------------------------------------------------
SIGNATURE OF ANNUITANT (ANNUITANT MUST SIGN IF CONTRACT OWNER IS A TRUST OR CUSTODIAN.)
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL ADVISER MUST COMPLETE REVERSE SIDE (PAGE 5)
- -------------------------------------------------------------------------------------------------------------------------
Page 4
<PAGE>
- -------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING SECTIONS MUST BE COMPLETED BY THE SECURITIES DEALER OR FINANCIAL ADVISER. Please type or print.
- -------------------------------------------------------------------------------------------------------------------------
10 INSURANCE IN FORCE Will the proposed contract replace any existing annuity or life insurance contract?
- -------------------------------------------------------------------------------------------------------------------------
ELECT ONE: / / NO / / YES IF YES, PLEASE LIST THE INSURANCE IN FORCE ON THE LIFE OF THE PROPOSED CONTRACT OWNER(S)
AND ANNUITANT(S):
(Attach a replacement form.)
$
----------------------------------------------------------------------------------------------------------------------
Company name Year issued Amount
- -------------------------------------------------------------------------------------------------------------------------
11 ADDITIONAL REMARKS
- -------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
12 DEALER INFORMATION
- -------------------------------------------------------------------------------------------------------------------------
Option: / / 1 / / 2 / / 3 / / 4 NOTE: LICENSING APPOINTMENT WITH LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK IS
REQUIRED FOR THIS APPLICATION TO BE PROCESSED. IF MORE THAN ONE
REPRESENTATIVE, PLEASE INDICATE NAMES AND PERCENTAGES IN SECTION 11.
/ / / / / / / / - / / / / /
---------------------------------------------------------------------------------- Registered representative's
Registered representative's name (print as it appears on NASD licensing) telephone number
/ / / / - / / / - / / / / /
---------------------------------------------------------------------------------- Registered representative's SSN
Client account number at dealer (if applicable)
----------------------------------------------------------------------------------------------------------------------
Dealer's name
----------------------------------------------------------------------------------------------------------------------
Branch address City State ZIP
----------------------------------------------------------------------------------------------------------------------
Branch number Representative number
/ / CHECK IF BROKER CHANGE OF ADDRESS
- -------------------------------------------------------------------------------------------------------------------------
13 REPRESENTATIVE'S SIGNATURE
- -------------------------------------------------------------------------------------------------------------------------
The representative hereby certifies that he/she witnessed the signature(s) in section 9 and that all information
contained in this application is true to the best of his/her knowledge and belief.
----------------------------------------------------------------------------------------------------------------------
Signature
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Send completed application -- with a check made payable to Lincoln Life & Annuity Company of
New York -- to your investment dealer's home office or to:
[LOGO]
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
P.O. Box 7866 Attention: ChoicePlus Operations
Fort Wayne, IN 46801-7866 1300 South Clinton Street
888-868-2583 Fort Wayne, IN 46802
</TABLE>
Page 5
<PAGE>
SERVICE AGREEMENT
for
services rendered to
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
by
DELAWARE SERVICE COMPANY, INC.
<PAGE>
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is made as of January 10, 2000,
by and among Delaware Management Holdings, Inc., a Delaware corporation
("Holdings"), Delaware Service Company, Inc., a Delaware corporation and a
wholly owned subsidiary of Holdings ("Delaware"), and Lincoln Life & Annuity
Company of New York, a New York insurance corporation ("LNY").
The parties hereto, in consideration of the mutual covenants hereinafter
expressed, agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms shall have the respective
meanings set forth in this Section 1.1 for all purposes of this Agreement except
where the application of such definitions is limited by reference in this
Section 1.1 to a specific Article of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Accounting Schedule" means SCHEDULE 1.1(A) hereto, which sets forth the
accounting services to be rendered pursuant to this Agreement, as such Schedule
may be amended from time to time pursuant to Section 15.1.
"Accounting Services" means the services listed in the Accounting Schedule
with respect to the Accounts.
"Accounts" means the Separate Accounts.
"Affiliate" means, with respect to any entity, any other entity
controlling, controlled by, or under common control with such entity.
"Business Day" means a day on which the New York Stock Exchange is open for
trading.
"Calculation Losses" means any losses suffered by a Contractowner, Third
Party Administrator, or Separate Account directly caused by an error in a Net
Asset Value or in Unit Value, or by the delivery to LNY of a Net Asset Value or
Unit Value after the applicable deadline provided for in Section 2.1; provided,
however, that such losses shall not include any consequential damages.
"Contractowner" means the present or former owner of an insurance or
annuity contract supported by a Separate Account, or any beneficiary or
annuitant thereof.
"Delaware" has the meaning set forth in the preamble to this Agreement.
2
<PAGE>
"Delaware Affiliate" means Holdings and any entity that is directly or
indirectly controlled by Holdings.
"Holdings" has the meaning set forth in the preamble to this Agreement.
"Lincoln Affiliate" means any Affiliate of LNY other than a Delaware
Affiliate.
"LNY" has the meaning set forth in the preamble to this Agreement.
"Net Asset Value" means the market value of a Fund or Series share
calculated each day by taking the closing market value of all securities owned,
adding the value of all other assets (such as cash), subtracting all
liabilities.
"Renewal Term" means each successive one-year term occurring after the
expiration of the initial term of this Agreement as described in Section 10.1.
"Separate Account" means a separate account of LNY identified as such on
the Accounting Schedule, and any additional separate account or sub-account of
LNY or any Lincoln Affiliate (or of any other person if LNY or any Lincoln
Affiliate has administrative responsibilities with respect to such separate
account or sub-account pursuant to any reinsurance agreement or otherwise)
designated in accordance with Section 4.1.
"Third Party Administrator" means an administrator of insurance or annuity
contracts acting on behalf of Contractowners.
"Unit Value" means the daily unit value per unit of the respective Separate
Accounts or sub-accounts thereof for each Business Day, all determined in
accordance with any applicable prospectus or regulatory requirement.
"Value Calculation Services" means those Accounting Services consisting of
or incidental to the calculation and communication of Unit Values in accordance
with the terms of this Agreement.
ARTICLE 2
SCOPE OF SERVICES
Section 2.1 SCOPE OF SERVICES. Delaware shall provide the Accounting
Services to LNY with respect to each of the Separate Accounts, all in accordance
with the terms of this Agreement. Without limiting the generality of the
foregoing, Delaware, no later than 6:00 p.m. (New York City time) on each
Business Day, shall in accordance with the terms of this Agreement provide to
LNY the Value Calculation Services for each of the Accounts. In the event of any
error in the Value Calculation Services, the parties hereto will follow the
procedures set forth in SCHEDULE 2.1, without prejudice to any other rights
described in this Agreement.
3
<PAGE>
ARTICLE 3
LNY'S SUPPORT OBLIGATIONS
Section 3.1 PROVISION OF DATA. LNY shall use its best efforts to provide or
cause to be provided to Delaware the data identified in SCHEDULE 3.1 during the
periods and in accordance with the procedures identified in such Schedule, it
being understood that Delaware shall not be responsible for any Calculation
Losses or other claims, suits, hearings, actions, damages, liabilities, fines,
penalties, costs, losses or expenses, including reasonable attorney's fees,
which any party may sustain or incur, directly or indirectly, in each case to
the extent caused by or arising from LNY's failure to provide such data in
accordance with such SCHEDULE 3.1.
Section 3.2 DATA TO BE PROVIDED BY THIRD PARTIES. With respect to each of
the mutual funds identified in SCHEDULE 3.2 as an available investment of one or
more of the Separate Accounts and each third party service provider identified
in such Schedule, LNY shall direct each of the managers of such funds or such
service provider, as the case may be, to provide or cause to be provided to
Delaware the data identified in SCHEDULE 3.2 in accordance with the procedures
and time deadlines identified in such Schedule.
ARTICLE 4
NEW ACCOUNTS; NEW INVESTMENT MANAGERS
Section 4.1 ADDITIONAL ACCOUNTS. LNY may from time to time designate (i)
one or more additional separate accounts to constitute Separate Accounts for all
purposes of this Agreement, or (ii) one or more newly established sub-accounts
of any Separate Account. Such designation shall be:
(a) subject to Delaware's consent, which shall not be unreasonably
withheld; provided, that such consent shall be considered to be
unreasonably withheld if Delaware does not make reasonable
efforts to accept such new separate accounts and sub-accounts,
which efforts shall include, but not be limited to, reasonable
consideration of the expansion of Delaware's infrastructure to
handle such new separate accounts and sub-accounts; and
(b) evidenced by a writing executed by LNY and Delaware setting forth
the name of such separate account or new sub-account, the
effective date of the designation thereof as a Separate Account
or new sub-account, and any other matters the parties wish to
include.
Except as otherwise specified in such writing, Delaware shall provide to LNY
with respect to a Separate Account or new sub-account, the same Accounting
Services as are specified in the Accounting Schedule with respect to the other
Separate Accounts or sub-account of a Separate Account, as the case may be.
4
<PAGE>
ARTICLE 5
CHARGES
Section 5.1 ACCRUAL OF CHARGES. LNY agrees to reimburse Delaware for the
Accounting Services provided by Delaware to LNY pursuant to this Agreement. The
charge to LNY for such Accounting Services shall be at cost and shall include
all direct and directly allocable expenses, reasonably and equitably determined
to be attributable to LNY by Delaware, plus a reasonable charge for direct
overhead, the amount of such charge for overhead to be agreed upon by the
parties from time-to-time.
Subject to New York Insurance Department Regulation 33, the bases for
determining such charges to LNY shall be those used by Delaware for internal
cost distribution including, where appropriate, time records prepared at least
annually for this purpose.
Such bases shall be modified and adjusted by mutual agreement where
necessary or appropriate to reflect fairly and equitably the actual incidence of
cost incurred by Delaware on behalf of LNY.
Cost analyses will be made at least annually by Delaware to determine, as
closely as possible, the actual cost of Accounting Services rendered to LNY
hereunder. Delaware shall forward to LNY the information developed by these
analyses, and such information shall be used to develop bases for the
distribution of expenses which more currently reflect the actual incidence of
cost incurred by Delaware on behalf of LNY.
Delaware's determination of charges hereunder shall be in accordance with
New York Insurance Department Regulation 33 to the extent applicable and shall
be presented to LNY, and if LNY objects to any such determination, it shall so
advise Delaware within thirty (30) days of receipt of notice of said
determination. Unless the parties can reconcile any such objection, they shall
agree to the selection of a firm of independent certified public accountants
which shall determine the charges properly allocable to LNY and shall, within a
reasonable time, submit such determination, together with the basis therefor, in
writing to Delaware and LNY, whereupon such determination shall be binding. The
expenses of such a determination by a firm of independent certified public
accountants shall be borne equally by Delaware and LNY.
Section 5.2 PAYMENT OF CHARGES BY LNY. Delaware shall submit to LNY within
thirty (30) days of the end of each calendar month a written statement of the
amount estimated to be owed by LNY for Accounting Services pursuant to this
Agreement in that calendar month, and LNY shall pay to Delaware within thirty
(30) days following receipt of such written statement the amount set forth in
the statement.
Within thirty (30) days after the end of each calendar quarter, Delaware
will submit to LNY a detailed written statement of the charges due from LNY to
Delaware in the preceding calendar quarter, including charges not included in
any previous statements, and any balance payable or to be refunded as shown in
such statement shall be paid or refunded within fifteen (15) days following
receipt of such written statement by LNY.
5
<PAGE>
ARTICLE 6
STANDARD OF CARE; INDEMNIFICATION
Section 6.1 STANDARD OF CARE. Delaware shall provide the Accounting
Services with a level of care equal to or greater than the level of care at
which it performs similar functions for mutual funds that are sponsored or
managed by any Delaware Affiliate, and in any event, Delaware shall always
exercise reasonable care in performing the Accounting Services.
Section 6.2 INDEMNIFICATION
(a) INDEMNIFICATION BY LNY. LNY shall indemnify, defend and hold harmless
Delaware and any Delaware Affiliate, and the directors, officers and employees
of the foregoing (each individually, a "Delaware Indemnified Party"), against
any and all claims, suits, hearings, actions, damages, liabilities, fines,
penalties, costs, losses or expenses, including reasonable attorney's fees,
which any Delaware Indemnified Party may sustain or incur, directly or
indirectly, in each case to the extent caused by or arising from (i) the
negligence, recklessness or intentional misconduct of LNY or any Lincoln
Affiliate, or any director, officer or employee thereof, in the performance of
this Agreement; or (ii) the failure of LNY to comply with the terms of this
Agreement.
(b) INDEMNIFICATION BY DELAWARE. Subject to Section 3.1, Delaware shall
indemnify, defend and hold harmless LNY, the Lincoln Affiliates and the
directors, officers and employees of the foregoing (each individually, a
"Lincoln Indemnified Party") against any and all claims, suits, hearings,
actions, damages, liabilities, fines, penalties, costs, losses (including but
not limited to (a) Calculation Losses reimbursed by LNY and (b) any market
fluctuation losses incurred by LNY in effecting such reimbursement) or expenses,
including reasonable attorney's fees, which any Lincoln Indemnified Party may
sustain or incur, directly or indirectly, in each case to the extent caused by
or arising from (i) the negligence, recklessness or intentional misconduct of
Delaware or any Delaware Affiliate, or any director, officer or employee
thereof, in the performance of this Agreement; or (ii) the failure of Delaware
to comply with the terms of this Agreement.
(c) PROCEDURES. Subject to the provisions of Section 6.2(d), promptly after
receipt by a Delaware Indemnified Party or a Lincoln Indemnified Party (each, an
"Indemnified Party") of notice of the commencement of any action, proceeding,
investigation or claim by any Contractowner or other third party (a
"Proceeding"), the Indemnified Party shall, if a claim in respect thereof is to
be made pursuant to this Section 6.2 against another party to this Agreement
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
commencement thereof; but the failure so to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any liability under this Section 6.2,
except to the extent that such failure to notify actually prejudices the
Indemnifying Party. In case any such Proceeding shall be brought against an
Indemnified Party, the Indemnifying Party shall be entitled to participate in
and to assume the defense thereof, with counsel satisfactory to the Indemnified
Party, and after notice from the Indemnifying Party to the Indemnified Party of
the Indemnifying Party's election to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if, in the reasonable judgment of the Indemnified Party, it is
advisable for the Indemnified Party to be represented by separate counsel other
than counsel for the Indemnifying Party, the Indemnified
6
<PAGE>
Party shall have the right to employ a single counsel to represent the
Indemnified Party, in which event the reasonable fees and expenses of such
separate single counsel shall be borne by the Indemnifying Party, and (ii) in
the case of any Proceeding brought by any governmental authority, the
Indemnifying Party shall have the right to participate in, but not to assume the
defense of, such Proceeding. The Indemnifying Party shall not be obligated under
any settlement agreement relating to any Proceeding under this Section 6.2 to
which it has not consented in writing, which consent shall not be unreasonably
withheld.
(d) PRESERVING RIGHTS WITH RESPECT TO CALCULATION LOSSES. Notwithstanding
Section 6.2(c), LNY may in its sole discretion elect to reimburse a
Contractowner, Third Party Administrator, or Separate Account for Calculation
Losses out of LNY's own funds and such reimbursement shall have no effect on the
respective indemnification obligations of the parties pursuant to Section 6.2(a)
and (b).
(e) OVERPAYMENTS. The parties agree that there may be circumstances in
which it would not be commercially reasonable for LNY to seek reimbursement from
one or more Contractowners of overpayments made them, taking into account
relevant factors such as industry practice; the amount of such overpayments; the
number of Contractowners overpaid; the cost of seeking reimbursement; and the
implications for customer relations of seeking reimbursement. In the event of
any overpayment to a Contractowner for which LNY intends to seek indemnification
from Delaware pursuant to Section 6.2(b) without seeking reimbursement from the
Contractowner, the parties shall negotiate in good faith as to what effect, if
any, the determination not to seek such reimbursement should have under the
circumstances on the rights of LNY or the Funds to indemnification for the
amounts overpaid.
ARTICLE 7
INSURANCE COVERAGE
Section 7.1 INSURANCE. Delaware and Holdings shall maintain insurance
coverage at a level at least equal to the insurance coverage held by each of
them at the time this Agreement becomes effective.
ARTICLE 8
FORCE MAJEURE AND DISASTER RECOVERY PLAN
Section 8.1 FORCE MAJEURE; DISASTER RECOVERY PLAN. No party shall be liable
to any other party for any damages caused by delays beyond its reasonable
control, including, without limitation, those delays occasioned by fire, strike,
labor dispute, acts of the other party, acts of any common carrier, pricing
service, corporate action service, or telephone network, acts of the power
supply company or its networks, restrictions by civil or military authorities,
acts of nature, or unforeseen transportation failures. In the event of any such
delay, the hindered party shall promptly notify the other parties and, upon the
giving of such notice, the period of time for performance of obligations
hereunder affected by such delays will be extended by the same number of days as
the delay. Notwithstanding the foregoing, Delaware shall maintain and implement
a customary disaster recovery plan and such plan shall be reasonably acceptable
to LNY and the Funds. This Article 8 shall not excuse any failure to perform, or
extend the time for performance of, any obligation of Delaware under this
Agreement to the extent that such
7
<PAGE>
failure or delay would have been avoided by compliance with such disaster
recovery plan, or by the use of reasonable, readily available alternatives.
ARTICLE 9
EFFECTIVENESS
Section 9.1 EFFECTIVENESS.
This Agreement shall become effective upon the date first set forth
above ("Effective Date").
ARTICLE 10
TERM AND TERMINATION
Section 10.1 TERM. The initial term of this Agreement shall end on the
fourth anniversary of the Effective Date and this Agreement shall be
automatically renewed for subsequent Renewal Terms thereafter unless sooner
terminated under Section 10.2.
Section 10.2 TERMINATION. Subject to the procedures set forth in Article
11, this Agreement may be terminated as follows:
(a) by LNY or Delaware in each case upon notice to each of the other
parties at least 180 days prior to the expiration of the initial
term or any Renewal Term, with such termination to become
effective upon such expiration; and
(b) by LNY or Delaware upon 30 days notice to each of the other
parties, for any material breach of this Agreement unless such
breach is cured within such notice period.
For the purpose of this Section 10.2(b) only, a "material breach" shall include,
but not be limited to, the failure by Delaware to provide Accounting Services
hereunder of a quality reasonably determined by LNY to be consistent with a
superior level of service in the industry.
8
<PAGE>
ARTICLE 11
PROCEDURES UPON TERMINATION
Section 11.1 OBLIGATIONS UPON TERMINATION. Upon termination of this
Agreement by any party under Article 10, each party shall be obligated to
cooperate with each other party to provide for the transfer of all
responsibilities, duties and obligations of this Agreement as may be necessary
to ensure the orderly, undisrupted business of each party. Such cooperation
shall include, but not be limited to, returning all papers, documents, materials
or equipment to the party owning such materials. In the event that this
Agreement is terminated by LNY under Section 10.2(b), LNY shall have the right
to require Delaware to continue performing all or any part of its
responsibilities, duties and obligations under this Agreement until the earlier
of (a) 210 days following the date notice of such termination was given, or (b)
the date that is 30 days after notice from LNY that Delaware shall cease such
performance. For this purpose, (a) the terms of this Agreement (including
without limitation the obligation of LNY to pay Delaware's fees under Article 5,
and the obligation of Delaware to continue to exercise the standard of care
required under Section 6.1 shall remain in effect with respect to the period in
which Delaware is obligated to continue such performance, and (b) if any portion
of Delaware's responsibilities, duties and obligations during such period are
not so extended as required by LNY, the parties shall mutually agree in good
faith on a reduction of fees which reflects the termination of such
responsibilities, duties and obligations.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other parties as follows:
Section 12.1 ORGANIZATION AND AUTHORITY. Such party is duly organized,
validly existing and in good standing as a corporation under the laws of the
state indicated on the first page of this Agreement, with the requisite
authority and power, in conformity with applicable laws, rules and regulations,
to execute and deliver this Agreement and to perform its obligations hereunder.
Such party has taken all necessary action to authorize such execution, delivery
and performance.
Section 12.2 NO CONFLICT WITH LAWS. The execution, delivery and performance
of this Agreement by such party do not conflict with or violate any laws
applicable to such party, any provision of its constituent documents, any order
or judgment of any court or governmental agency applicable to it or any of its
assets or any contractual restriction binding on it or its assets.
Section 12.3 OBLIGATION. This Agreement constitutes a legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to the enforcement of creditors' rights generally and
subject to principles of equity.
9
<PAGE>
ARTICLE 13
PARENT GUARANTY
Section 13.1 PARENT GUARANTY. Holdings hereby unconditionally guarantees
the full and punctual performance of the covenants, agreements and obligations
of Delaware under this Agreement, including but not limited to the payment when
due of all amounts that may from time to time be payable by Delaware pursuant to
Section 6.2(b) (the "Guaranteed Obligations").
Section 13.2 GUARANTY UNCONDITIONAL. The obligations of Holdings hereunder
shall be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released or discharged by:
(a) any extension, settlement, compromise, waiver or release in
respect of any obligation of Delaware under this Agreement;
(b) any modification or amendment of or supplement to this Agreement;
(c) any change in the corporate existence, structure or ownership of
Delaware, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Delaware or its assets; or
(d) any other act or omission to act or delay of any kind by Delaware,
LNY, any Fund or any other person which would, but for the provisions of
this paragraph (d), constitute a legal or equitable discharge of Holding's
obligations hereunder;
provided, however, that in the event of any extension, settlement, compromise,
waiver or release of any obligation of Delaware under this Agreement, or any
modification or amendment of or supplement to this Agreement, the guaranty
provided for in this Article 13 shall apply to the obligations of Delaware as so
extended, settled, compromised, waived, released, modified, amended or
supplemented.
Section 13.3 DISCHARGE ONLY UPON PAYMENT OR PERFORMANCE IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES. Holding's obligations hereunder shall
remain in full force and effect until the Guaranteed Obligations shall have been
paid or performed in full. If at any time any payment of Guaranteed Obligations
by Delaware under this Agreement is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of Delaware or
otherwise, Holding's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.
Section 13.4 WAIVER BY HOLDINGS. Holdings irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any person
against Delaware or any other person.
Section 13.5 SUBROGATION. Upon making any payment with respect to Delaware
hereunder, Holdings shall be subrogated to the rights of the payee against
Delaware with respect to such payment; provided that Holdings shall not enforce
payment by way of subrogation until all Guaranteed Obligations have been paid or
performed in full.
10
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ARTICLE 14
DISPUTE RESOLUTION
Before commencing litigation of any dispute arising out of or relating to
this Agreement, the parties shall attempt in good faith to resolve the dispute
by the following means:
Section 14.1 NEGOTIATION. The parties shall in good faith attempt to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiations between executives who have authority to settle the controversy. A
party may give the other parties written notice of any dispute not resolved in
the normal course of business. Within 20 days after delivery of that notice,
executives of the affected parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the matter has
not been resolved within 60 days of the disputing party's notice, or if the
parties fail to meet within 20 days, either party may initiate mediation of the
controversy or claim as provided in Section 14.2. If a negotiator intends to be
accompanied at a meeting by an attorney, the other negotiator shall be given at
least 3 Business Days' notice of that intention and may also be accompanied by
an attorney.
Section 14.2 MEDIATION. If the dispute has not been resolved by negotiation
as provided in Section 14.1, the parties shall endeavor for an additional period
of 60 days to settle the dispute by mediation under the then-current Center for
Public Resources (CPR) Model Procedure for Mediation of Business Disputes. The
neutral third party will be selected from the CPR Panel of Neutrals. If the
parties encounter difficulty in agreeing on a neutral, they will seek the
assistance of CPR in the selection process.
Section 14.3 CONFIDENTIALITY. All activities under this Article 14 are
confidential and shall be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and state rules of evidence.
ARTICLE 15
MISCELLANEOUS
Section 15.1 AMENDMENT. This Agreement, including any Exhibits or
Schedules, may be amended, modified or supplemented only in writing signed by
Delaware, LNY, and any Fund affected thereby. This Agreement shall be binding
upon all successors, assigns or transferees of the parties to this Agreement.
Section 15.2 ASSIGNMENT. This Agreement and the rights, duties and
obligations of the parties hereto shall not be assignable by any party, except
assignment to successors in the case of mergers, sales of all or substantially
all of the assets of such party or transfer of ownership by reorganization or
similar restructuring to a successor in interest to the business of such party,
without the prior written consent of the other parties, and any purported
assignment in the absence of such consent shall be void.
Section 15.3 NOTICES. All notices given or submitted pursuant to this
Agreement shall be made in writing and shall be deemed given when (a) deposited
with the United States Postal Service, postage prepaid, registered or certified
mail, return receipt requested; (b) deposited with
11
<PAGE>
a nationally recognized overnight mail delivery service; (c) sent by facsimile
with electronic confirmation of delivery or with a copy sent by mail as
described in (a) or (b) above; or (d) delivered in person; all to the last
address of record of each party being notified.
Any notice under this Agreement to LNY shall be given to:
ATTN: Troy D. Panning
2nd Vice President and Chief Financial Officer
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Phone: (315) 428-8411
Facsimile: (315) 428-8419
With a copy to:
ATTN: Robert O. Sheppard, Esq.
Corporate Counsel
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, NY 13202
Phone: (315) 428-8420
Facsimile: (315) 428-8419
Any notice under this Agreement to Delaware or Holdings shall be given to:
ATTN: Michael J. Bishof
Vice President and Treasurer
Delaware Management Company
1818 Market Street; 7th Floor
Philadelphia, PA 19103
Phone: (215) 255-2852
Facsimile: (215) 255-1645
With a copy to:
Richard J. Flannery
Managing Director, Corporate & Tax Affairs
Delaware Management Company
2005 Market Street
Philadelphia, PA 19103
Phone: (215) 255-1244
Facsimile: (215) 255-2822
Any party may, by means of written notice in compliance with this Section
15.3, change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
12
<PAGE>
Section 15.4 SEVERABILITY. If any provision of this Agreement, as applied
to any party or to any circumstances, shall be found by a court of competent
jurisdiction to be void, invalid or unenforceable, the same shall in no way
affect any other provision of this Agreement, the application of any such
provision in any other circumstances, or the validity or enforceability of this
Agreement; provided, however, that nothing in this Section 15.4 shall adversely
affect the fundamental benefits received by the parties under this Agreement.
Section 15.5 WAIVER. A waiver by any party of any of the terms and
conditions of this Agreement in any one instance shall not be deemed or
construed to be waiver of any such term or condition for the future, or of any
subsequent breach thereof, nor shall it be deemed a waiver of performance of any
other obligation hereunder. No waiver of any provision of this Agreement shall
be valid unless agreed to in writing by the party or parties against whom such
waiver is sought to be enforced.
Section 15.6 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto relating to the subject matter of this
Agreement and supersedes all prior and collateral agreements, understandings,
statements and negotiations of the parties.
Section 15.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of law provisions thereof.
Section 15.8 SECTION AND PARAGRAPH HEADINGS. The titles of the sections and
paragraphs of this Agreement are for convenience only and shall not in any way
affect the interpretation of any provision or condition of this Agreement.
Section 15.9 COUNTERPARTS. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
the parties.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By:
---------------------------------------------
Joanne B. Collins
Title: President and Treasurer
Date:
-------------------------------------------
DELAWARE MANAGEMENT HOLDINGS, INC.
By:
---------------------------------------------
David K. Downes
Title: Executive Vice President & Chief Operating Officer
Date:
-------------------------------------------
DELAWARE SERVICE COMPANY, INC.
By:
---------------------------------------------
Michael P. Bishof
Title: Vice President & Treasurer
Date:
-------------------------------------------
14
<PAGE>
SCHEDULE 1.1 (a)
ACCOUNTING SCHEDULE
The following services will be provided by Delaware for the duration of the
Services Agreement. The Separate Accounts (and their respective Sub-Accounts)
for which these services will be provided are as follows:
- Separate Account H
- Separate Account N
- Separate Account Q
- Separate Account L
- Separate Account M
- Separate Account R
- Separate Account S
Daily Unit Value Calculations:
1. Maintain Portfolio History
- Accrue dividends and expenses to each Sub-Account
- Maintain gain/loss history for each Sub-Account
- Maintain record of holdings for each Sub-Account
2. Record and reconcile shareholder activity
- Book subscription, liquidations, and dividend reinvestments
to each Sub-Account
- Record settlements of shareholder activity
- Reconcile Sub-Account units outstanding to LNY
administrative systems
- Establish controls for daily pricing of units outstanding of
each Sub-Account
3. Calculate the Unit Value for each LNY Separate Account Sub-Account
4. Disseminate daily Unit Values to interested parties (I.E., Lipper,
Morningstar, etc.) as mutually agreed upon by LNY and Delaware
5. Resolve daily pricing and/or custody discrepancies
6. Accept NAVs from applicable managers, advisors, and subadvisors for
purposes of calculating Unit Values of pertinent Separate Account
Sub-Accounts
Financial Reporting:
15
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1. Provide LNY with an automated transmission of Separate Account
Sub-Account financial data into the LNY General Ledger
2. Provide other ancillary schedules as mutually agreed upon by LNY and
Delaware
Other Services:
1. Support business relationships with LNY business partners (I.E.,
advisors, custodians, banks, third party administrators, etc.)
- Provide portfolio holdings and security valuation reports
- Prepare cash forecasts and reconciliations as mutually agreed
upon by LNY and Delaware
- Assist in security settlements
- Resolve cash discrepancies
- Other reasonable requests as mutually agreed upon by LNY and
Delaware
2. Disseminate reconciliation data to interested parties for daily
balancing needs as mutually agreed upon by LNY and Delaware
3. Provide process control data as mutually agreed upon by LNY and
Delaware
4. Perform daily cash reconciliations for each Separate Account provided
that the bank(s) and/or third party mutual fund complex(es) send the
necessary information to perform such reconciliations
5. Perform weekly asset reconciliations for each Separate Account
provided that the bank(s) and/or mutual fund complex(es) send the
necessary information to perform such reconciliations
16
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SCHEDULE 2.1
PROCEDURES FOR CORRECTING ERRORS
The following charts set forth certain procedures to be followed in the
event of errors in the calculation of the Unit Values. There are two separate
charts. CHART I outlines the procedures to be followed in the event that the
error is greater than or equal to 0.5% of the Separate Account's Unit Value.
CHART II outlines the procedures in the event that the error is less than 0.5%.
Each of the Charts assumes that the error in the Unit Value is at least $0.01.
If the error is less that $0.01, no action will be taken.
The procedures set forth in these Charts are designed to be consistent with
informal positions taken by the Securities and Exchange Commission (the "SEC")
with respect to errors in the calculation of net asset values or unit values.
The parties to the Services Agreement shall negotiate in good faith to amend
this Schedule 2.1 as appropriate in the event that: (a) the SEC modifies,
amends, or supplements such positions, or issues any other regulatory guidance
with respect to unit values; or (b) a Unit Value changes to a degree that
alternative error correction procedures should be considered.
CHART I
ERROR GREATER THAN OR EQUAL TO 0.5%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
TYPE OF TRANSACTION UNIT VALUE UNDERSTATED UNIT VALUE OVERSTATED
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Subscription Make Separate Account Whole(1) Reprocess(2)
- --------------------------------------------------------------------------------------------------
Redemption Reprocess(3) Make Separate Account Whole(1)
- --------------------------------------------------------------------------------------------------
<CAPTION>
CHART II
ERROR LESS THAN 0.5%
- --------------------------------------------------------------------------------------------------
TYPE OF TRANSACTION UNIT VALUE UNDERSTATED UNIT VALUE OVERSTATED
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Subscription Make Separate Account Whole(4) No Action(5)
- --------------------------------------------------------------------------------------------------
Redemption No Action(6) Make Separate Account Whole(4)
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Alternatively, at LNY's discretion, all shareholder transactions can be
reprocessed. The shareholder would be the Contractowner.
(2) Reprocessing would occur for all transactions where the shareholder effect
is greater than $10.00.
(3) Reprocessing would occur for all transactions where the shareholder effect
is greater than $10.00. LNY would reimburse the shareholder.
17
<PAGE>
(4) Alternatively, at LNY's discretion, the shareholder transactions can be
reprocessed. At the Separate Account level, the shareholder would be the
Contractowner.
(5) Alternatively, LNY could determine to reprocess the transactions.
(6) Alternatively, LNY could determine to reprocess transactions and reimburse
the shareholders.
SCHEDULE 3.1
DATA PROVIDED BY LNY
The following information represents data that will be provided by LNY to
Delaware for the purpose of enabling Delaware to perform the accounting services
pursuant to the Services Agreement.
1. By 9:00 a.m., New York time, each Business Day, LNY will provide
Delaware with trade activity (by Sub-Account) for the purpose of
adding this information to the outstanding assets of each Sub-Account.
This daily trade activity will include a net purchase or redemption
amount by Sub-Account, the net number of units purchased by
Sub-Account by LNY clients the preceding Business Day or days, and
Fund share purchases and sales in dollars and share amounts.
2. By 9:00 a.m., New York time, each Business Day, LNY will provide
Delaware with the number of outstanding units within each Sub-Account
for purposes of balancing to the number of units used in the daily
Unit Value calculation.
Note: In the event that LNY identifies erroneous data in their daily
transmission of trade activity while performing their balancing routine
subsequent to the transmission, LNY will inform Delaware of the erroneous
information via telephone.
18
<PAGE>
SCHEDULE 3.2
DATA PROVIDED BY UNAFFILIATED MUTUAL FUNDS AND SERVICE PROVIDERS
The following information represents data that will be provided by third parties
to Delaware pursuant to Section 3.2 of the Services Agreement.
1. Each evening of a Business Day, all applicable Fund managers,
advisors, or subadvisors will provide to Delaware (via fax), the daily
Net Asset Values of such funds no later than 6:00p.m., New York time.
[See note below.]
2. Each evening of a Business Day, Delaware will obtain the daily Net
Asset Values of such of its own funds as are underlying investments in
LNY's delivery timelines specified in this Services Agreement.
3. Delaware will accept data from and work with LNY business partners in
a relationship accepted in the industry as a normal working
relationship. These types of relationships would include cooperating
with custodians, portfolio managers, etc. for the purpose of
conducting daily business transactions.
Note: In the event that Delaware does not receive timely NAVs or trade
information from Fund managers, advisors, or subadvisors which causes Delaware
to be incapable of calculating a Unit Value using mutually agreed upon
processing procedures or causes Delaware to estimate a Unit Value, then Delaware
and LNY must mutually agree upon the processing activities to take place on that
particular valuation date.
19
<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
<TABLE>
<CAPTION>
Description Page
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
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
</TABLE>
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the day of ________,, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A. I M Distributors, Inc., a Delaware corporation
("AIM"), Lincoln Life & Annuity Company of New York, a New York life
insurance company ("LIFE COMPANY"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts"); and Lincoln Financial Advisors Corporation ("UNDERWRITER"),
an affiliate of LIFE COMPANY and the principal underwriter of the Accounts
and the Contracts (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold
to one or more separate accounts of life insurance companies to fund benefits
under variable annuity contracts and variable life insurance policies; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent
the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts" or Policies")
as set forth on Schedule A hereto, as the Parties hereto may amend from time
to time, which Contracts, if required by applicable law, will be registered
under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount
thereof to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust investment company
under the 1940 Act (or exempt therefrom), and the security interests deemed
to be issued by the Accounts under the Policies will be registered as
securities under the 1933 Act (or exempt therefrom); and
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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.
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<PAGE>
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its desipated agent will use its best efforts to
provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00
p.m. Central Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open for
regular trading and (ii) AVIF calculates the Fund's net asset value.
(b) LIFE COMPANY will use the data provided by AVIF each Business
Day pursuant to paragraph (a) immediately above to calculate Account unit
values and to process transactions that receive that same Business Day's
Account unit values. LIFE COMPANY will perform such Account processing the
same Business Day, and will place corresponding orders to purchase or redeem
Shares with AVIF by 9:00 a.m. Central Time the following Business Day;
PROVIDED, however, that AVIF shall provide additional time to LIFE COMPANY in
the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph
(a) immediately above. Such additional time-shall be equal to the additional
time that AVIF takes to make the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY
and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase
and redemption orders with respect to each Fund and shall transmit one net
payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be
entitled to an adjustment to the number of Shares purchased or redeemed to
reflect the correct net asset value per Share. Any material error in the
calculation or reporting- of net asset value per Share, dividend or capital
gain information shall be reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by LIFE COMPANY by 1:00 p.m.
Central Time on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date
the order is placed in order to enable LIFE COMPANY to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result
from purchase payments, premium payments, surrenders and other transactions
under Policies (collectively, "Policy transactions") and that LIFE COMPANY
receives prior to the close of regular trading on the New York Stock Exchange
on a Business Day will be executed at the net asset values of the appropriate
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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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<PAGE>
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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<PAGE>
(v) any written materials to be submitted by LIFE
COMPANY to the IRS, any Participant or any other
claimant in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided
by LIFE COMPANY to AVIF (together with any supporting
information or analysis); subject to the
confidentiality provisions of Section 18, at least
ten (10) business days or such shorter period to
which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted,
and (b) shall not be submitted by LIFE COMPANY
to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates
and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of LIFE COMPANY) in order
facilitate review by AVIF or its advisors of any
written submissions provided to it pursu-ant to the
preceding clause or its assessment of the validity
or amount of any claim against its arising from such
a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim
of the IRS or any Participant that would give rise
to a claim against AVIF or its affiliates (a)
compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the
express written consent of AVIF or its
affiliates, which shall not be unreasonably
withheld, PROVIDED that LIFE COMPANY shall not
be required, after exhausting all administrative
penalties, to appeal any adverse judicial
decision unless AVIF or its affiliates shall
have provided an opinion of independent counsel
to the effect that a reasonable basis exists
for taking such appeal; and PROVIDED FURTHER that
the costs of any such appeal shall be borne equally
by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if LIFE
COMPANY fails to comply with any of the foregoing
clauses (i) through (vii), and such failure could be
shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written
consent to any compromise or settlement of any claim or liability hereunder,
LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act
in the name of LIFE COMPANY in, and to control the conduct of, such
conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF or its
affiliates shall bear the fees and expenses associated with the conduct of
the proceedings that it is so authorized to control; PROVIDED, that in no
event shall LIFE COMPANY have any liability resulting from AVIFs refusal to
accept the proposed settlement or
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<PAGE>
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
policies under applicable provisions of the Code and that it will use its
best efforts to maintain such treatment; LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated
in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to
be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY, including, the furnishing of information not
otherwise available to LIFE COMPANY which is required by state insurance law
to enable LIFE COMPANY to obtain the authority needed to issue the Contracts
in any applicable state.
(b) LIFE COMPANY represents and warrants that (1) it is an
insurance company duly organized, validly existing, under the laws of the
State of New York and has full corporate power, authority and legal right to
execute, deliver and per-form its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established and
maintains each Account as a segregated asset account under New York Insurance
Law and the regulations thereunder, and (iii) the Contracts comply in all
material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Maryland and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
(d) AIM represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has full power, authority and right to execute, deliver and
perform its duties and comply with its obligations under this agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the
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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) AVIIF will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a
majority of whom are not "interested" persons of the Fund, formulate and
approve any plan under Rule l2b-I to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to the funds and/or securities of the Fund are and continue to
be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(l) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes coverage
for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the
1933 Act or AVIF Prospectus, (1i) any request by the SEC
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<PAGE>
for any amendment to such registration statement or AVIF Prospectus that may
affect the offering of Shares of AVIF, (iii) the initiation of any
proceedings against AVIF, AIM or the investment adviser to AVIF for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance
with applicable state and federal law, or (b) such law precludes the use of
such Shares as an underlying investment medium of the Policies issued or to
be issued by LIFE COMPANY. AVIF will make every reasonable effort to prevent
the issuance, with respect to any Fund, of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to each Account's registration statement
under the 1933 Act relating to the Policies or each Account Prospectus, (ii)
any request by the SEC for any amendment to such registration statement or
Account Prospectus that may affect the offering of Shares of AVIF, (iii) the
initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering, of each Account's interests
pursuant to the Policies, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold
in accordance with applicable state and federal law. LIFE COMPANY will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS: INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction
solicitation material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to each Account
or the Contracts and to one (1) or more Funds, within twenty (20) calendar
days of the filing of such document with the SEC or other regulatory
authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at
least ten (10) Business Days prior to its use or such shorter period as the
Parties hereto may, from time to time, agree upon. No such material shall be
used if AVIF or its designated agent objects to such use within five (5)
Business Days after receipt of such material or such shorter period as the
Parties hereto may, from time to time, agree upon. AVIF hereby designates AIM
as the entity to receive such sales literature, until such time as AVIF
appoints another designated agent by giving notice to LIFE COMPANY in the
manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with
9
<PAGE>
the sale of the Policies other than (i) the information or representations
contained in the registration statement, including the AVIF Prospectus
contained therein, relating to Shares, as such registration statement and AVIF
Prospectus may be amended from time to time; or (ii) in reports or proxy
materials for AVIF; or (iii) in published reports for AVIF that are in the
public domain and approved by AVIF for distribution; or (iv) in sales
literature or other promotional material approved by AVIF, except with the
express written permission of AVIF or AW.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that
is intended for use only by brokers or agents selling the Policies (I.E.,
information that is not intended for distribution to Participants) ("broker
only materials") is so used, and neither AVIF nor any of its affiliates
shall be liable for any losses, damages or expenses relating to the improper
use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media, (E.G., on-line networks such as the Internet or other
electronic messages), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the
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 (1) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (H) such law
precludes the use of such Shares as an underlying, investment medium of the
Policies issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's
investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify
as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to
so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply
with Section 817(h) of the Code or with successor or similar provisions, or
if LIFE COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Policies issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance policies under the
Code (other than by reason of the Fund's
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noncompliance with Section 817(h) or Subchapter M of the Code) or if interests
in an Account under the Contracts are not registered, where such registration
is required, and, in all material respects, are not issued or sold in
accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until
the Party terminating this Agreement gives prior written notice to the other
Party to this Agreement of its intent to terminate, and such notice shall set
forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the
provisions of Sections 6. 1 (a) or 6. 1 (e) hereof, such prior written notice
shall be given at least six (6) months in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the
provisions of Sections 6. 1 (b) or 6. 1 (c) hereof, such prior written notice
shall be given at least ninety (90) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the
provisions of Sections 6. 1 (d), 6. 1 (f), 6. 1 (g), 6. 1 (h) or 6. 1 (i)
hereof, such prior written notice shall be given as soon as possible within
twenty-four (24) hours after the terminating Party learns of the event
causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Policies
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Policies"). Specifically, without limitation, the
owners of the Existing Policies will be permitted to reallocate investments
in the Fund (as in effect on such date), redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Policies. The parties agree that this Section 6.3 will not
apply to any terminations under Section 5 and the effect of such terminations
will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6. 1 (b), 6. 1 (c), 6. 1 (d), 6. 1 (f), 6. 1 (g), 6. 1 (h) or
6. 1 (i) hereof, this Agreement shall nevertheless continue in effect as to
any Shares of that Fund that are outstanding as of the date of such
termination (the
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"Initial Termination Date"). This continuation shall extend to the
earlier of the date as of which an Account owns no Shares of the affected
Fund or a date (the "Final Termination Date") six (6) months
following the Initial Termination Date, except that LIFE COMPANY may, by
written notice shorten said six (6) month period in the case of a
termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6. 1(h) or 6. 1 (i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance
to one another in taking all necessary and appropriate steps for the purpose
of ensuring that an Account owns no Shares of a Fund after the Final
Termination Date with respect thereto, or, in the case of a termination
pursuant to Section 6. l (a), the termination date specified in the notice of
termination. Such steps may include combining the affected Account with
another Account, substituting other mutual fund shares for those of the
affected Fund, or otherwise terminating participation by the Policies in such
Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each
other notice or communication required or permitted by this Agreement will be
given to the following persons at the following addresses and facsimile
numbers, or such other persons, addresses or facsimile numbers as the Party
receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
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.
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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.
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SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and
12.1(c), below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold
harmless AVIF, AIM, their affiliates, and each person, if any, who controls
AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933
Act and each of their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12. 1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of LIFE COMPANY and/or UNDERWRITER or
actions in respect thereof (including, to the extent reasonable, legal and
other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise; PROVIDED, the Account
owns shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus,
the Contracts, or sales literature or advertising
for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading; PROVIDED, that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to LIFE COMPANY and/or UNDERWRITER by
or on behalf of AVIF for use in any Account's 1933
Act registration statement, any Account
Prospectus, the Contracts, or sales literature or
advertising, or otherwise for use in connection
with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than
statements or representations contained in
AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of
the foregoing, not supplied for use therein by
or on behalf of LIFE COMPANY, UNDERWRITER, or
their affiliates and on which such persons
have reasonably relied) or the negligent, illegal
or fraudulent conduct of LIFE COMPANY,
UNDERWRITER, or their respective affiliates or
persons under their control (including, without
limitation, their employees and "persons
associated with a member", as that term is
defined in paragraph (q) of Article I of the
NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIFs 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any
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amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading if such a statement or omission was made
in reliance upon and in conformity with information
furnished to AVIF, AIM or their affiliates by or on
behalf of LIFE COMPANY, UNDERWRITER, or their
affiliates for use in AVIFs 1933 Act registration
statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY
and/or LJNDERWRITER to perform the obligations,
provide the services and furnish the materials
required of it under the terms of this Agreement, or
any material breach of any representation and/or
warranty made by LIFE COMPANY and/or UNDERWRITER in
this Agreement or arise out of or result from any
other material breach of this Agreement by LIFE
COMPANY and/or UNDERWRITER; or
(v) arise as a result of failure by the Policies issued
by LIFE COMPANY to qualify as annuity contracts or
life insurance policies under the Code, otherwise
than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by
that Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii)
to AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under
this Section 12.1 with respect to any action against an Indemnified Party
unless AVIF or AIM shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY
and/or LTNDERWRITER of any such action shall not relieve LIFE COMPANY and/or
UNDERWRITER from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12. 1. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, LIFE COMPANY and/or UNDERWRITER shall
be entitled to participate, at its own expense, in the defense of such action
and also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from LIFE COMPANY and/or
UNDERWRITER to such Indemnified Party of LIFE COMPANY's and/or UNDERWRITER's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with LIFE COMPANY and/or UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY
nor UNDERWRITER will be liable to such Indemnified Party under this Agreement
for any legal or other
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expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
(a). Except to the extent provided in Sections 12.2(c), 12.2(d)
and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE
COMPANY, UNDERWRITER, their respective affiliates, and each person, if any,
who controls LIFE COMPANY, UNDERWRITER, or their respective affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
AVIF and/or AIM) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law, or otherwise;
PROVIDED, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIFs 1933 Act registration
statement, AVIF Prospectus or sales literature or
advertising, of AVIF (or any amendment or
supplement to any of the foregoing), or arise
out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to
make the statements therein not misleading;
PROVIDED, that this agreement to indemnify shall
not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY,
UNDERWRITER, or their respective affiliates for
use in AVIF's 1933 Act registration statement,
AVIF Prospectus, or in sales literature or
advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than
statements or representations contained in any
Account's 1933 Act registration statement, any
Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or
supplement to any of the foregoing, not supplied
for use therein by or on behalf of AVIF, AIM or
their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, AIM or their
affiliates or persons under their control
(including, without limitation, their employees
and "persons associated with a member" as that
term is defined in Section (q) of Article I of the
NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act
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registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or
any amendment or supplement to any of the foregoing,
or the omission or alleged omission to state therein
a material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made
in reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER, or their
affiliates by or on behalf of AVIF or AIM for use in
any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform
the obligations, provide the services and furnish
the materials required of it under the terms of this
Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d)
and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder, or (ii) Section 817(h) of the Code
and regulations thereunder, including, without limitation, any income taxes
and related penalties, rescission charges, liability under state law to
Participants asserting, liability against LIFE COMPANY pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of
another investment company or portfolio for those of any adversely affected
Fund as a funding medium for each Account that LIFE COMPANY reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or actions to which
an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (1) under this Agreement, or
(1i) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2
with respect to any action against an Indemnified Party unless the
Indemnified Party shall have notified AVIF and/or AIM in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify AVIIF or AIM
of any such action shall not relieve AVIF or AIM from any liability
22
<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 COUP
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to under
federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of
reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other
information developed by the LIFE COMPANY Protected Parties or any of their
employees or agents in connection with LIFE COMPANY's performance of its
duties under this Agreement are the valuable property of the LIFE COMPANY
Protected Parties. AVIF agrees that if it comes into possession of any list
or compilation of the identities of or other information about the LIFE
COMPANY Protected Parties' customers, or any other information or property of
the LIFE COMPANY Protected Parties, other than such information as may be
independently developed or compiled by AVIF from information supplied to it
by the LIFE COMPANY Protected Parties' customers who also maintain accounts
directly with AVIF, AVIF will hold such information or property in confidence
and refrain from using, disclosing or distributing any of such information or
other property except: (a) with LIFE COMPANY's prior written consent; or (b)
as required by law or judicial process. LIFE COMPANY acknowledges that the
identities of the customers of AVIF or any of its affiliates (collectively,
the "AVIF Protected Parties" for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and
procedures or other information developed by the AVIF Protected Parties or
any of their employees or agents in connection with AVIF's performance of its
duties under this Agreement are the valuable property of the AVIF Protected
Parties. LIFE COMPANY agrees that if it comes into possession of any list
24
<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 judicial process. Each party acknowledges that any
breach of the agreements in this Section 18 would result in immediate and
irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("ALM" or "licensor"), an
affiliate of AVIF, owns all right, title and interest in and to the name,
trademark and service 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 ADA to LIFE COMPANY (the "AIM licensed marks" or the
"licensor's licensed marks") and is authorized to use and to license other
persons to use such marks. LIFE COMPANY and its affiliates are hereby granted
a non-exclusive license to use the AIM licensed marks in connection with LIFE
COMPANY's performance of the services contemplated under this Agreement,
subject to the terms and conditions set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this
Agreement. Upon automatic termination, the licensee shall cease to use the
licensor's licensed marks, except that LIFE COMPANY shall have the right to
continue to service any outstanding Contracts bearing any of the AIM licensed
marks. Upon AIM's elective termination of this license, LIFE COMPANY and its
affiliates shall immediately cease to issue any new annuity or life insurance
Policies bearing any of the AIM licensed marks and shall likewise cease any
activity which suggests that it has any right under any of the AIM licensed
marks or that it has any association with AIM, except that LIFE COMPANY shall
have the right to continue to service outstanding Contracts bearing any of
the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any of the
licensor's licensed marks which were previously approved by the licensor but,
due to changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor,
25
<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: By:
Name: Name:
Title: Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: By:
Name: Name:
Title: Assistant Secretary President
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK, on behalf of itself and
its separate accounts
Attest: By:
Name: Name:
Title: Assistant Secretary President
LINCOLN FINANCIAL ADVISORS
CORPORATION as principal
underwriter for the separate
accounts of Lincoln Life & Annuity
Company of New York
Attest: By:
Name: Name:
Title: Assistant Secretary President
27
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
- AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Lincoln Life & Annuity Flexible Premium Variable Life Account M
LLANY Separate Account R for Flexible Premium Variable Life Insurance
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Lincoln Life & Annuity Company of New York:
Flexible Premium Variable Life Insurance Policy
LN615 NY LNY
Lincoln Life & Annuity Company of New York
Flexible Premium Variable Life Insurance Policy On the Lives of Two
Insureds
LN650 NY
28
<PAGE>
SCHEDULE B
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Fund
AIM and Design
AIM LOGO
29
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
DESCRIPTION LIFE COMPANY AIM/AVIF
<S> <C> <C>
REGISTRATION
Prepare and file Account registration Fund registration statements
registration statements(1) statements
Payment of fees Account fees Fund fees
PROSPECTUSES
Typesetting Account Prospectuses Fund Prospectuses
Account Prospectuses, and Fund Prospectuses distributed
Printing Fund Prospectuses to existing Participants'
(but not for EXISTING,
PARTICIPANTS)
SAIS
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
SUPPLEMENTS (TO
PROSPECTUSES OR SAlS
Typesetting and Printing Account Supplements, and Fund Supplements to existing
Fund Supplements (but not for Participants(2)
existing Participants)
</TABLE>
(1) Includes all filings and costs necessary to keep registrations
current and effective; including, without limitation, filing Forms N-SAR and
Rule 2417-2 Notices as required by law.
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated
as between AINVAVIF on the one hand and LIFE COMPANY on the other based on
(a) the ratio of the number of pages of the combined prospectus, report, or
other document, for each Fund listed on Schedule A hereto to the total number
of pages in such combined prospectus, report, or other document; and (b) the
ratio of the number of Participants who invest in all Funds of AVIF to the
total number of Participants.
30
<PAGE>
<TABLE>
<CAPTION>
Description LIFE COMPANY AIM/AVIEF
<S> <C> <C>
FINANCIAL REPORTS
Typesetting Account Reports Fund Reports to existing
ParticipantS(2)
Printing Account Reports, and Fund
Reports (not to existing
PARTICIPANTS)
MAILING AND DISTRIBUTION
To Contract owners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAls,
SUPPLEMENTS and REPORTS
PROXIES
Typesetting, printing and Account and Fund Proxies Fund Proxies where the
mailing of proxy where the matters submitted matters submitted are solely
solicitation materials and are solely Account-related Fund-related
voting instruction
solicitation materials and Account Proxies even where
tabulation of proxies to the matters submitted are
Participants solely Fund-related
OTHER (SALES-RELATED)
Contract owner Account-related items and\
communication Fund-related items
Distribution Policies
Administration Account (Policies)
</TABLE>
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated
as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on
(a) the ratio of the number of pages of the combined prospectus, report, or
other document, for each Fund listed on Schedule A hereto to the total number
of pages in such combined prospectus, report, or other document; and (b) the
ratio of the number of Participants who invest in all Funds of AVIF to the
total number of Participants.
31
<PAGE>
AMENDMENT NO. I
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated October 15, 1998, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, The Lincoln Life & Annuity Company
of New York, a New York life insurance company and Lincoln Financial Advisors
Corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED
THE POLICIES UTILIZING SOME OR BY THE SEPARATE ACCOUNTS
ALL OF THE FUNDS
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Lincoln Life & Annuity Flexible - The Lincoln Life & Annuity Company of New
AIM V.I. Diversified Income Fund Premium Variable Life Account M York: Flexible Premium Variable Life
AIM V.I. Growth Fund Insurance Policy LN615NYLNY
AIM V.I. International Equity Fund
AIM V.I. Value Fund LLANY Separate Account R for - The Lincoln Life & Annuity Company of New
Flexible Premium Variable Life York: Flexible Premium Variable Life
Insurance Insurance Policy On the Lives of Two
Insureds LN650NY
- Lincoln Life & Annuity Company of New York:
Lincoln New York Account N for Delaware Lincoln New York Choice Plus
Variable Annuities Variable Annuity AN426NY
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf of its duly authorized officer
on the date specified below. All other terms and provisions of the Agreement not
amended herein shall remain in full force and effect.
Effective Date:
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
Name: Name:
Title: Assistant Secretary Title: President
s
(SEAL)
1 of 2
<PAGE>
Attest: (SEAL)
Name:
Title:
AIM DISTRIBUTORS, INC.
By:
Name:
Title:
(SEAL)
THE LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK
Attest:
Name:
Title:
By:
Name:
Title:
(SEAL)
LINCOLN FINANCIAL ADVISORS CORPORATION
Attest:
Name: By:
Title: Name:
Title:
2 of 2
<PAGE>
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated October 15, 1998, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, The Lincoln Life & Annuity Company
of New York, a New York life insurance company and Lincoln Financial Advisors
Corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------------- ----------------------------------- ----------------------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- ------------------------------------------- ----------------------------------- ----------------------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Lincoln Life & Annuity - The Lincoln Life & Annuity Company of New York:
AIM V.I. Diversified Income Fund Flexible Premium Variable Flexible Premium Variable Life Insurance Policy
AIM V.I. Growth Fund Life Account M LN615NYLNY; LN660NY
AIM V.I. International Equity Fund
AIM V.I. Value Fund
- ------------------------------------------- ----------------------------------- ----------------------------------------------------
LLANY Separate Account R - The Lincoln Life & Annuity Company of New York:
for Flexible Premium Flexible Premium Variable Life Insurance Policy
Variable Life Insurance On the Lives of Two Insureds LN650NY; LN655
- ------------------------------------------- ----------------------------------- ----------------------------------------------------
Lincoln New York Account N - Lincoln Life & Annuity Company of New York:
for Variable Annuities Delaware Lincoln New York Choice Plus Variable
Annuity AN426NY
- ------------------------------------------- ----------------------------------- ----------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf of its duly authorized officer
on the date specified below. All other terms and provisions of the Agreement not
amended herein shall remain in full force and effect.
Effective Date: ___________________
<TABLE>
<S><C>
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
-------------------------------- -------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: By:
-------------------------------- ------------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
THE LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Attest: By:
-------------------------------- ------------------------------------
Name: Name:
-------------------------------- ------------------------------------
Title: Title:
-------------------------------- ------------------------------------
(SEAL)
LINCOLN FINANCIAL ADVISORS CORPORATION
AAttest: By:
-------------------------------- ------------------------------------
Name: Name:
-------------------------------- ------------------------------------
Title: Title:
-------------------------------- ------------------------------------
(SEAL)
</TABLE>
2 of 2
<PAGE>
PARTICIPATION AGREEMENT
AMONG
DELAWARE GROUP PREMIUM FUND, INC.
AND
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
DELAWARE DISTRIBUTORS, LP
THIS AGREEMENT, made and entered into this 15th day of October,
1999, by and between DELAWARE GROUP PREMIUM FUND, INC., a corporation
organized under the laws of Maryland (the "Fund"), and LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK, a New York insurance corporation (the "Company"), on its
own behalf and on behalf of each separate account of the Company named in
Schedule 1 to this Agreement as in effect at the time this Agreement is
executed and such other separate accounts that may be added to Schedule 1
from time to time in accordance with the provisions of Article XI of this
Agreement (each such account referred to as the "Account"), and DELAWARE
DISTRIBUTORS, LP, a Delaware limited partnership (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively referred to
as "Variable Insurance Products," the owners of such products being referred
to as "Product owners") to be offered by insurance companies which have
entered into participation agreements with the Fund ("Participating Insurance
Companies"); and
WHEREAS, the common stock of the Fund (the "Fund shares") consists
of separate series ("Series") issuing separate classes of shares ("Series
shares"), each such class representing an interest in a particular managed
portfolio of securities and other assets; and
WHEREAS, the Series available to these Variable Insurance Products
are listed on Schedule 4, as may be amended; 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-lA to register itself as an
open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), and the Fund shares under the Securities
Act of 1933, as amended (the "1933 Act"); and
<PAGE>
WHEREAS, the Company has filed a registration statement with the SEC
to register under the 1933 Act, unless exempt, certain variable annuity
contracts described in Schedule 2 to this Agreement as in effect at the time
this Agreement is executed and such other variable annuity contracts and
variable life insurance policies which may be added to Schedule 2 from time
to time in accordance with Article XI of this Agreement (such policies and
contracts shall be referred to herein collectively as the "Contracts," each
such registration statement for a class or classes of contracts listed on
Schedule 2 being referred to as the "Contracts Registration Statement" and
the prospectus for each such class or classes being referred to herein as the
"Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being referred to as
"Contractowners"); and
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, unless exempt, with the SEC as a unit investment trust under the
1940 Act before any Contracts are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an
agreement (the "Fund Distribution Agreement") pursuant to which the
Distributor will distribute Fund shares; and
WHEREAS, Delaware Management Company (the "Investment Manager") is
registered as an investment adviser under the INVESTMENT ADVISERS ACT OF 1940
and any applicable state securities laws and serves as an investment manager
to the Fund pursuant to an agreement; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Series shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Series shares to unit investment trusts such as the Accounts at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Series
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.
2
<PAGE>
1.2. The Fund agrees to make the shares of its Series 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 such net
asset value by 6:00 p.m., New York time, on each such Business Day.
Notwithstanding any other provision in this Agreement to the contrary, the
Board of Directors of the Fund (the "Fund Board") may suspend or terminate
the offering of Fund shares of any Series, 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 of any
Series (it being understood that "shareholders" for this purpose shall mean
Product owners). Such suspension or termination of the offering of any Series
of Fund shares does not by itself constitute the termination of this
Agreement.
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 in accordance
with Section 1.4 of this Agreement, the applicable provisions of the 1940 Act
and the then currently effective Fund Prospectus. Notwithstanding the
foregoing, the Fund may delay redemption of Fund shares of any Series to the
extent permitted by the 1940 Act, any rules, regulations or orders
thereunder, or the then currently effective Fund Prospectus.
1.4.
(a) For purposes of Sections 1.1, 1.2 and 1.3, the 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 the close of trading on the New York
Stock Exchange) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such
redemption or purchase request by 11:00 a.m., New York time on the
next following Business Day. For purposes of this Agreement,
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading.
(b) The Company shall pay for shares of each Series on the
same day that it places an order with the Fund to purchase those
Series shares for an Account. Payment for Series 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., New York time on the
day the Fund is properly notified of the purchase order for Series
shares. If Federal Funds are not received on time, such funds will
be invested, and Series shares purchased thereby will be issued, as
soon as practicable.
3
<PAGE>
(c) Payment for Series shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the Company by
wire on the day the Fund is notified of the redemption order of
Series 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. Neither the Fund nor the Distributor shall bear any
responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds; 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 Series 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 Series shares in the form of additional
shares of that Series. 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 Series
shares so issued as payment of such dividends and distributions.
1.7 The Fund shall use its best efforts to make the net asset value
per share for each Series available to the Company by 6 p.m., New York time
each Business Day, and in any event, as soon as reasonably practicable after
the net asset value per share for such Series is calculated, and shall
calculate such net asset value in accordance with the then currently
effective Fund Prospectus. Neither the Fund, any Series, the Distributor, nor
the Investment Manager nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund, the Distributor or the Investment Manager.
1.8
(a) The Company may withdraw the Account's investment in the
Fund or a Series 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 Contractowners having an interest in the affected
Series to substitute the shares of another investment company for
Series 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.
4
<PAGE>
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to Section
1.9 hereof) and the cash value of the Contracts may be invested in
other investment companies.
(c) The Company shall not, without prior notice to the
Distributor (unless otherwise required by applicable law), take any
action to operate the Account as a management investment company
under the 1940 Act.
1.9. The Fund and the Distributor agree that Fund shares will be
sold only to Participating Insurance Companies and their separate accounts.
The Fund and the Distributor will not sell Fund shares to any insurance
company or separate account unless an agreement complying with Article VII of
this Agreement is in effect to govern such sales. No Fund shares of any
Series 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, unless exempt, (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 in good standing
under applicable law and that it has legally and validly authorized each
Account as a separate account under Section 4240 of the New York Insurance
Law (NYIL), and has registered or, prior to the issuance of any Contracts,
will register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act, unless exempt, to serve as a separate account for
its Contracts, and that it will maintain such registrations for so long as
the law requires.
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.
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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 and the Distributor immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.6. The Fund 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; and with state-mandated investment restrictions (if
any) set forth on Schedule 3, as amended from time to time by the Company in
accordance with Section 6.6. The Fund, however, makes no representation as to
whether any aspect of its operations (including, but not limited to, fees and
expenses and investment policies) otherwise complies with the insurance laws
or regulations of any state. The Company alone shall be responsible for
informing the Fund of any investment restrictions imposed by state insurance
law and applicable to the Fund.
2.7. The Distributor represents and warrants that it is duly
registered as a broker-dealer under the 1934 Act, a member in good standing
of the NASD, and duly registered as a broker-dealer under applicable state
securities laws; its operations are in compliance with applicable law, and it
will distribute the Fund shares according to applicable law.
2.8. The Distributor, on behalf of the Investment Manager,
represents and warrants that the Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940 and is in
compliance with applicable federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Distributor 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 of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in
order for the Company to have a new Contracts Prospectus printed together
with the Fund Prospectus in one document. See Article V for a detailed
explanation of the responsibility for the cost of printing and distributing
Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the Distributor (or, in
the Fund's discretion, the Fund Prospectus shall state that such Statement is
available from the Fund), and the Distributor (or the Fund) shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contractowner who requests such Statement.
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3.3.
(a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each
case in a form suitable for printing. The Fund shall be responsible
for the costs of printing and distributing these materials to
Contractowners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Fund or the Distributor prior to its use. No such material shall be used, except
with the prior written permission of the Fund or the Distributor. The Fund and
the Distributor agree 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 or the Distributor.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund or by the Distributor, except with the prior written permission of the
Fund or the Distributor. The Fund agrees to respond to any request for
permission on a prompt and timely basis. If neither the Fund nor the Distributor
responds 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.
3.6. The Fund and the Distributor shall not give any information or
make any representations on behalf of the Company or concerning the Company, 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 Contractowners, or in
sales literature or other promotional material approved in writing by the
Company, except with the prior written permission of the Company. The Company
agrees to respond to any request for permission on a prompt and timely basis. If
the Company fails to respond within 10 days of a request by the Fund or the
Distributor, then the Fund and the Distributor are relieved of the obligation to
obtain the prior written permission of the Company.
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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, promptly 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, promptly 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, prospectuses, Statements of Additional Information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under state insurance laws, NASD rules, the 1940
Act or the 1933 Act.
ARTICLE IV. VOTING
4.1 Subject to applicable law and the order referred to in Article
VII, the Fund shall: solicit voting instructions from Contractowners;
4.2 Subject to applicable law and the order referred to in Article
VII, the Company shall:
(a) vote Fund shares of each Series attributable to
Contractowners in accordance with instructions or proxies received
in timely fashion from such Contractowners;
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(b) vote Fund shares of each Series attributable to
Contractowners 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 of each Series held by the Company on its
own behalf or on behalf of the Account that are not attributable to
Contractowners 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 prints the Fund Prospectuses and SAIs in a booklet 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.)
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.
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<PAGE>
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.
6.6.
(a) The Company shall amend Schedule 3 when appropriate in
order to inform the Fund of any applicable state-mandated
investment restrictions with which the Fund must comply.
(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3,
the Company shall be informed immediately of the substance of those
restrictions.
ARTICLE VLI. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and
Shared Funding Order") dated November 2, 1987 of the Securities and Exchange
Commission under Section 6(c) of the Act and, in particular, has reviewed the
conditions to the relief set forth in the related Notice. As set forth
therein, the Company agrees to report to the 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 the conditions of the
Mixed and Shared Funding Order 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 Contractowners.
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.
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(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 irreconcilable
material conflict. These steps could include: (i) withdrawing the
assets allocable to some or all of the affected Accounts from the
Fund or any Series and reinvesting such assets in a different
investment vehicle, including another Series of the Fund, or
submitting the question of whether such segregation should be
implemented to a vote of all affected Contractowners and, as
appropriate, segregating the assets of any particular group (i.e.,
variable annuity Contractowners, variable life insurance
policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option
of making such a change; and (ii) establishing a new registered
mutual fund or management separate account, or taking such other
action as is necessary to remedy or eliminate the irreconcilable
material conflict.
(b) If the Company disagrees with the 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. 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 Contractowners.
(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
controversy.
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.
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 Syracuse, New York. The Arbitrator is not empowered to award damages
in excess of compensatory damages.
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(d) If the Board shall determine that the Fund or another
insurer 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 insurer,
as applicable, shall, at its sole cost and expense, take whatever
steps are necessary to eliminate the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote,
the Company shall withdraw (without charge or penalty) the Account's
investment in the Fund, if the Fund so elects.
7.4 Subject to the terms of Section 7.2 above, the Company shall
carry out the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict, but in no event will the
Fund be required to establish a new funding medium for any variable contract,
nor will the Company be required to establish a new funding medium for any
Contract if an offer to do so has been declined by a vote of a majority of
affected Contractowners.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Fund, the Distributor and each person who
controls or is associated with the Fund (other than another Participating
Insurance Company) or the Distributor within the meaning of such terms under
the federal securities laws and any officer, trustee, director, employee or
agent of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information
furnished in writing to the Company by the Fund or the Distributor
(or a person authorized in writing to do so on behalf of the Fund
or the Distributor) 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
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(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis
in accordance with the procedures set forth in Article 1; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor 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 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 or the
Distributor 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 Distributor
or 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 Distributor or persons under its control
with respect to the sale or distribution of the Contracts or Fund
shares; or
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(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 Distributor or the Fund to the Company (or a person
authorized in writing to do so on behalf of the Fund or the
Distributor); or
(d) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including, but not by way of limitation, a failure,
whether unintentional or in good faith or otherwise: (i) to comply
with the diversification requirements of 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 Distributor or the
Fund of this Agreement.
This indemnification will be in addition to any liability which the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is due
to the wilful misfeasance, bad faith, gross negligence or reckless disregard
of duty by the party seeking indemnification.
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8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled
to indemnification ("indemnified party") under this Article VIII of notice of
the commencement of any action, if a claim in respect thereof is to be made
by the indemnified party against any person obligated to provide
indemnification under this Article VIII ("indemnifying party"), such
indemnified party will notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, provided that the
omission to so notify the indemnifying party will not relieve it from any
liability under this Article VIII, except to the extent that the omission
results in a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to give such
notice. The indemnifying party, upon the request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this Article VIII shall
survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant, and the terms hereof shall be limited, interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written
notice to the other parties; or
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(b) at the option of the Company if shares of any Series 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, or an expected or
anticipated ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's ability to
perform the Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment
Manager or any Sub-Investment Manager, by the NASD, the SEC, or any
state securities or insurance commission or any other regulatory
body regarding the duties of the Fund or the Distributor under this
Agreement, or an expected or anticipated ruling, judgment or
outcome which would, in the Company's reasonable judgment,
materially impair the Fund's or the Distributor's ability to
perform Fund's or Distributor's obligations and duties hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or Sub-investment
Manager by the NASD, the SEC, or any state securities or insurance
commission or any other regulatory body which would, in the good
faith opinion of the Company, result in material harm to the
Accounts, the Company, or Contractowners.
(f) upon requisite vote of the Contractowners having an
interest in the affected Series (unless otherwise required by
applicable law) and written approval of the Company, to substitute
the shares of another investment company for the corresponding
Series shares of the Fund in accordance with the terms of the
Contracts; or
(g) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
(h) 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
(i) at the option of the Company if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code,
or under any successor or similar provision, or if the Company
reasonably believes, based on an opinion of its counsel, that the
Fund may fail to so qualify; or
17
<PAGE>
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the
Code and any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes that
the Contracts may fail to so qualify; or
(l) at the option of either the Fund or the Distributor if the
Fund or the Distributor, respectively, shall determine, in their
sole judgment exercised in good faith, that either (1) the Company
shall have suffered a material adverse change in its business or
financial condition; or (2) the Company shall have been the subject
of material adverse publicity which is likely to have a material
adverse impact upon the business and operations of either the Fund
or the Distributor; or
(m) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that
either: (1) the Fund and the Distributor, or either of them, shall
have suffered a material adverse change in their respective
businesses or financial condition; or (2) the Fund or the
Distributor, or both of them, shall have been the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Company; or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to
another insurance company pursuant to an assumption reinsurance
agreement) unless the non-assigning party consents thereto or
unless this Agreement is assigned to an affiliate of the
Distributor.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section
10.1, no termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, and that 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.
(c) In the event that any termination is based upon the
provisions of Section 10.1(e) of this Agreement, such prior written
notice shall be given at least sixty (60) days before the date of
any proposed vote to replace the Fund's shares.
18
<PAGE>
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, the Fund and the Distributor
will, at the option of the Company, continue to make available
additional Fund shares for so long after the termination of this
Agreement as the Company desires, pursuant to the terms and
conditions of this Agreement as provided in paragraph (b) below,
for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as ("Existing Contracts").
Specifically, without limitation, if the Company so elects to make
additional Fund shares available, the owners of the Existing
Contracts or the Company, whichever shall have legal authority to
do so, shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts.
(b) In the event of a termination of this Agreement pursuant
to Section 10.1 of this Agreement, the Fund and the Distributor
shall promptly notify the Company whether the Distributor and the
Fund will continue to make Fund shares available after such
termination. 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 or any conditions
or undertakings incorporated by reference in Article VII, and the
effect of such Article VII termination shall be governed by the
provisions set forth or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the
Contracts and to add new classes of variable annuity contracts and variable
life insurance policies to be issued by the Company through a Separate
Account investing in the Fund. The provisions of this Agreement shall be
equally applicable to each such class of contracts or policies, unless the
context otherwise requires. The schedule of available series in the Fund may
also be amended from time to time.
19
<PAGE>
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:
Delaware Group Premium Fund, Inc.
1818 Market Street
Philadelphia, PA 19103
Attn: Christopher Price
If to the Company:
Lincoln Life & Annuity Company of New York
120 Madison Street, Suite 1700
Syracuse, New York 13202-2802
Attn: Troy Panning
If to the Distributor:
Delaware Distributors, Inc.
1818 Market Street
Philadelphia, PA 19103
Attn: Bruce D. Barton
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
20
<PAGE>
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.
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.
DELAWARE GROUP PREMIUM FUND, INC. (Fund)
Date: ________________ By: ______________________________________
Name: David K. Downes
Title: President and Chief Executive Officer
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Company)
Date: ________________ By: ______________________________________
Name: ____________________________________
Title: ___________________________________
DELAWARE DISTRIBUTORS, LP (Distributor)
by DELAWARE DISTRIBUTORS, INC. (General Parties)
Date: ________________ By: ______________________________________
Name: Bruce D. Barton
Title: President
21
<PAGE>
SCHEDULE 1
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of October 11, 1999
<TABLE>
<CAPTION>
Separate Account Date Created
- ---------------- ------------
<S> <C>
Lincoln Life & Annuity Separate Account M November 24, 1997
Lincoln Life & Annuity Separate Account N March 11, 1999
Lincoln Life & Annuity Separate Account R January 29, 1998
Lincoln Life & Annuity Separate Account S March 2, 1999
</TABLE>
22
<PAGE>
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of October 15, 1999
LLANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE - VUL
CHOICE PLUS VARIABLE ANNUITY
LLANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE - SVUL
CVUL
23
<PAGE>
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of October 11, 1999
None.
24
<PAGE>
SCHEDULE 4
Series in the Fund Available
to the Contracts and Policies
Listed on Schedule 2
As of October 15, 1999
Trend Series
Emerging Markets Series
Small Cap Value Series
Delchester Series
REIT Series
Devon Series
25
<PAGE>
SCHEDULE 1
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of May 1, 2000
<TABLE>
<CAPTION>
Separate Account Date Created
- ---------------- ------------
<S> <C>
Lincoln Life & Annuity Variable Annuity Separate Account L July 24, 1996
Lincoln Life & Annuity Flexible Premium Variable Life Account M November 24, 1997
Lincoln New York Separate Account N for Variable Annuities March 11, 1999
LLANY Separate Account R for Flexible Premium Variable Life Insurance January 29, 1998
LLANY Separate Account S for Flexible Premium Variable Life Insurance March 2, 1999
</TABLE>
<PAGE>
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 2000
LINCOLN VUL
DELWARE-LINCOLN CHOICE PLUS VARIABLE ANNUITY
LINCOLN SVUL
LINCOLN CVUL
GROUP VARIABLE ANNUITY (GVA) I, II, III
<PAGE>
AMENDMENT TO
SCHEDULE 4
Series in the Fund Available
to the Contracts and Policies
Listed on Schedule 2
As of May 1, 2000
Trend Series
Emerging Markets Series
Small Cap Value Series
High Yield Series
REIT Series
Devon Series
Growth & Income
Select Growth
Social Awareness
International Equity
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to Schedules 1, 2 and 4 to be executed in its name and behalf by its duly
authorized officer on the date specified below.
DELAWARE GROUP PREMIUM FUND (Fund)
Date: ________________ By: _____________________________________________
David K. Downes
President and Chief Executive Officer
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Company)
Date: ________________ By: _____________________________________________
Troy D. Panning
CFO/2nd Vice President
DELAWARE DISTRIBUTORS, LP (Distributor)
by DELAWARE DISTRIBUTORS, INC. (General Parties)
Date: ________________ By: _____________________________________________
Bruce D. Barton
President
<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 Sit 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- I A 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 Under-writer agree as follows:
ARTICLE 1. SALE OF FUND SHARES
I A - 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 1, 111, V, VII and Section 2.5 of Article H
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 11. 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 win 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- I 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- I 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- I 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 individual
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-(I) 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.
7
<PAGE>
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
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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- I 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
9
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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 8
17(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 detennined 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>
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
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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, ARC 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 of 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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<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 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
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
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<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
<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.
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:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND
By:
J. Gary Burkehead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By:
Neal Litvack
President
21
<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 GAC96-1 11
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>
SCHEDULE A
AMENDED AS OF FEBRUARY 15, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded by Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- -----------------------
<S> <C> <C>
Lincoln Life & Annuity Variable GAC96-111 Growth - Initial
Annuity Account L GAC91-101 Equity-Income - Initial
Lincoln Life & Annuity Flexible LN615NY - LNY Equity-Income - Initial
Premium Variable Life Account M
Lincoln New York Account N AN426NY Equity-Income - Initial
for Variable Annuities Growth - Initial
Overseas - Initial
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF FEBRUARY 15, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund
American Variable Insurance Series (AVIS)
BT Insurance Funds Trust
Calvert Responsibly Invested Balanced Portfolio
Delaware Group Premium Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Liberty Variable Investment Trust
Lincoln National
MFS Variable Insurance Trust
T. Rowe Price International Series, Inc.
Templeton Variable Products Series Fund
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedules A and C 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.
Date LINCOLN LIFE & ANNUITY
-------------------------- COMPANY OF NEW YORK
By:
--------------------------------
Name: Troy D. Panning
Title: CFO/2nd Vice-President
Date VARIABLE INSURANCE PRODUCTS FUNDS
--------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
--------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE>
SCHEDULE A
AMENDED AS OF MAY 1, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded by Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- -----------------------
<S> <C> <C>
Lincoln Life & Annuity Variable GAC96-111; GAC91-101 Growth - Initial
Annuity Separate Account L (GVA I, II, III) Equity-Income - Initial
Lincoln Life & Annuity Flexible LN615NY - LNY Equity-Income - Initial
Premium Variable Life Account M (VUL I)
LN660NY Growth - Service
(VUL) High Income - Service
Lincoln New York Separate AN426NY Equity-Income - Initial
Account N for Variable Annuities (ChoicePlus) Growth - Initial
Overseas - Initial
LLANY Separate Account R for LN650 Growth - Service
Flexible Premium Variable (SVUL) High Income - Service
Life Insurance
LN655 Growth - Service
(SVUL II) High Income - Service
LLANY Separate Account S for LN920NY Growth - Service
Flexible Premium Variable (CVUL) High Income - Service
Life Insurance Overseas - Service
LN925 Growth - Service
(CVUL Series III) High Income - Service
Overseas - Service
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF MAY 1, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund
American Century Variable Products Group, Inc.
American Variable Insurance Series (AVIS)
Baron Capital Funds Trust
BT Insurance Funds Trust
Calvert Responsibly Invested Balanced Portfolio
Delaware Group Premium Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Janus Aspen Series
Liberty Variable Investment Trust
Lincoln National Funds
MFS Variable Insurance Trust
Neuberger&Berman Advisers Management Trust
OCC Accumulation Trust
Oppenheimer Funds
T. Rowe Price International Series, Inc.
Templeton Variable Products Series Fund
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedules A and C 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.
Date LINCOLN LIFE & ANNUITY
-------------------------- COMPANY OF NEW YORK
By:
--------------------------------
Name: Troy D. Panning
Title: CFO/2nd Vice-President
Date VARIABLE INSURANCE PRODUCTS FUNDS
--------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
--------------------------
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<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 11, 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 of 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- I A 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 Under-writer 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 1. SALE OF FUND SHARES
-------------------
I.I. 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 1, 111, V, VII and Section 2.5 of
Article 11 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 11. 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- I 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- I 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- I 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-(I) 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 Ill. 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 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
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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. 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 it-reconcilable
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 FUN
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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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
17
<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 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 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
<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 fights, 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:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND II
By:
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By:
Neal Litvack
President
21
<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
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>
SCHEDULE A
AMENDED AS OF FEBRUARY 15, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded by Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln Life & Annuity Variable GAC96-111 Asset Manager - Initial
Annuity Account L GAC91-101
Lincoln Life & Annuity Flexible LN650NY Contrafund - Service
Premium Variable Account R
Lincoln Life & Annuity Flexible LN615NY - LNY Asset Manager - Initial
Premium Variable Life Account M Investment Grade Bond -
Initial
Contrafund - Service
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF FEBRUARY 15, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
Baron Capital Funds Trust
BT Insurance Funds Trust
Calvert Responsibiltiy Invested Balanced Portfolio
Delaware Group Premium Fund, Inc.
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Janus Aspen Series
Lincoln National (LN)
MFS-Registered Trademark- Variable Insurance Trust
Neuberger Berman Advisers Management Trust
Templeton Variable Products Series Fund
Twentieth Century's TCI Portfolios, Inc.
T. Rowe Price International Series, Inc.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to Schedules A and C 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.
Date______________________________ LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
By: _________________________________
Name: Troy D. Panning
Title: CFO/2nd Vice President
Date______________________________ VARIABLE INSURANCE PRODUCTS FUNDS II
By: _________________________________
Name: _______________________________
Title: ______________________________
Date _____________________________ FIDELITY DISTRIBUTORS CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>
SCHEDULE A
AMENDED AS OF MAY 1, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln Life & Annuity Variable GAC96-111; GAC91-101 Asset Manager - Initial
Annuity Separate Account L (GVA I, II, III) Contrafund - Initial
Lincoln Life & Annuity Flexible LN615NY Asset Manager - Initial
Premium Variable Life Account M (VUL I) Investment Grade Bond -
Initial
LN660NY Contrafund - Service
(VUL)
LLANY Separate Account R LN650NY Contrafund - Service
for Flexible Premium Variable (SVUL)
Life Insurance
LN655 Contrafund - Service
(SVUL II)
LLANY Separate Account S LN920NY Asset Manager - Service
for Flexible Premium Variable (CVUL) Contrafund - Service
Life Insurance
LN925 Asset Manager - Service
(CVUL Series III) Contrafund - Service
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF MAY 1, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
American Century Variable Products Group, Inc.
American Variable Insurance Series (AVIS)
Baron Capital Funds Trust
BT Insurance Funds Trust
Calvert Responsibiltiy Invested Balanced Portfolio
Delaware Group Premium Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Janus Aspen Series
Lincoln National Funds
MFS-Registered Trademark- Variable Insurance Trust
OCC Accumulation Trust
Oppenheimer Funds
Neuberger Berman Advisers Management Trust
Templeton Variable Products Series Fund
T. Rowe Price International Series, Inc.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedules A and C 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.
Date____________________ LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
By: _______________________________
Name: Troy D. Panning
Title: CFO/2nd Vice President
Date____________________ VARIABLE INSURANCE PRODUCTS FUNDS II
By: _______________________________
Name: _______________________________
Title: _______________________________
Date____________________ FIDELITY DISTRIBUTORS CORPORATION
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
FIDELITY FUND PARTICIPATION AGREEMENT
VIP III COMPLETE AGREEMENT
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND III, FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of the 15th day of
October,1999 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 III, 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 has obtained an order from the Securities and
Exchange Commission, 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 Act") and Rules 6e-2(b) (15)
<PAGE>
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
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts under the 1933 Act, unless exempt;
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 and variable
life contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act, unless exempt; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("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 insurance 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
1
<PAGE>
receipt by the Fund; provided that the Fund receives notice of such order by
9:00 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 life insurance or 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 one or more investment companies other than the Fund.
2
<PAGE>
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 or its designee 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 unless an exemption from registration is
available and an opinion of counsel to that effect shall have been furnished to
the Fund; that the Contracts will be issued 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 Code 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, unless exempt, 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 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
3
<PAGE>
1940 Act from time to timeas 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; 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. (a) With respect to Initial Class shares, 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.
(b) With respect to Service Class shares, the Fund has adopted a Rule
12b-1 Plan under which it makes payments to finance distribution expenses. The
Fund represents and warrants that it has a board of trustees, a majority of whom
are not interested persons of the Fund, which has formulated and approved the
Fund's Rule 12b-1 Plan to finance distribution expenses of the Fund and that any
changes to the Fund's Rule 12b-1 Plan will be approved by a similarly
constituted board of trustees.
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
4
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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.
5
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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.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under the Investment
Advisers Act of 1940 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-(l) 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 (which shall mean, for purposes of this Article III if the Company so
requests, a separate prospectus for each Fund portfolio used in a particular
Account), 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
6
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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 annually 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 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
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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.
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 an offering statement for unregistered contracts, 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
8
<PAGE>
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
regulator5, 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 Contracts or
each Account, and to their investments 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.
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
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<PAGE>
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
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
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<PAGE>
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., 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
(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
11
<PAGE>
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, 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. l.(a) The Company agrees to indemnify and hold harmless tile 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
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Registration Statement or prospectus for the
Contracts or in the 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 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 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 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
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<PAGE>
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. l.(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
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 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 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
14
<PAGE>
(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
(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
15
<PAGE>
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 tile
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 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:
(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.
16
<PAGE>
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.
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 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 ninety (90) days
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
<PAGE>
17
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
(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) termination by the Company by written notice to the Fund and
the Underwriter upon 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 shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) termination by written notice to the Company at the option of
the Fund, upon institution of formal proceedings against the
Company and 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
18
<PAGE>
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) termination by written notice to the Fund and the Underwriter,
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
Underwriter's obligations and duties hereunder; or
(k) termination by written notice to the Fund and the Underwriter,
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 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 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
19
<PAGE>
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, one
party's obligation under Article VIII to indemnify the other party 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, Suite 1700
Syracuse, NY 13202
Attention: Troy Panning
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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.
20
<PAGE>
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 any insurance commissioner with any 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 insurance
regulations and any other applicable law or regulations of that state.
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. The Company
shall promptly notify the Fund and the Underwriter of any change in control of
the Company.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
21
<PAGE>
(a) the Company's annual statement (prepared under
statutory ) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90
days alter the end of each fiscal year;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any). as soon as practical and in any
event within 45 days after the end of each quarterly
period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the SEC
or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company, as soon as practical after the
receipt thereof.
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:
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
VARIABLE INSURANCE PRODUCTS FUND III
By:
-------------------------------------------
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTION
By:
--------------------------------------------
Kevin J. Kelly
Vice President
22
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
AS OF OCTOBER 15, 1999
<TABLE>
<S> <C> <C>
Separate Account and Date ESTABLISHED BY Form Numbers of Contracts FUNDED BY
BOARD OF DIRECTORS SEPARATE ACCOUNT FIDELITY FUND (CLASS)
Lincoln Life & Annuity Separate LN650NY Growth Opportunities -
Account R (January 29, 1998) Service Class
</TABLE>
23
<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)
24
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
1. 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.
1. The above contents should be received by the Company at least 7 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.
2. 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.
3. 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.
4. 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.
25
<PAGE>
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
26
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Investment Companies
Available: AIM, Bankers Trust, Baron Capital, Colonial, Delaware, Dreyfus,
Janus, Kemper, Lincoln National Investments, MFS, Neuberger
Berman, Templeton
27
<PAGE>
SCHEDULE A
AMENDED AS OF FEBRUARY 15, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln Life & Annuity Separate LN650NY Growth Opportunities
Account R - Service Class
Lincoln New York Account N AN426NY Growth Opportunities
for Variable Annuities - Initial Class
Lincoln Life & Annuity Flexible LN615NY - LNY Growth Opportunities
Premium Variable Life Account M - Service Class
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF FEBRUARY 15, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund
American Variable Insurance Series (AVIS)
BT Insurance Funds Trust
Baron Capital Funds Trust
Delaware Group Premium Fund
Janus Aspen Series
Liberty Variable Investment Trust
Lincoln National Investments
MFS Variable Insurance Trust
Neuberger & Berman AMT
Templeton Variable Products Series Fund
1
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused these
Amendments to Schedules A and C 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.
Date LINCOLN LIFE & ANNUITY COMPANY
------------------------- OF NEW YORK
By:
----------------------------
Name: Troy D. Panning
Title: CFO/2nd Vice-President
Date VARIABLE INSURANCE PRODUCTS FUNDS III
-------------------------
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
-------------------------
By: ----------------------------
Name:
----------------------------
Title:
----------------------------
2
<PAGE>
SCHEDULE A
AMENDED AS OF MAY 1, 2000
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
LLANY Separate Account R for LN650NY Growth Opportunities
Flexible Premium Variable Life (SVUL) - Service Class
Insurance
LN 655 Growth Opportunities
(SVUL II) - Service Class
Lincoln New York Separate Account AN426NY Growth Opportunities
N for Variable Annuities (ChoicePlus) - Initial Class
Lincoln Life & Annuity Flexible LN660NY Growth Opportunities
Premium Variable Life Account M (VUL) - Service Class
</TABLE>
<PAGE>
SCHEDULE C
AMENDED AS OF MAY 1, 2000
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund
American Variable Insurance Series (AVIS)
BT Insurance Funds Trust
Baron Capital Funds Trust
Delaware Group Premium Fund
Janus Aspen Series
Liberty Variable Investment Trust
Lincoln National Investments
MFS Variable Insurance Trust
Neuberger & Berman AMT
OCC Accumulation Trust
Oppenheimer Funds
Templeton Variable Products Series Fund
1
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused these
Amendments to Schedules A and C 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.
Date LINCOLN LIFE & ANNUITY COMPANY
--------------------- OF NEW YORK
By:
-------------------------
Name: Troy D. Panning
Title: CFO/2nd Vice-President
Date VARIABLE INSURANCE PRODUCTS FUNDS III
----------------------
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
----------------------
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
2
<PAGE>
SCHEDULE A
AMENDED AS OF OCTOBER 15, 1999
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- --------------------------
<S> <C>
Lincoln Life & Annuity Variable GAC96-111
Annuity Account L GAC91-101
Lincoln Life & Annuity Flexible Premium LN650NY
Variable Account R
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A 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.
Date LINCOLN LIFE & ANNUITY
------------------------ COMPANY OF NEW YORK
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date VARIABLE INSURANCE PRODUCTS
------------------------ FUNDS II
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
------------------------
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
<PAGE>
SCHEDULE C
AMENDED AS OF OCTOBER 15, 1999
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth Fund
AIM International Equity Fund
AIM V.I. Value Fund
BARON CAPITAL FUNDS TRUST
Baron Capital Asset Fund
BT INSURANCE FUNDS TRUST
EAFE Index Fund
Equity 500 Index Fund
Small Cap Index Fund
Calvert Responsibiltiy Invested Balanced Portfolio
DELAWARE GROUP PREMIUM FUND, INC.
Delchester Series
Devon Series
Emerging Markets Series
REIT Series
Small Cap Value Series
Trend Series
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Contrafund Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
Growth Opportunities Portfolio
JANUS ASPEN SERIES
Janus Aspen Series Balanced Portfolio
Janus Aspen Series Worldwide Growth Portfolio
<PAGE>
LINCOLN NATIONAL (LN)
LN Bond Fund
LN Capital Appreciation Fund
LN Equity-Income Fund
LN Global Asset Allocation Fund
LN Money Market Fund
LN Social Awareness Fund
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
Templeton International Fund - Class 2
Templeton Stock Fund - Class 2
TWENTIETH CENTURY'S TCI PORTFOLIOS, INC.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule C 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.
Date LINCOLN LIFE & ANNUITY
---------------------- COMPANY OF NEW YORK
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date VARIABLE INSURANCE PRODUCTS
----------------------- FUNDS II
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
-----------------------
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
<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").
WITNESSETH:
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 V (15)
and 6e-3 (T) V (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);
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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, as
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 1.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARE
1.1. For purposes of this Article 1, the Company shall be the Trust's
agent for 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
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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 sub-account of each Account.
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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
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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; (ii) 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 held in any segregated asset account in
its own right, to the extent permitted by law.
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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 an
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 other 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 its 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 the 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 upon having a reasonable basis for believing any
Portfolio has ceased to comply or might not so comply and will
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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, that 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
Class of the Trust finances its distribution expenses pursuant to a
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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 owners and, as appropriate, withdrawal of the assets of any appropriate
group
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(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 making 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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4.7 The Company shall at least annually submit to the Trustees Such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 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 1940
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 the Trust and/or the Participating insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3M,
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the Trust
and each Of Its Trustees, officers, employees and agents and each
person, if any, who controls the Trust within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually the "Indemnified Party" for purposes of this Article V)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company,
which consent shall not be unreasonably withheld) or 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 or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of Trust 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 a
disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this 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,
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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 Partys 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
14
<PAGE>
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 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:
15
<PAGE>
(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 sales literature of the
Trust (or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") 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 of such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the disclosure documents or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Trust, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Trust Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document
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 Trust; or
(iv) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
representation specified in Section 3.7 of this Agreement and the
diversification requirements specified in Section 3.6 of this
Agreement); or
(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 5.2(b) and 5.2(c)
hereof.
16
<PAGE>
(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 statute, at common
law or otherwise,
17
<PAGE>
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.
18
<PAGE>
(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.
19
<PAGE>
6.4 If this Agreement is terminated for any reason, except under Article
IV (Potential Conflicts) above, the Trust shall, at the option of the Company,
continue to make available additional shares of any Portfolio and redeem shares
of any Portfolio pursuant to all of the terms and conditions of this Agreement
for all Contracts in effect on the effective date of -termination of this
Agreement. if this Agreement is terminated pursuant to Article IV, the
provisions of Article IV shall govern.
6.5 The provisions of Articles 11 (Representations and Warranties) and V
(indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.4, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.6 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (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 Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust 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 Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
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 Trust or the Underwriter:
Templeton Variable Products Series Fund or
20
<PAGE>
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
21
<PAGE>
granting exemptive relief there from 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.
22
<PAGE>
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:
Name: Phillip L. Holstein
Title: President
The Trust:
Templeton Variable Products Series Fund
---------------------------------------
By its authorized officer
By:
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
-------------------------------------
By its authorized officer
By:
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
23
<PAGE>
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
24
<PAGE>
SCHEDULE B
TRUST PORTFOLIOS AND CLASSES AVAILABLE
Templeton Variable Products Series Adviser
- ---------------------------------- -------
Templeton Asset Allocation Fund Templeton Investment Counsel, Inc.
-Class 1
Templeton International Fund Templeton investment Counsel, Inc.
-Class 1
Templeton Stock Fund Templeton Investment Counsel, Inc.
-Class 1
25
<PAGE>
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: LN650NY
SEC Registration Number: 333-46113
2. Lincoln Life &Annuity Flexible Premium Variable Life Account M
Title: VUL I Form: LN605NY
SEC Registration Number: 333-42507
26
<PAGE>
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 11 Asset manager Portfolio
Fidelity VIP 11 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
27
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
The Lincoln Life & Annuity Company of New York, Templeton Variable
Products Series Fund and Franklin Templeton Distributors, Inc. hereby amend
their Fund Participation Agreement dated as of September 21, 1998, by:
1. Replacing Schedule A-C of the Agreement with Amended Schedule A-C,
attached;
2. Replacing Schedule D of the Agreement with Amended Schedule D,
attached;
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to Fund Participation Agreement, to be effective as of
October 15, 1999.
<TABLE>
<S> <C>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK TEMPLETON VARIABLE PRODUCTS SERIES FUND
By its authorized officer By its authorized officer
By: By:
---------------------------------------- ----------------------------------------
Name: Name: Karen L. Skidmore
Title: Title: Assistant Vice President and
Assistant Secretary
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
By its authorized officer
By:
----------------------------------------
Name: Deborah Gatzek
Title: Senior Vice President and
Assistant Secretary
</TABLE>
<PAGE>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2
----------------------------------------------------------------------------------------
<S> <C> <C>
CONTRACT/PRODUCT SVUL I VUL I
NAME AND TYPE
----------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes
----------------------------------------------------------------------------------------
SEC REGISTRATION 811-08651 811-08559
NUMBER --1940 ACT
----------------------------------------------------------------------------------------
REPRESENTATIVE LN650NY LN605NY
FORM NUMBERS
----------------------------------------------------------------------------------------
SEPARATE ACCOUNT LLANY Separate Lincoln Life & Annuity
NAME/DATE Account R Flexible Premium
ESTABLISHED Variable Life Account M
----------------------------------------------------------------------------------------
SEC REGISTRATION 333-46113 333-42507
NUMBER -- 1933 ACT
----------------------------------------------------------------------------------------
TEMPLETON TVP - Templeton TVP - Templeton Asset
VARIABLE International Fund Allocation Fund -- Class 1
PRODUCTS SERIES Class 2- Templeton Templeton Investment
FUND ("TVP") - Investment Counsel, Inc. Counsel, Inc.
PORTFOLIOS AND
CLASSES - ADVISER TVP - Templeton Stock TVP - Templeton
Fund -- Class 2 - International Fund -- Class
Templeton Investment 1- Templeton Investment
Counsel, Inc. Counsel, Inc.
TVP - Templeton Stock
Fund -- Class 1 -
Templeton Investment
Counsel, Inc.
----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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
AIM International Equity Fund
Baron Capital Asset Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
BT EAFE Equity Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Delaware Delchester Series
Delaware Devon Series
Delaware REIT Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Investment Grade Bond Portfolio
Fidelity VIP II Contrafund -- Service Class
Fidelity VIP III Growth Opportunities -- Service Class
Janus Aspen Balanced Portfolio
Janus Aspen Worldwide Growth Portfolio
Lincoln National Money Market Fund
Lincoln National Bond Fund
Lincoln National Capital Appreciation Fund
Lincoln National Equity-Income Fund
Lincoln National Social Awareness Fund
Lincoln National Global Asset Allocation Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
AMT Partners Fund
AMT Mid-cap Growth Fund
OpCap Global Equity Portfolio
OpCap Managed Portfolio
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
The Lincoln Life & Annuity Company of New York, Templeton Variable
Products Series Fund, and Franklin Templeton Distributors, Inc. hereby amend
their Fund Participation Agreement dated as of September 21, 1999, and as
amended on October 15, 1999 ("Agreement"), by:
1. Adding Franklin Templeton Variable Insurance Products Trust, an
open-end management investment company organized as a business trust
under Massachusetts law, as a party to the Agreement between and 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 (the "Underwriter") and
Lincoln Life & Annuity Company of New York, a life insurance company
organized as a corporation under New York law (the "Company"). Both
Templeton Variable Products Series Fund and Franklin Templeton
Variable Insurance Products Trust shall hereinafter be referred to as
the "Trust."
2. Adding a new Section, "Agreement"
AGREEMENT
1.0 Form of Agreement. This Agreement shall also create a
separate agreement for each Trust and the Underwriter as though
each Trust and the Underwriter had executed an identical Fund
Participation Agreement with the Company. No rights,
responsibilities or liabilities arising under the Agreement as it
pertains to one Trust shall be enforceable by or against any
party to the Agreement as it pertains to another Trust.
3. Adding Franklin Templeton Variable Insurance Products Trust to
Article VII, "Notices"
If to the Trust:
Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Karen Skidmore, Assistant Vice
President, Assistant Secretary
4. Replacing Schedule A-C of the Agreement with Amended Schedule
A-C, attached;
5. Replacing Schedule D of the Agreement with Amended Schedule D,
attached;
6. Adding Schedule E to the Agreement, attached. (REDACTED)
1
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment to Fund Participation Agreement, to be
effective as of April 30, 2000.
<TABLE>
<S> <C>
Lincoln Life & Annuity Company of New York Templeton Variable Products Series Fund
- ------------------------------------------ ---------------------------------------
By its authorized officer By its authorized officer
By: By:
Name: Troy D. Panning Name: Karen L. Skidmore
Title: CFO/2nd Vice President Title: Assistant Vice President and
Assistant Secretary
Franklin Templeton Distributors, Inc.
---------------------------------------
By its authorized officer
By:
Name: Phillip J. Kearns
Title: Vice President
</TABLE>
2
<PAGE>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN LIFE &
ANNUITY COMPANY OF NEW YORK
<TABLE>
<CAPTION>
- ----------------------- ------------------------------ -------------------------------- -------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- ----------------------- ------------------------------ -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT SVUL I VUL I Delaware - Lincoln New York
NAME AND TYPE Choice Variable Annuity
- ----------------
- ----------------------- ------------------------------ -------------------------------- -------------------------------
REGISTERED (Y/N) Yes Yes Yes
- ----------------------- ------------------------------ -------------------------------- -------------------------------
SEC REGISTRATION 811-08651 811-08559 811-09763
NUMBER - 1933 ACT
- ----------------------- ------------------------------ -------------------------------- -------------------------------
REPRESENTATIVE LN650NY LN605NY AN426NY
FORM NUMBERS
- ----------------------- ------------------------------ -------------------------------- -------------------------------
SEPARATE ACCOUNT LLANY Separate Account R for Lincoln Life & Annuity Lincoln New York Separate
NAME/DATE Flexible Premium Variable Flexible Premium Variable Life Account N for Variable
ESTABLISHED Life Insurance Account M Annuities
- ----------------------- ------------------------------ -------------------------------- -------------------------------
SEC REGISTRATION 333-46113 333-42507 333-93875
NUMBER - 1940 ACT
- ----------------------- ------------------------------ -------------------------------- -------------------------------
TEMPLETON VARIABLE TVP - Templeton Asset TVP - Templeton Asset VIP - Franklin Small Cap
PRODUCTS SERIES Allocation Fund - Class 1 Allocation Fund - Class 1 Fund Class 2 - Franklin
FUND ("TVP"), Templeton Investment Templeton Investment Counsel, Advisors, Inc.
FRANKLIN TEMPLETON Counsel, Inc. Inc.
VARIABLE INSURANCE VIP - Mutual Shares
PRODUCTS TRUST TVP - Templeton TVP - Templeton International Securities Fund Class 2 -
("VIP") -PORTFOLIOS International Fund - Class Fund - Class 1- Templeton Franklin Mutual Advisers, LLC
AND CLASSES - 1- Templeton Investment Investment Counsel, Inc.
ADVISER Counsel, Inc. VIP - Templeton International
TVP - Templeton Stock Fund - Fund Class 2 - Templeton
TVP - Templeton Stock Fund - Class 1 - Investment Counsel, Inc. (as
Class 1 - Templeton Templeton Investment Counsel, of May 1, 2000, Templeton
Investment Counsel, Inc. Inc. International Securities Fund)
VIP - Templeton Global Growth
Fund Class 2 - Templeton
Global Advisors Limited (as
of May 1, 2000, Templeton
Growth Securities Fund)
- ----------------------- ------------------------------ -------------------------------- -------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ----------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT CVUL LVUL - I
NAME AND TYPE CVUL Series III VUL
- ----------------
- ----------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Yes Yes
- ----------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 811-09257 811-08559
NUMBER - 1933 ACT
- ----------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE LN920NY LN615NY
FORM NUMBERS LN925 LN660NY
- ----------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT LLANY Separate Account S for Lincoln Life & Annuity
NAME/DATE Flexible Premium Variable Flexible Premium Variable Life
ESTABLISHED Life Insurance Account M
- ----------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 333-74325 333-42507
NUMBER - 1940 ACT
- ----------------------- ------------------------------- -------------------------------- -------------------------------
TEMPLETON VARIABLE VIP - Franklin Small Cap Fund TVP - Templeton International
PRODUCTS SERIES Class 2 - Franklin Advisers, Fund Class 2 - Templeton
FUND ("TVP"), Inc. Investment Counsel, Inc. (as
FRANKLIN TEMPLETON of May 1, 2000, Templeton
VARIABLE INSURANCE International Securities Fund)
PRODUCTS TRUST
("VIP") -PORTFOLIOS VIP - Templeton Global Growth
AND CLASSES - Fund Class 2 - Templeton
ADVISER Global Advisors Limited (as of
May 1, 2000, Templeton Growth
Securities Fund)
- ----------------------- ------------------------------- -------------------------------- -------------------------------
</TABLE>
4
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
<TABLE>
<S> <C>
AIM V.I.Capital Appreciation Fund Fidelity VIP Equity Income Portfolio
AIM V.I. Diversified Income Fund Fidelity VIP Growth
AIM V.I. Growth Fund Fidelity VIP High Income
AIM V.I. International Fund Fidelity VIP Overseas
AIM V.I. Value Fund Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Investment Grade Bond Portfolio
Fidelity VIP II Contrafund
Fidelity VIP III Growth Opportunities
Alliance Premier Growth Janus Aspen Balanced Portfolio
Alliance Growth and Income Janus Aspen Global Technology
Alliance Growth Janus Aspen Flexible Income
Alliance Technology Janus Aspen Worldwide Growth Portfolio
AMT Partners Fund Lincoln National Money Market Fund
AMT Mid-cap Growth Fund Lincoln National Bond Fund
Lincoln National Capital Appreciation Fund
Lincoln National Equity-Income Fund
Lincoln National Social Awareness Fund
Lincoln National Global Asset Allocation Fund
Avis Global Small Capitalization MFS Emerging Growth Series
Avis Growth MFS Total Return Series
Avis International MFS Utilities Series
Avis Growth-Income MFS Research
Avis Bond
Avis U.S. Government/AAA-Rated SecuritiesFund
Baron Capital Asset Fund OpCap Global Equity Portfolio
Opcap Managed Portfolio
BT EAFE Equity Index Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
Delaware Premium Aggressive Growth Fund
Delaware Devon Series
Delaware Emerging Markets Series
Delaware High Yield Series
Delaware International Series
Delaware Premium Growth & Income
Delaware REIT Series
Delaware Small Cap Value Series
Delaware Trend Series
</TABLE>
5
<PAGE>
SCHEDULE E
(REDACTED)
6
<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 ("LFA"), 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.
2
<PAGE>
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.
3
<PAGE>
ARTICLE 11. 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, endowment 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.
4
<PAGE>
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 111. 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,
5
<PAGE>
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
6
<PAGE>
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.
7
<PAGE>
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- I 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- I 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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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 (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 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 made 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 I
1.1(b) through Section 11. (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 O. 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 its authorized officer,
By:
Title:
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF
THE
PORTFOLIOS
By its authorized officer and not individually,
By:
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By:
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>
<S><C>
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
Lincoln Life & Annuity Flexible Flexible Premium Variable Life MFS Emerging Growth Series
Premium Variable Life MFS Total Return Series
Account M WS Utilities Series
LLANY Separate Account R for
Flexible Premium Variable Life
Insurance
</TABLE>
19
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
15th day of July 1998, by and among MFS Variable Insurance Trust, Lincoln Life &
Annuity Company of New York and Massachusetts Financial Services Company, the
parties do hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to the Participation Agreement to be executed in Its name and on its behalf by
its duly authorized representative. The Amendment shall take effect on May 1,
1999.
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
By its authorized officer,
By:
Title:
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,
By:
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By:
Arnold D. Scott
Senior Executive Vice President
#29215
<PAGE>
As of May 1, 1999
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<S><C>
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTOR BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
Lincoln Life & Annuity Flexible / / Variable Universal Life I MFS Emerging Growth Series
Premium Variable Life / / Lincoln Variable Universal Life MFS Total Return Series
Account M MFS Utilities Series
LLANY Separate Account R for / / Survivorship Variable MFS Emerging Growth Series
Flexible Premium Variable Life Universal Life I MFS Total Return Series
Insurance / / Lincoln Survivorship Variable MFS Utilities Series
Universal Life
LLANY Separate Account S For / / Corporate Specialty Markets MFS Total Return Series
Flexible Previum Variable Life COLI (CVUL) MFS Utilities Series
Insurance MFS Capital
Opportunitites Series
MFS Research Series
</TABLE>
#29215
<PAGE>
AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
15th day of July 1998, as amended, by and among MFS Variable Insurance Trust,
Lincoln Life & Annuity Company of New York and Massachusetts Financial Services
Company, the parties do hereby agree to an amended Schedule A as attached
hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Participation Agreement to be executed in its name and on its behalf by its
duly authorized representative. The Amendment shall take effect on February 15,
2000.
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
By its authorized officer,
By:
Title:
MFS VARIABLE INSURANCE TRUST,
on behalf of the Portfolios By its authorized officer,
By:
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By:
Chairman, Chief Executive Officer
<PAGE>
As of February 15, 2000
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
<S> <C> <C>
Lincoln Life & Annuity Flexible / / Variable Universal Life I MFS Emerging Growth Series
Premium Variable Life / / Lincoln Variable Universal MFS Total Return Series
Account M Life MF S Utilities Series
/ / Flexible Premium Variable
Life - Two Insureds
LLANY Separate Account R for / / Survivorship Variable MFS Emerging Growth Series
Flexible Premium Variable Life Universal Life I MFS Total Return Series
Insurance / / Lincoln Survivorship, Variable MFS Utilities Series
Universal Life
LLANY Separate Account S For / / Corporate Specialty Markets MFS Total Return Series
Flexible Premium Variable Life COLI (CVUL) MFS Utilities Series
Insurance MFS Capital
Opportunities Series
MFS Research Series
Lincoln New York Account N Delaware - Lincoln New York MFS Emerging Growth Series
for Variable Annuities Choice Plus Variable Annuity MFS Total Return Series
MFS Utilities Series
MFS Research
</TABLE>
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the _____st day of _____ 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)(1 5) 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
1
<PAGE>
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 1. 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 redemptiion 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 p.m. 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 p.m. 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 11. 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 Ill. 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 20
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 V1. 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 of
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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:
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(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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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:
14
<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 breach
of any material provision of this Agreement, which breach has
not been cured to the satisfaction of TRUST within ten days
after written 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 BOS865
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:
Name:
Title:
19
<PAGE>
BANKERS TRUST COMPANY
By:
Name:
Title:
Vice President
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
By:
Name:
Title:
20
<PAGE>
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>
AMENDMENT NO. 3
to the
FUND PARTICIPATION AGREEMENT
AMENDMENT, dated as of May 1, 2000, to the Fund Participation Agreement
dated as of the 1st day of October, 1998 (the "Agreement"), by and between BT
Insurance Funds Trust ("Trust"), Bankers Trust Company ("Adviser"), and LINCOLN
LIFE & ANNUITY COMPANY OF NEW YORK ("Life Company").
WHEREAS, Trust, Life Company and Adviser wish to revise Appendix B to the
Agreement;
NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust,
Life Company and Adviser hereby agree as follows:
1. Appendix B to the Agreement is hereby amended, and restated in its
entirety, by the Appendix B attached to this Amendment.
Except as expressly set forth above, all other terms and provisions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment as of the date and year first above written.
BT INSURANCE FUNDS TRUST
By:_____________________________________
Name:
Title:
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By:_____________________________________
Name:
Title:
BANKERS TRUST COMPANY
By:_____________________________________
Name:
Title:
<PAGE>
APPENDIX B
(Revised effective May 1, 2000)
SEPARATE ACCOUNTS
1) Lincoln Life & Annuity Flexible Premium Variable Life Account M
2) LLANY Separate Account R for Flexible Premium Variable Life Insurance
3) Lincoln New York Separate Account N for Variable Annuities
4) LLANY Separate Account S for Flexible Premium Variable Life Insurance
<PAGE>
FORM OF
PARTICIPATION AGREEMENT
AMONG
THE LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
AND
LIBERTY ADVISORY SERVICES CORPORATION
AND
LIBERTY VARIABLE INVESTMENT TRUST
AND
LIBERTY FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, made and entered into this 1st day of February, 2000 by
and among Liberty Variable Investment Trust, a Massachusetts Business Trust
organized under the laws of Massachusetts (the "Fund") on behalf of the Series
named in Schedule 1 that may be amended from time to time in accordance with the
provisions of Article XI of this Agreement, Lincoln Life & Annuity Company of
New York, a New York insurance corporation (the "Company"), on its own behalf
and on behalf of each separate account of the Company named in Schedule 1 to
this Agreement as in effect at the time this Agreement is executed and such
other separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"), Liberty Advisory Services Corporation
(the "Investment Manager"), and Liberty Funds Distributor, Inc., each a
Massachusetts corporation (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission
(the "SEC") and the SEC has declared effective a registration statement
(referred to herein as the "Fund Registration Statement" and the prospectus
contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to
herein as the "Fund Prospectus") on Form N-lA to register itself as an open-end
management investment company (File No. 811-7556) under the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Fund shares (File No.
33-59216) under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act (unless exempt therefrom) certain variable annuity
contracts described in Schedule 2 to this Agreement as in effect at the time
this Agreement is executed and such other variable annuity contracts and
variable life insurance policies which may be added to Schedule 2 from time to
time in accordance with Article XI of this Agreement (such policies and
contracts shall be referred to herein collectively as the "Contracts," each such
registration statement for a class or
<PAGE>
classes of contracts listed on Schedule 2 being referred to as the "Contracts
Registration Statement" and the prospectus for each such class or classes being
referred to herein as the "Contracts Prospectus," and the owners of such
contracts, as distinguished from all Product Owners, being referred to as
"Contract Owners"); and
WHEREAS, each Account, a validly existing separate account, duly
authorized by resolution of the Board of Directors of the Company on the date
set forth on Schedule 1, sets aside and invests assets attributable to the
Contracts; and
WHEREAS, the Company has registered or will have registered each
Account (unless exempt therefrom) with the SEC as a unit investment trust under
the 1940 Act before any Contracts are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an agreement
(the AFund Distribution Agreement") pursuant to which the Distributor will
distribute Fund shares; and
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisors Act of 1940 and any applicable state securities
laws and serves as an investment manager to the Fund pursuant to an agreement,
and may delegate its responsibilities to selected Sub-Investment Managers; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Fund shares
which the Company orders on behalf of each Account, executing such orders on a
daily basis in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the
Company on behalf of each Account at the then applicable net asset value per
share on Business Days as defined in Section 1.4 of this Agreement, and the Fund
shall use its best efforts to calculate and deliver such net asset value by 6:00
p.m., New York time, on each such Business Day. Notwithstanding any other
provision in this Agreement to the contrary, the Trustees of the Fund may
suspend or
2
<PAGE>
terminate the offering of shares, if such action is required by law
or by regulatory authorities having jurisdiction or if, in the sole discretion
of the Trustees acting in good faith and in light of its fiduciary duties under
Federal and any applicable state laws, suspension or termination is necessary
and in the best interests of the shareholders (it being understood that
"shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by each Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect
redemption wires on the same day as notification of redemption unless unusual
circumstances evolve which cause the Fund to have to redeem securities) in
accordance with Section 1.4 of this Agreement, the applicable provisions of the
1940 Act and the then currently effective Fund Prospectus. Notwithstanding the
foregoing, the Fund may delay redemption of Fund shares of any Fund to the
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Fund shall
treat receipt on any Business Day by the Company of redemption
and purchase requests from each Account prior to the time
prescribed in the current Fund Prospectus (which as of the
date of execution of this Agreement is the close of the New
York Stock Exhange) as receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such
redemption or purchase request by 10:00 a.m., New York time on
the next following Business Day. For purposes of this
Agreement, "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading.
(b) The Company, which in addition to being a life insurance
company is a broker/dealer and member of the NASD, shall pay
for the shares on the same day that it places an order with
the Fund to purchase those Fund shares for an Account. Payment
for Fund shares will be made by each Account or the Company in
Federal Funds transmitted to the Fund by wire to be received
by 2:00 p.m., New York time on the day the Fund is properly
notified of the purchase order for shares. The Fund will
confirm receipt of each trade and these confirmations will be
received by Company via Fax or Email by 2:00 p.m. New York
time. If Federal Funds are not received on time, such funds
will be invested, and shares purchased thereby will be issued,
as soon as practicable.
(c) Payment for shares redeemed by each Account or the Company
will be made in Federal Funds transmitted to the Company by
wire on the same day the Fund is notified of the redemption
order of shares, except that the Fund reserves the right to
delay payment of redemption proceeds as permitted under
Section 22(e) of the 1940 Act. Neither the Fund nor the
Distributor shall bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds if
securities must be redeemed; the Company alone shall be
responsible for such action.
3
<PAGE>
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or each Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate ledger
for each Account or the appropriate subaccount of each Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of each Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of each Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 6 p.m., New York time each Business Day,
and in any event, as soon as reasonably practicable after the net asset value
per share is calculated, and shall calculate such net asset value in accordance
with the then currently effective Fund Prospectus. Neither the Fund, the
Distributor, nor the Investment Manager nor any of their affiliates shall be
liable for any information provided to the Company pursuant to this Agreement
which information is based on incorrect information supplied by the Company to
the Fund, the Distributor or the Investment Manager.
1.8. (a) The Company may withdraw each Account's investment in the
Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) upon a determination by a majority of the
Trustees, or a majority of disinterested Trustees, that an
irreconcilable material conflict exists among the interests of
(x) any Product Owners or (y) the interests of the
Participating Insurance Companies investing in the Fund; (iii)
upon requisite vote of the Contractowners having an interest
in the affected Fund to substitute the shares of another
investment company for shares in accordance with the terms of
the Contracts; (iv) as required by state and/or federal laws
or regulations or judicial or other legal precedent of general
application; or (v) at the Company's sole discretion, pursuant
to an order of the SEC under Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the
Fund shares may be sold to other insurance companies (subject
to Section 1.9 hereof) and the cash value of the Contracts may
be invested in other investment companies.
(c) The Company shall not, without prior notice to the
Distributor (unless otherwise required by applicable law),
take any action to operate each Account as a management
investment company under the 1940 Act.
4
<PAGE>
1.9. The Fund and the Distributor agree that Fund shares will be sold
only to Participating Insurance Companies and their separate accounts. The Fund
and the Distributor will not sell Fund shares to any insurance company or
separate account unless an agreement substantially complying with Article VII of
this Agreement is in effect to govern such sales. No Fund shares will be sold to
the general public.
ARTICLE 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, unless exempt therefrom, (b) that the Contracts will be issued in
compliance in all material respects with all applicable Federal and state laws
and (c) that the Company will require of every person distributing the Contracts
that the Contracts be offered and sold in compliance in all material respects
with all applicable Federal and state laws. The Company further represents and
warrants that it is an insurance company duly organized and validly existing
under applicable law and that it has legally and validly authorized each Account
as a separate account under Section 4240 of the New York Insurance Law, and has
registered or, prior to the issuance of any Contracts, will register each
Account (unless exempt therefrom) as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a separate account for its Contracts,
and that it will maintain such registrations for so long as any Contracts issued
under them are outstanding.
2.2. The Fund represents and warrants that shares of any Series sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund shares
are sold. The Fund further represents and warrants that it is a Massachusetts
Business Trust duly organized and in good standing under the laws of
Massachusetts.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder. In the event of a
breach of this Section 2.4 by the Fund, it will: (a) immediately notify the
Company of such breach; and (b) take the steps necessary to adequately diversify
each portfolio so as to achieve such compliance within the period allowed by
regulation.
2.5. The Company represents and warrants that the Contracts are
currently and at the time of issuance will be treated as annuity contracts or
life insurance policies, whichever is appropriate, under applicable provisions
of the Code. The Company shall make every effort to maintain such treatment and
shall notify the Fund and the Distributor immediately upon having a
5
<PAGE>
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.6. The Fund (except for the Newport Tiger Fund, Variable Series)
represents and warrants that the Fund's investment policies, fees and expenses,
and operations are and shall at all times remain in material compliance with the
laws of the state of New York ("NY"), to the extent required to perform this
Agreement; and with any state-mandated investment restrictions set forth on
Schedule 3, as amended from time to time by the Company in accordance with
Section 6.6. The Fund, however, makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Distributor represents and warrants that it is duly registered
as a broker-dealer under the 1934 Act, a member in good standing of the NASD,
and duly registered as a broker-dealer under applicable state securities laws;
its operations are in compliance with applicable law, and it will distribute the
Fund shares according to applicable law.
2.8. The Investment Manager represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
and is in compliance with applicable federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Distributor shall provide the Company with as many copies of
the current Prospectus of any Series named in Schedule 1 as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund at its
expense shall provide to the Company a camera-ready copy, and electronic
version, of the current Fund Prospectus suitable for printing and other
assistance as is reasonably necessary in order for the Company to have a new
Contracts Prospectus printed together with the Fund Prospectus in one document.
See Article V for a detailed explanation of the responsibility for the cost of
printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Distributor, and the Distributor
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports with
respect to the Series named in Schedule 1
6
<PAGE>
and other communications to shareholders (except proxy
material), in each case in a form suitable for printing, as
determined by the Company. The Fund shall be responsible for
the costs of printing and distributing these materials to
Contract owners, subject to the limitation in Article V.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to a third party proxy house for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Distributor prior to its use. No such material shall be used, except with the
prior written permission of the Distributor. The Distributor agrees to respond
to any request for approval on a prompt and timely basis. Failure of the
Distributor to respond within 10 days of the request by the Company shall
relieve the Company of the obligation to obtain the prior written permission of
the Distributor.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Distributor, except with the prior written permission of the Distributor.
The Distributor agrees to respond to any request for permission on a prompt and
timely basis. If the Distributor does not respond within 10 days of a request by
the Company, then the Company shall be relieved of the obligation to obtain the
prior written permission of the Distributor.
3.6. The Fund and the Distributor shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account or the Contracts other than the information or representations
contained in the Contracts Registration Statement or Contracts Prospectus, as
such Registration Statement and Prospectus may be amended or supplemented from
time to time, or in published reports of each Account which are in the public
domain or approved in writing by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved in writing
by the Company, except with the prior written permission of the Company. The
Company agrees to respond to any request for permission on a prompt and timely
basis. If the Company fails to respond within 10 days of a request by the Fund
or the Distributor, then the Fund and the Distributor are relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of
all Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to any Series of the Fund named
in Schedule 1, within 20 days after the filing of such document with the SEC or
other regulatory authorities.
7
<PAGE>
3.8. The Company will provide to the Fund at least one complete copy of
all Contracts Registration Statements, Contract Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts and their investment in the Fund, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
3.9. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. VOTING
4.1 Subject to applicable law and the order referred to in Article
VII, the Fund shall: solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the order referred to in Article
VII, the Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely
fashion from such Contract owners;
(b) vote Fund shares attributable to Contract owners for which
no instructions have been received in the same proportion as
Fund shares for which instructions have been received in
timely fashion; and
(c) vote Fund shares held by the Company on its own behalf or
on behalf of each Account that are not attributable to
Contract owners in the same proportion as Fund shares for
which instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
8
<PAGE>
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required of the Fund by any
Federal or state securities law, all taxes on the issuance or transfer of Fund
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-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 may print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contract owners.)
During the calendar year 2000, the Fund will not pay more than $15,000
of the cost of printing and distributing Fund Prospectuses, Statements of
Additional Information and annual and semi-annual reports to existing Contract
owners.
The Company is responsible for the cost of printing and distributing
Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h)
of the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and each Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
9
<PAGE>
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have its Trustees, a majority of
whom shall not be interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
6.6. (a) The Company shall amend Schedule 3 when appropriate in
order to inform the Fund of any applicable state-mandated
investment restrictions with which the Fund must comply.
(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in
Schedule 3, the Company shall be informed immediately of the
substance of those restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and
Shared Funding Order") dated July 1, 1998 of the Securities and Exchange
Commission under Section 6c of the Act and, in particular, has reviewed the
conditions to the relief set forth in the related Notice. As set forth therein,
the Company agrees to report to the Trustees any potential or existing conflicts
between the interests of Product Owners of all separate accounts investing in
the Fund, and to assist the Trustees in carrying out their responsibilities
under the conditions of the Mixed and Shared Funding Order by providing all
information reasonably necessary for the Trustees to consider any issues raised,
including information as to a decision to disregard voting instructions of
variable contract owners.
7.2. If a majority of the Trustees, or a majority of disinterested
Trustees, determines that a material irreconcilable conflict exists, the
Trustees shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the Trustees, after notice to the Company
and a reasonable opportunity for the Company to appear before
it and present its case, determine that the Company is
responsible for said conflict, and if the Company agrees with
that determination, the Company shall, at its sole cost and
expense, take whatever steps are necessary to remedy the
irreconcilable material conflict. These steps could include:
(i) withdrawing the assets allocable to some or all of the
affected Accounts from the Fund and reinvesting such assets in
a different investment vehicle, or submitting the question of
whether such segregation should be implemented to a vote of
all affected Contractowners and, as appropriate, segregating
the assets of any particular group (i.e., variable annuity
Contractowners, variable life insurance
10
<PAGE>
policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the
option of making such a change; and (ii) establishing a new
registered mutual fund or management separate account, or
taking such other action as is necessary to remedy or
eliminate the irreconcilable material conflict.
(b) If the Company disagrees with the Trustees' determination,
the Company shall file a written protest with the Trustees,
reserving its right to dispute the determination as between
just the Company and the Fund. After reserving that right the
Company, although disagreeing with the Trustees that it (the
Company) was responsible for the conflict, shall take the
necessary steps, under protest, to remedy the conflict,
substantially in accordance with paragraph (a) just above, for
the protection of Contractowners.
(c) As between the Company and the Fund, if within 45 days
after the Trustees' determination the Company elects to press
the dispute, it shall so notify the Trustees in writing. The
parties shall then attempt to resolve the matter amicably
through negotiation by individuals from each party who are
authorized to settle the matter.
If the matter has not been amicably resolved within
60 days from the date of the Company's notice of its intent to
press the dispute, then before either party shall undertake to
litigate the dispute it shall be submitted to non-binding
arbitration conducted expeditiously in accordance with the
American Arbitration Association's (AAA) Rules for
Non-Administered Arbitration of Business Disputes, by a sole
arbitrator; PROVIDED, HOWEVER, that if one party has requested
the other party to seek an amicable resolution and the other
party has failed to participate, the requesting party may
initiate arbitration before expiration of the 60-day period
set out just above.
If within 45 days of the commencement of the process
to select an arbitrator the parties cannot agree upon the
arbitrator, then he or she will be selected from the AAA
Panels of Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place
of arbitration shall be Syracuse, New York. The Arbitrator is
not empowered to award damages in excess of compensatory
damages.
(d) If the Trustees shall determine that the Fund or another
insurer was responsible for the conflict, then the Trustees
shall notify the Company immediately of that determination.
The Fund shall assure the Company that it (the Fund) or that
other insurer, as applicable, shall, at its sole cost and
expense, take whatever steps are necessary to eliminate the
conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to
11
<PAGE>
disregard Contractowner voting instructions and that decision represents a
minority position or would preclude a majority vote, the Company shall withdraw
(without charge or penalty) each Account's investment in the Fund, if the Fund
so elects.
7.4. Subject to the terms of Section 7.2 above, the Company shall carry
out the responsibility to take remedial action in the event of a Trustees
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested
Trustees shall determine whether or not any proposed action adequately remedies
any irreconcilable conflict, but in no event will the Fund be required to
establish a new funding medium for any variable contract, nor will the Company
be required to establish a new funding medium for any Contract if in either case
an offer to do so has been declined by a vote of a majority of affected
Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund, the Investment Manager, the Distributor and each
person who controls, is controlled by or is affiliated with any of them (other
than another Participating Insurance Company) within the meaning of such terms
under the federal securities laws and any officer, trustee, director, employee
or agent of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or
the Contracts themselves (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission or such alleged statement or alleged omission was
made in reliance upon and in conformity with information
furnished in writing to the Company by the Fund or the
Investment Manager (or a person authorized in writing to do so
on behalf of the Fund or the Investment Manager) for use in
the Contracts Registration Statement, Contracts Prospectus or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(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
12
<PAGE>
or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other
promotional material of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the
Company or persons under its control with respect to the sale
or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made, if such statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or
on behalf of the Company; or
(d) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments
under the terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to
transmit a request for redemption or purchase of Fund shares
on a timely basis in accordance with the procedures set forth
in Article 1; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its
Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE INVESTMENT MANAGER. The Investment Manager
on behalf of itself, the Fund, and the Distributor agrees to indemnify and hold
harmless the Company and each person who controls, is controlled by or is
affiliated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(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
13
<PAGE>
Prospectus (or any amendment or supplement thereto) or sales
literature or other promotional material of the Fund, or arise
out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided
that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission
was made in reliance upon and in conformity with information
furnished in writing by the Company to the Fund or the
Investment Manager for use in the Fund Registration Statement,
Fund Prospectus (or any amendment or supplement thereto) or
sales literature for the Fund or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the
Investment Manager, the Fund or the Distributor (other than
statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the
Investment Manager or the Fund or persons under their control)
or wrongful conduct of the Investment Manager or persons under
its control with respect to the sale or distribution of the
Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contracts
Registration Statement, Contracts Prospectus or sales
literature or other promotional material for the Contracts (or
any amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made, if such statement or omission was made in reliance
upon information furnished in writing by the Investment
Manager or the Fund to the Company (or a person authorized in
writing to do so on behalf of the Fund or the Investment
Manager); or
(d) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including, but not by way of limitation, a failure,
whether unintentional or in good faith or otherwise: (i) to
comply with the diversification requirements specified in
Article VI of this Agreement; and (ii) to provide the Company
with accurate information sufficient for it to calculate its
accumulation and/or annuity unit values in timely fashion as
required by law and by the Contracts Prospectuses); or
(e) arise out of any material breach by the Investment Manager
or the Fund of this Agreement.
This indemnification will be in addition to any liability which the Investment
Manager may otherwise have; provided, however, that no party shall be entitled
to indemnification if such loss,
14
<PAGE>
claim, damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant, and the terms hereof shall be limited, interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
15
<PAGE>
(a) at the option of any party upon six months advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of
notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of each Account,
the administration of the Contracts or the purchase of Fund
shares, or an expected or anticipated ruling, judgment or
outcome which would, in the Fund's reasonable judgment,
materially impair the Company's ability to perform the
Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment
Manager or any Sub-Investment Manager, by the NASD, the SEC,
or any state securities or insurance commission or any other
regulatory body regarding the duties of the Fund or the
Distributor under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment, materially impair the Fund's or
the Distributor's ability to perform Fund's or Distributor's
obligations and duties hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or any
Sub-Investment Manager by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory
body which would, in the good faith opinion of the Company,
result in material harm to the Accounts, the Company, or
Contract owners.
(f) upon requisite vote of the Contract owners having an
interest in the affected Fund (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of the Fund in accordance with the terms
of the Contracts; or
(g) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance
with applicable Federal and/or state law; or
(h) at the option of the Company or the Fund upon a
determination by a majority of the Trustees, or a majority of
disinterested Trustees, that an irreconcilable material
conflict exists among the interests of (i) any Product owners
16
<PAGE>
or (ii) the interests of the Participating Insurance Companies
investing in the Fund; or
(i) at the option of the Company if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the
Code, or under any successor or similar provision, or if the
Company reasonably believes, based on an opinion of its
counsel, that the Fund may fail to so qualify; or
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of
the Code and any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(l) at the option of either the Fund or the Distributor if the
Fund or the Distributor, respectively, shall determine, in
their sole judgment exercised in good faith, that either (1)
the Company shall have suffered a material adverse change in
its business or financial condition; or (2) the Company shall
have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of either the Fund or the Distributor; or
(m) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that
either: (1) the Fund and the Distributor, or either of them,
shall have suffered a material adverse change in their
respective businesses or financial condition; or (2) the Fund
or the Distributor, or both of them, shall have been the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
the Company;or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to
another insurance company pursuant to an assumption
reinsurance agreement) unless the non-assigning party consents
thereto or unless this Agreement is assigned to an affiliate
of the Distributor.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties to
this Agreement of its intent to terminate which notice shall set forth the basis
for such termination. Furthermore:
(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
17
<PAGE>
(b) In the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement,
such prior written notice shall be given at least ninety (90)
days before the effective date of termination, or sooner if
required by law or regulation.
(c) in the event that any termination is based upon the
provisions of Section 10.1(e) of this Agreement, such prior
written notice shall be given at least sixty (60) days before
the date of any proposed vote to replace the Fund's shares.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 of this Agreement, the Fund and the
Distributor will, at the option of the Company, continue to
make available additional Fund shares for so long after the
termination of this Agreement as the Company desires, pursuant
to the terms and conditions of this Agreement as provided in
paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, if the Company so elects to make additional Fund
shares available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so, shall
be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing
Contracts.
(b) In the event of a termination of this Agreement pursuant
to Section 10.1 of this Agreement, the Fund and the
Distributor shall make Fund shares available pursuant to
Section 10.3(a) above. However, Fund and Distributor in the
event of negative financial impact to either, may notify
Company in writing of their intent to cease offering Fund
Shares to Company. Fund and Distributor agree to continue to
offer such Fund shares for a period of twelve months from the
date of such written notice, or until Company receives a valid
SEC Substitution Order allowing the movement of assets to
another fund, and the Company is able to effectuate such
substitution, whichever is sooner.
(c) The parties agree that this Section 10.3 shall not apply
to any termination made pursuant to Article VII or any
conditions or undertakings incorporated by reference in
Article VII, and the effect of such Article VII termination
shall be governed by the provisions set forth or incorporated
by reference therein.
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
18
<PAGE>
contracts and variable life insurance policies to be issued by the Company
through a Separate Account investing in the Fund. The provisions of this
Agreement shall be equally applicable to each such class of contracts or
policies, unless the context otherwise requires.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Liberty Variable Investment Trust
One Financial Center
Boston, MA 02111
Attn: Secretary
If to the Company:
Lincoln Life & Annuity Company of New York
120 Madison Street
Suite 1700
Syracuse, NY 13202
Attn: Troy Panning
If to the Investment Manager:
Liberty Advisory Services Corp.
125 High Street
Boston, MA 02110
Attn: President
If to the Distributor:
Liberty Funds Distributors, Inc.
One Financial Center
Boston, MA 02111
Attn: President
With a copy to: General Counsel
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.
19
<PAGE>
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LIBERTY VARIABLE INVESTMENT TRUST (FUND)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK(Company)
Date: Signature:
-----------------------------------------------
Name: Troy D. Panning
Title: CFO/2nd Vice President
LIBERTY FUNDS DISTRIBUTOR, INC. (DISTRIBUTOR)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
LIBERTY ADVISORY SERVICES CORPORATION (INVESTMENT MANAGER)
Date: Signature:
-----------------------------------------------
Name:
---------------------------------------------------
Title:
---------------------------------------------------
21
<PAGE>
SCHEDULE 1
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Series of the Fund
As of February 1, 2000
<TABLE>
<CAPTION>
Company Separate Account(s)/Date Authorized Eligible Variable Series of the Fund
- ------------------------------------------- ------------------------------------
<S> <C>
Lincoln Life Variable Annuity Account N Newport Tiger Fund, Variable Series
</TABLE>
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SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of February 1, 2000
Delaware-Lincoln ChoicePlus Variable Annuity (individual annuity)
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SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of February 1, 2000
None
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FUND PARTICIPATION AGREEMENT
BETWEEN
THE LINCOLN LIFE AND ANNUITY COMPANY OF NEW YORK
AND
LINCOLN NATIONAL BOND FUND, INC.
THIS AGREEMENT, made and entered into this day of ____, ____________
1998, by and between Lincoln National Bond Fund, Inc. a corporation organized
under the laws of Maryland (the "Fund"), and THE 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-lA 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
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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; and
WHEREAS, pursuant to Articles of Merger approved by the Company
in 1988, the Company succeeded to all the legal rights and responsibilities of
Lincoln National Pension Insurance Company, the signatory to the original
Agreement to Purchase Shares, which this Agreement amends and restates; and
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
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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.
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
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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.
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
4
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issued in compliance in all material respects with all applicable Federal and
state laws and (c) that the Company will require of every person distributing
the Contracts that the Contracts be offered and sold in compliance in all
material respects with all applicable Federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
authorized each Account as a separate account under Section 4240 of the New York
Insurance Law, and has registered or, prior to the issuance of any Contracts,
will register each Account (unless exempt therefrom) as a unit investment trust
in accordance with the provisions of the 1940 Act to serve as a separate account
for its Contracts, and that it will maintain such registrations for so long as
any Contracts issued under them are outstanding.
2.2. The Fund represents and warrants that 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
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in the event the fidelity bond coverage should lapse at any time.
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.
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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,
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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 Contract owners. (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
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and for underlying funds other than those of the Fund, then the Fund shall pay
only its proportionate share of the total cost to distribute the booklet to
existing Contract owners.)
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 Contract owners. 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 VlI. 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
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any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
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
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resolution and the other party has failed to participate,
the requesting party may initiate arbitration before
expiration of the 60-day period set out just above.
If within 45 days of the commencement of the process to
select an arbitrator the parties cannot agree upon the
arbitrator, then he or she will be selected from the 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
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which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained
in the Contracts Registration Statement, Contracts
Prospectus, sales literature or other promotional material
for the Contracts or the Contracts themselves (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made; provided that this obligation to indemnify shall
not apply if such statement or omission or such alleged
statement or alleged omission was made in reliance upon and
in conformity with information furnished in writing to the
Company by the Fund (or 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
12
<PAGE>
(f) arise as a result of the Company's providing the
Fund with inaccurate information, which causes the Fund to
calculate its Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE 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
13
<PAGE>
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
(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
14
<PAGE>
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
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 subinvestment advisor, by the NASD, the SEC, or any
state securities or insurance
15
<PAGE>
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
(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
16
<PAGE>
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.
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
17
<PAGE>
termination shall be governed by the provisions set forth or
incorporated by reference therein.
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 Bond 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 Amended and Restated 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 BOND FUND, INC.
Signature:
--------------------------------------------
Name: Kelly D. Clevenger
-------------------------------------------------
Title: President
------------------------------------------------
LINCOLN LIFE ANNUITY COMPANY OF NEW YORK (Company)
Signature:
--------------------------------------------
Name: Phillip Holstein
-------------------------------------------------
#78396 Title: President & CEO, Lincoln Life & Annuity Company
of New York
------------------------------------------------
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of
-----------------
LLANY ACCOUNT Q VARIABLE ANNUITY
19
<PAGE>
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of
----------------
GROUP MULTI FUND
<PAGE>
AMENDMENT TO
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of October 15, 1999
LLANY ACCOUNT Q VARIABLE ANNUITY
LLANY SEPARATE ACCOUNT R
95161/21FD01!.DOC
<PAGE>
AMENDMENT TO
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of October 15, 1999
GROUP MULTI FUND
LLANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE - SVUL
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Signature:
---------------------------------
Name: Kelly D. Clevenger
--------------------------------------
Title: President
-------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Signature
----------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
95161/21FD01!.DOC
<PAGE>
AMENDMENT TO
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of February 15, 2000
LINCOLN NEW YORK ACCOUNT Q VARIABLE ANNUITIES
LLANY SEPARATE ACCOUNT R
LINCOLN NEW YORK ACCOUNT N FOR VARIABLE ANNUITIES
95161/21FD01!.DOC
<PAGE>
AMENDMENT TO
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of February 15, 2000
GROUP MULTI FUND
LLANY FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE - SVUL
DELAWARE-LINCOLN NEW YORK CHOICE PLUS VARIABLE ANNUITY
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
Date: LINCOLN NATIONAL BOND FUND, INC.
---------------
By:
----------------------------------------
Kelly D. Clevenger
President
Date: LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
---------------
By:
----------------------------------------
Troy D. Panning
CFO/2nd Vice President
95161/21FD01!.DOC
<PAGE>
AMENDMENT TO
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of May 1, 2000
LINCOLN LIFE & ANNUITY FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN NEW YORK SEPARATE ACCOUNT N FOR VARIABLE ANNUITIES
LLANY ACCOUNT Q FOR VARIABLE ANNUITIES
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LLANY SEPARATE ACCOUNT S FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
95161/21FD01!.DOC
<PAGE>
AMENDMENT TO
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 2000
GROUP MULTI FUND
LINCOLN SVUL
LINCOLN SVUL II
DELAWARE-LINCOLN NEW YORK CHOICE PLUS VARIABLE ANNUITY
LINCOLN CVUL
LINCOLN CVUL SERIES III
LINCOLN VUL
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Signature:
---------------------------------
Kelly D. Clevenger
President
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Signature:
---------------------------------
Troy D. Panning
CFO/2nd Vice President
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated
November 2, 1998, by and among Lincoln Life & Annuity Company of New York and
Lincoln National Bond Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered
each Account with the SEC (unless exempt therefrom) as a unit investment trust
under the 1940 Act before any Contracts are issued by that Account; and"
Page 4, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the
Contracts will be issued in compliance in all material respects
with all applicable Federal and state laws and (c) that the
Company will require of every person distributing the Contracts
that the Contracts be offered and sold in compliance in all
material respects with all applicable Federal and state laws. The
Company further represents and warrants that it is an insurance
company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a
separate account under Section 4240 of the New York Insurance
Law, and has registered or, prior to the issuance of any
Contracts, will register each Account (unless exempt therefrom)
as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a separate account for its Contracts,
and that it will maintain such registrations for so long as any
Contracts issued under them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Date: By:
--------------- --------------------------------------
Name: Kelly D. Clevenger
------------------------------------
Title: President
-----------------------------------
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
Date: By:
--------------- --------------------------------------
Name: Joanne B. Collins
------------------------------------
Title: President
-----------------------------------
<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 25th day of September, 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-lA 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
1
<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.
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
2
<PAGE>
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.
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
3
<PAGE>
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 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
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<PAGE>
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.
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
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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.
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.
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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, 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
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<PAGE>
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.)
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
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<PAGE>
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.
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
9
<PAGE>
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.
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
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<PAGE>
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:
(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
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<PAGE>
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.
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
12
<PAGE>
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
(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
13
<PAGE>
by the party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of 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:
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<PAGE>
(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
(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
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<PAGE>
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.
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
16
<PAGE>
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.
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
17
<PAGE>
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.
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.
18
<PAGE>
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
-------------------------------
SCHEDULE 1
Lincoln National Money Market Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of September 25, 1998
LLANY FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LLANY ACCOUNT Q VARIABLE ANNUITY
LLANY ACCOUNT R FOR VARIABLE LIFE
19
<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 September 25, 1998
VUL I
GROUP MULTI FUND
SVUL I
AMENDMENT TO
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 October 15, 1999
VUL I
GROUP MULTI FUND
SVUL
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
<PAGE>
LINCOLN NATIONAL MONEY MARKET FUND, INC.
Signature: /s/ Kelly D. Clevenger
----------------------------------------
Name: Kelly D. Clevenger
--------------------------------------------
Title: President
-------------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Signature: /s/ Troy D. Panning
----------------------------------------
Name: Troy D. Panning
--------------------------------------------
Title: CFO/2nd Vice President
-------------------------------------------
<PAGE>
AMENDMENT TO
SCHEDULE 1
Lincoln National Money Market Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of February 15, 2000
LINCOLN LIFE & ANNUITY FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN NEW YORK ACCOUNT Q VARIABLE ANNUITIES
LLANY SEPARATE ACCOUNT R
LINCOLN NEW YORK ACCOUNT N FOR VARIABLE ANNUITIES
<PAGE>
AMENDMENT TO
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 February 15, 2000
VUL I
GROUP MULTI FUND
SVUL
DELAWARE-LINCOLN NEW YORK CHOICE PLUS VARIABLE ANNUITY
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
Date: LINCOLN NATIONAL MONEY MARKET FUND, INC.
------------
By: /s/ Kelly D. Clevenger
-------------------------
Kelly D. Clevenger
President
Date: 12-15-99 LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
-------------
By: /s/ Troy D. Panning
-------------------------
Troy D. Panning
CFO/2nd Vice President
<PAGE>
AMENDMENT TO
SCHEDULE 1
Lincoln National Money Market Fund, Inc.
Separate Accounts of Lincoln Life & Annuity Company of New York
Investing in the Fund
As of May 1, 2000
LINCOLN LIFE & ANNUITY FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN NEW YORK SEPARATE ACCOUNT N FOR VARIABLE ANNUITIES
LLANY ACCOUNT Q FOR VARIABLE ANNUITIES
LLANY SEPARATE ACCOUNT R FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
LLANY SEPARATE ACCOUNT S FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<PAGE>
AMENDMENT TO
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 May 1, 2000
VUL I
GROUP MULTI FUND
LINCOLN SVUL
LINCOLN SVUL II
DELAWARE-LINCOLN NEW YORK CHOICEPLUS VARIABLE ANNUITY
LINCOLN VUL
LINCOLN CVUL
LINCOLN CVUL SERIES III
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 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:
----------------------------------------
Kelly D. Clevenger
President
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Signature:
----------------------------------------
Troy D. Panning
CFO/2nd Vice President
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated November 2, 1998, by
and among Lincoln Life & Annuity Company of New York and Lincoln National Money
Market Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each Account
with the SEC (unless exempt therefrom) as a unit investment trust under the 1940
Act before any Contracts are issued by that Account; and"
Page 4, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the Contracts will
be issued in compliance in all material respects with all applicable
Federal and state laws and (c) that the Company will require of every
person distributing the Contracts that the Contracts be offered and sold
in compliance in all material respects with all applicable Federal and
state laws. The Company further represents and warrants that it is an
insurance company duly organized and validly existing under applicable
law and that it has legally and validly authorized each Account as a
separate account under Section 4240 of the New York Insurance Law, and
has registered or, prior to the issuance of any Contracts, will register
each Account (unless exempt therefrom) as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a separate
account for its Contracts, and that it will maintain such registrations
for so long as any Contracts issued under them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation 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.
Date: 9-16-99 By: /s/ Kelly D. Clevenger
------------ --------------------------------
Name: Kelly D. Clevenger
-----------------------------
Title: President
----------------------------
LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK
Date: 9-16-99 By: /s/ Joanne B. Collins
------------ --------------------------------
Name: Joanne B. Collins
-----------------------------
Title: President
----------------------------
<PAGE>
April 24, 2000
EXHIBIT 9
VIA EDGAR
- ---------
Securities and Exchange Commission
Division of Investment Management
Office of Insurance Products
450 Fifth Street, N.W.
Washington, DC 20549
Re: Lincoln Life & Annuity Separate Account N for Variable Annuities
Initial Registration
Opinion and Consent of Counsel
Ladies and Gentlemen:
I have recently made such examination of law and have examined such
records and documents as I have deemed necessary to render the opinion
expressed below.
I am of the opinion that upon acceptance by Lincoln Life & Annuity
Separate Account N for Variable Annuities (the "Account"), a segregated
account of Lincoln Life & Annuity Company of New York ("LNY"), of
contributions from a person pursuant to an annuity contract issued in
accordance with the prospectus contained in this amended Registration
Statement on Form N-4, and upon compliance with applicable law, such person
will have a legally issued interest in his or her individual account with the
Account, and the securities issued will represent binding obligations of LNY.
I consent to the filing of this Opinion as an exhibit to the Account's
Initial Registration Filing to the Registration Statement on Form N-4.
Very truly yours,
/s/ Robert O. Sheppard
Robert O. Sheppard
ROS/jlk
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Pre Effective Amendment No. 1 to the Registration Statement (Form N-4 No.
333-93875) and the related Statement of Additional Information appearing therein
and pertaining to Lincoln New York Account N for Variable Annuities, and to the
use therein of our report dated March 10, 2000, with respect to the
statutory-basis financial statements of Lincoln Life & Annuity Company of New
York.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
April 24, 2000
<PAGE>
EXHIBIT 13
NON-STANDARDIZED QUOTATIONS
This schedule presents the formulas and calculations employed in producing
non-standardized investment results. Amount and Compound Growth Rate
calculations are shown for all base periods disclosed.
The formula for calculating the current Amount of an originally invested
$10,000 for a particular base period is:
CP - (X/Y) * $10,000
where:
CP= Amount at End of Base Period
X= Accumulation Unit Value at End of Base Period
Y= Accumulation Unit Value at Beginning of Base Period
The formula for calculating the Compound Growth Rate for a particular base
period is:
(1/N)
GR = (X/Y) - 1
Where:
GR= Annualized Return
X= Accumulation Unit Value at End of Base Period
Y= Accumulation Unit Value at Beginning of Base Period
N= Number of Years of Fund Performance Being Evaluated
Separate Account N - Standardized 1 Year Returns
ONE YEAR RETURNS PERIOD ENDING 6/30/00
<TABLE>
<CAPTION>
Bond
<S> <C>
Fund Value $1,097.60
Surr Charge $ 60.00
Final Value $1,037.60
Annual Return 3.76%
</TABLE>
Calculation of Annual Return
<PAGE>
Final Value = 1,000 * (6/30/00 Unit Value / 6/30/99 Unit Value)
Surrender Charge
Annual Return = Final Value / 1,000 - 1
Unit Value
<TABLE>
<CAPTION>
Date Bond
- ---- ----
<S> <C>
6/30/99 4.181866
6/30/00 4.590005
</TABLE>
FIVE YEAR RETURNS PERIOD ENDING 6/30/00
<TABLE>
<CAPTION>
Bond
<S> <C>
One Year $ 979.21
Two Year $1,083.46
Three Year $1,115.06
Four Year $1,186.36
Five Year $1,302.15
</TABLE>
Calculation of Annual Return
Final Value Year One = 1,000 * (6/30/96 Unit Value / 6/30/95 Unit Value)
Final Value Year Two = Final Value Year One * (6/30/97 Unit Value / 6/30/96 Unit
Value)
Final Value Year Three = Final Value Year Two * (6/30/98 Unit Value / 6/30/97
Unit Value)
Final Value Year Four = Final Value Year Three * (6/30/99 Unit Value / 6/30/98
Unit Value)
Final Value Year Five = Final Value Year Four * (6/30/00 Unit Value / 6/30/99
Unit Value)
Annual Return = (Final Value Year Five / 1000) * (1/5) - 1
<PAGE>
Unit Values
<TABLE>
<CAPTION>
Date Bond
- ---- ----
<S> <C>
6/30/95 3.524949
6/30/96 3.451666
6/30/97 3.819158
6/30/98 3.930525
6/30/99 4.181866
6/30/00 4.590005
</TABLE>
Separate Account N - Standardized 10 Year Returns
TEN YEAR/LIFETIME RETURNS PERIOD ENDING 6/30/00
<TABLE>
<CAPTION>
Bond
<S> <C>
One Year $1,099.07
Two Year $1,152.51
Three Year $1,251.98
Four Year $1,420.15
Five Year $1,591.95
Six Year $1,558.86
Seven Year $1,724.82
Eight Year $1,775.12
Nine Year $1,888.63
Ten Year $2,072.96
Surr Charge 0.00
Final Value $2,072.96
Annual Return 7.56%
</TABLE>
<PAGE>
Separate Account N - Standardized 10 Year/Lifetime Returns
Calculation of Annual Return
For the Bond Fund
Final Value Year One = 1,000 * (6/30/91 Unit Value / 6/30/90 Unit Value)
Final Value Year Two = Final Value Year One * (6/30/92 Unit Value / 6/30/91 Unit
Value)
Final Value Year Three = Final Value Year Two * (6/30/93 Unit Value / 6/30/92
Unit Value)
Final Value Year Four = Final Value Year Three * (6/30/94 Unit Value / 6/30/93
Unit Value)
Final Value Year Five = Final Value Year Four * (6/30/95 Unit Value / 6/30/94
Unit Value)
Final Value Year Six = Final Value Year Five * (6/30/96 Unit Value / 6/30/95
Unit Value)
Final Value Year Seven = Final Value Year Six * (6/30/97 Unit Value / 6/30/96
Unit Value)
Final Value Year Eight = Final Value Year Seven * (6/30/98 Unit Value / 6/30/97
Unit Value)
Final Value Year Nine = Final Value Year Eight * (6/30/99 Unit Value / 6/30/98
Unit Value)
Final Value Year Ten = Final Value Year Nine * (6/00 Unit Value / 6/30/99 Unit
Value)
Annual Return = (Final Value Year Ten / 1,000 * (1/10) - 1
Unit Values
<TABLE>
<CAPTION>
Date Bond
- ---- ----
<S> <C>
6/30/90 2.214231
6/30/91 2.433591
6/30/92 2.551916
6/30/93 2.772179
6/30/94 3.144542
<PAGE>
6/30/95 3.524949
6/30/96 3.451666
6/30/97 3.819158
6/30/98 3.930525
6/30/99 4.181866
6/30/00 4.590005
</TABLE>
Period (in years) 10.0000
Non-Standardized Performance - Separate Account N
Accumulated Amounts
<TABLE>
<CAPTION>
Base Period
Years Start Date End Date Bond
<S> <C> <C> <C>
1 6/30/99 6/30/00 $1,097.60
2 6/30/98 6/30/99 $1,167.78
3 6/30/97 6/30/98 $1,201.84
4 6/30/96 6/30/97 $1,329.79
5 6/30/95 6/30/96 $1,302.15
Life $4,590.01
</TABLE>
Accumulated Amounts = (End Date Unit Value / Start Date Unit Value * 1,000
Compound Growth Rates
<TABLE>
<CAPTION>
Base Period
Years Start Date End Date Bond
<S> <C> <C> <C>
1 6/30/99 6/30/00 9.76%
2 6/30/98 6/30/99 8.06%
3 6/30/97 6/30/98 8.32%
4 6/30/96 6/30/97 7.39%
5 6/30/95 6/30/96 5.42%
Life 9.67%
</TABLE>
One Year Return = 6/30/00 Unit Value / 6/30/99 Unit Value - 1
Two Year Return = 6/30/00 Unit Value / 6/30/98 Unit Value - (1/2) - 1
Three Year Return = 6/30/00 Unit Value / 6/30/97 Unit Value - (1/3) - 1
Four Year Return = 6/30/00 Unit Value / 6/30/96 Unit Value - (1/4) - 1
Five Year Return = 6/30/00 Unit Value / 6/30/95 Unit Value - (1/5) - 1
Life Return = 6/30/00 Unit Value/Inception Date Unit Value) - (1/period) - 1
Non-Standardized Performance - Separate Account N
<PAGE>
Unit Values
<TABLE>
<CAPTION>
Date Bond
- ---- ----
<S> <C>
6/30/00 4.590005
6/30/99 4.181866
6/30/98 3.930525
6/30/97 3.819158
6/30/96 3.451666
6/30/95 3.524949
</TABLE>
Life Return
<TABLE>
<S> <C>
Inception Date/Start Date 12/28/81
Unit Value 1.000000
Period (Years) 19.5055
</TABLE>
<PAGE>
PC Docs 12752 3/8/99
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
|
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life|
| | assurance & pension products |
|
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| |
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| |
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| | | Financial Investment Services, Inc. |
| |--| (fka Financial Services Department, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| | | Financial Investments, Inc. |
| |--| (fka Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| |
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| |
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| |
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
|
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
|
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (fka Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Lincoln Financial Advisors Corporation |
| | | (fka LNC Equity Sales Corporation) |
| | | 100% - Indiana - Broker-Dealer |
| |
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | | Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | | 80%-100% of the common stock (see Attachment #1). These |
| | | subsidiaries serve as the corporate agency offices for the |
| | | marketing and servicing of products of The Lincoln National |
| | | Life Insurance Company. Each subsidiary's assets are less |
| | | than 1% of the total assets of the ultimate controlling |
| | | person. |
| |
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
|
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
|
|
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
|
|
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |--| Delaware International Advisers Ltd.|
| | | | | 81.1% - England - Investment Advisor |
| | |
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service|
| | | |
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Mktg & Admin Services|
| | | | |
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Holding Company |
| | | | | | ________________________________________
| | | | | |--|Delaware Management Business Trust |
| | | | | | |100% - Delaware - Investment Advisor |
| | | | | | |consists of: |
| | | | | | |Delaware Management Company Series |
| | | | | | | and Delaware Investment Advisers
Series |
| | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-MutualFund Distrib. |
| | | | | | |& Broker/Dealer |
| | | | | | |1%Equity-Delaware Capital |
| | | | |Management, Inc. |
| | | | |1% Equity-Delaware Distributors, |
| | | | |Inc.(G.P) |
| | | | | |
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General
| | | | | | | Partner |
| | | | | |
| | | | | |--| Founders CBO, L.P. |
| | | | | | |1%-Delaware-Investment |
| | | | | | | Partnership |
| | | | | | |99% held by outside |
| | | | | | |investors |
| | | | | |
| | | | | |--|Founders CBO Corporation|
| | | | |100%-Delaware-Co-Issuer |
| | | | |with Founders CBO |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Distributors, Inc.
| | | | | | | 100% - Delaware - General Partner |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-Mutual Fund Distributor & |
| | | | | | |Broker/Dealer |
| | | | | |1% Equity-Delaware Capital |
| | | | | |Management, Inc. |
| | | | | |1% Equity-Delaware Distributors, Inc.|
| | | | | |(G.P) |
| | | | | |
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(fka Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & |
Broker/Dealer |
| | | | | | |1% Equity-Delaware Capital
| | | | | | | Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, |
| | | | | | | Inc. |
| | | | |--| Delaware Service Company, Inc. |
| | | | |100%-Delaware-Shareholder Services & |
| | | | |Transfer Agent |
| | | | | |
| | | | |__| Retirement Financial Services, Inc. |
| | | | | |(fka Delaware Investment & Retirement
| | | | | | Services,Inc.) |
| | | | | | 100% - Delaware - Registered Transfer
| | | | | | Agent & I/A |
| | |
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | |
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | |
| | | | Vantage Global Advisors, Inc. |
| | |--| (fka Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| | | Lincoln Investment Management, Inc. |
| |--| (fka Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| |--|AnnuityNet, Inc. |
| | | 100% - Indiana - Distribution of annuity products|
| | |
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| |
| |--|Lincoln National Insurance Associates, Inc.|
| | | (fka Cigna Associates, Inc.) |
| | | 100% - Connecticut - Insurance Agency |
| | |
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | | 100% - Alabama - Insurance Agency |
| | |
| | | | Lincoln National Insurance Associates of Massachusetts,|
| | | | Inc. (fka Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| |
| |--|Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| |
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| |
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (fka Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (fka Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| |
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| |
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| |
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
|
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
|
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
|
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Reinsurance Company Limited |
| | (fka Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| |
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
|
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
|
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Allied Westminster & Company Limited |
| | | (fka One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| |
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| |
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| |
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| |
| |--| Lincoln Financial Advisers Limited |
| | | (fka: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln ISA Management Limited |
| | | | (fka Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln Milldon Limited |
| | | |(fka: Laurentian Milldon Limited) |
| | | | 100% - England/Wales - Sales Company |
| | |
| | |--| Laurtrust Limited |
| | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | |
| | |--| Lincoln Management Services Limited |
| | | |(fka: Laurentian Management Services Limited) |
| | | | 100% - England/Wales - Management Services |
| | | |
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| |
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| |
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | |
| | |--| UK Mortgage Securities Limited |
| | | | 100% - England/Wales - Inactive |
| |
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| |
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | | |
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | |
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | |
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | |
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment
| | | | |(Inactive) |
| | | |
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | |
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | |
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension |
| | | | | Fund (Inactive) |
| | | |
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| | |
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | |
| |--| LIV Limited (fka Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | |
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| |
| |--| Lincoln Independent Limited |
| | |(fka: Laurentian Independent Financial Planning Ltd.) |
| | | 100% - England/Wales - Independent Financial Adviser |
| | |
| |--| Lincoln Investment Management Limited |
| | |(fka: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| |
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| |
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| |
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| |
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| |
| |--| Lincoln Independent (Jersey) Limited |
| | | (fka Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
| | Linsco Reinsurance Company |
|--| (fka Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
|
|
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| |
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | |
| | |--|Solutions Reinsurance Limited |
| | | | 100% - Bermuda - Class III Insurance Co|
|
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
|
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
|
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
Footnotes:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(fka: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (fka: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (fka: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act ast Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (fka Laurentian
Financial Group PLC); Lincoln Milldon Limited (fka Laurentian Milldon
Limited); Lincoln Management Services Limited (fka Laurentian Management
Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN LIFE NEW YORK SEPARATE ACCOUNT N FOR VARIABLE ANNUITIES
RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940
Records to Be Maintained by Registered Investment Companies, Certain
Majority-Owned Subsidiaries Thereof, and Other Persons Having Transactions with
Registered Investment Companies.
Reg. 270.31a-1. (a) Every registered investment company, and every underwriter,
broker, dealer, or investment advisor which is a majority-owned subsidiary of
such a company, shall maintain and keep current the accounts, books, and other
documents relating to its business which constitute the record forming the basis
for financial statements required to be filed pursuant to Section 30 of the
Investment Company Act of 1940 and of the auditor's reports relating thereto.
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
Annual Reports Finance Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual Finance Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR Finance Eric Jones Permanently, the first two
years in an easily accessible
place
</TABLE>
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
TYPE OF RECORD
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and quantity
of securities, the unit and aggregate purchase or sale price, commission paid,
the market on which effected, the trade date, the settlement date, and the name
of the person through or from whom purchased or received or to whom sold or
delivered.
PURCHASES AND SALES JOURNALS
<TABLE>
<S> <C> <C> <C>
Daily reports CSRM Nancy Alford Permanently, the first two
of securities Finance Eric Jones years in an easily accessible
transactions place
PORTFOLIO SECURITIES
C-Port Purchase/ Finance Eric Jones Permanently, the first two
Sales Reports years in an easily accessible
place
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
RECEIPTS AND DELIVERIES OF SECURITIES (UNITS)
Not Applicable.
PORTFOLIO SECURITIES
Not Applicable.
RECEIPTS AND DISBURSEMENTS OF CASH AND OTHER DEBITS AND CREDITS
Daily Journals CSRM Nancy Alford Permanently, the first two
Finance Eric Jones years in an easily accessible
place
</TABLE>
(2) General and auxiliary ledgers (or other record) reflecting all asset,
liability, reserve, capital, income and expense accounts, including:
(i) Separate ledger accounts (or other records) reflecting the following:
(a) Securities in transfer;
(b) Securities in physical possession;
(c) Securities borrowed and securities loaned;
(d) Monies borrowed and monies loaned (together with a record of the
collateral therefore and substitutions in such collateral);
(e) Dividends and interest received;
(f) Dividends receivable and interest accrued.
Instructions. (a) and (b) shall be stated in terms of securities quantities
only; (c) and (d) shall be stated in dollar amounts and securities quantities as
appropriate; (e) and (f) shall be stated in dollar amounts only.
GENERAL LEDGER
<TABLE>
<S> <C> <C> <C>
LNL trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
SECURITIES IN TRANSFER
Not Applicable.
SECURITIES IN PHYSICAL POSSESSION
Not Applicable.
SECURITIES BORROWED AND LOANED
Not Applicable.
MONIES BORROWED AND LOANED
Not Applicable.
DIVIDENDS AND INTEREST RECEIVED
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
DIVIDENDS RECEIVABLE AND INTEREST ACCRUED
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
</TABLE>
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
LEDGER ACCOUNT FOR EACH PORTFOLIO SECURITY
<TABLE>
<S> <C> <C> <C>
Daily Report Finance Eric Jones Permanently, the first two
Of Securities years in an easily accessible
Transaction (Daily place
Trade File)
</TABLE>
(iii) Separate ledger accounts (or other records) for each broker-dealer, bank
or other person with or through which transactions in portfolio securities are
affected, showing each purchase or sale of securities with or through such
persons, including details as to the date of the purchase or sale, the quantity
and unit and aggregate prices of such securities, and the commissions or other
compensation paid to such persons. Purchases or sales effected during the same
day at the same price may be aggregated.
Not Applicable.
(iv) Separate ledger accounts (or other records), which may be maintained by a
transfer agent or registrar, showing for each shareholder of record of the
investment company the number of shares of capital stock of the company held in
respect of share accumulation accounts (arising from periodic investment plans,
dividend reinvestment plans, deposit of issued shares by the owner thereof,
etc.), details shall be available as to the dates and number of shares of each
accumulation, and except with respect to already issued shares deposited by the
owner thereof, prices of each such accumulation.
SHAREHOLDER ACCOUNTS
<TABLE>
<S> <C> <C> <C>
Master file Finance Eric Jones Permanently, the first two
Record (Daily CSRM Nancy Alford years in an easily accessible
Trade File & Leg place
Syst Client Rpt)
</TABLE>
(3) A securities record or ledger reflecting separately for each portfolio
security as of trade date all "long" and "short" positions carried by the
investment company for its own account and showing the location of all
securities long and the off-setting position to all securities short. The record
called for by this paragraph shall not be required in circumstances under which
all portfolio securities are maintained by a bank or banks or a member or
members of a national securities exchange as custodian under a custody agreement
or as agent for such custodian.
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
Not Applicable
</TABLE>
(4) Corporate charters, certificates of incorporation or trust agreements, and
bylaws, and minute books of stockholders' and directors' or trustees' meetings;
and minute books of directors' or trustees' committee and advisory board or
advisory committee meetings.
CORPORATE DOCUMENTS
<TABLE>
<S> <C> <C> <C>
Memorandum Legal Janet Lindenberg Permanently, the first two
Establishing SA years in an easily accessible
place
</TABLE>
(5) A record of each brokerage order given by or in behalf of the investment
company for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such record shall include the name of the broker, the
terms and conditions of the order and of any modification or cancellation
thereof, the time of entry or cancellation, the price at which executed, and the
time of receipt of report of execution. The record shall indicate the name of
the person who placed the order in behalf of the investment company.
ORDER TICKETS
<TABLE>
<S> <C> <C> <C>
UIT applica- CSRM Nancy Alford Six years, the first two
tions and Finance Eric Jones years in an easily accessible
daily reports place
of securities
transactions
</TABLE>
(6) A record of all other portfolio purchase or sales showing details comparable
to those prescribed in paragraph 5 above.
COMMERCIAL PAPER
Not Applicable.
(7) A record of all puts, calls, spreads, straddles, and other options in which
the investment company has any direct or indirect interest or which the
investment company has granted or guaranteed; and a record of any contractual
commitments to purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the purchase or
sale of securities, which may be cancelled by the company on notices without
penalty or cost of any kind); containing at least an identification of the
security, the number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
RECORD OF PUTS, CALLS, SPREADS, ETC.
Not Applicable.
(8) A record of the proof of money balances in all ledger accounts (except
shareholder accounts), in the form of trial balances. Such trial balances shall
be prepared currently at least once a month.
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
TRIAL BALANCE
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
</TABLE>
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph are
applicable to the extent they are not met by compliance with the requirements of
paragraph 4 of this Rule 31a1(b).
<TABLE>
<S> <C> <C> <C>
Advisory Legal Products and Distribution, Six years, the first two
Agreements LNL Law Division years in an easily accessible
place
</TABLE>
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
Not Applicable.
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
<TABLE>
<S> <C> <C> <C>
Correspondence CSRM Nancy Alford Six years, the first two
years in an easily accessible
place
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
Proxy State- CSRM Nancy Alford Six years, the first two
ments and years in an easily accessible
Proxy Cards place
Pricing Sheets Finance Eric Jones Permanently, the first two
years in an easily accessible
place
Bank State- Treasurers Rusty Summers Six years, the first two
ments years in an easily accessible
place
</TABLE>
September 24, 2000
