Exhibit 10. (j)

 

 

 

 

GRANTOR TRUST AGREEMENT

 

Dated as of March 19, 2007

 

and

 

Effective as of March 1, 2007

 

among

 

Lincoln Life & Annuity Company of New York

 

as Grantor

 

ING Life Insurance and Annuity Company

 

as Beneficiary

 

and

 

The Bank of New York

 

as Trustee

 

and

 

The Bank of New York

 

as Securities Intermediary

 

 

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TABLE OF CONTENTS

 

 

PAGE

 

Parties/Recitals

2

 

1.

Deposit of Assets to the Trust Account

3

 

2.

Withdrawal of Assets from the Trust Account

6

 

3.

Redemption, Investment and Substitution of Assets

9

 

4.

Crediting of Income

10

 

5.

Right to Vote Assets

10

 

6.

Additional Rights and Duties of the Trustee

10

 

7.

The Trustee's Compensation, Expenses, etc.

13

 

8.

Resignation or Removal of the Trustee

13

 

9.

Termination of the Trust Account

14

 

10.

Representations and Warranties

14

 

11.

Definitions

16

 

12.

Governing Law

18

 

13.

UCC

19

 

14.

Successors and Assigns

19

 

15.

Severability

19

 

16.

Entire Agreement

19

 

17.

Amendments

19

 

18.

Notices, etc.

19

 

19.

Headings

21

 

20.

Counterparts

21

 

2

 

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GRANTOR TRUST AGREEMENT

 

 

GRANTOR TRUST AGREEMENT, dated as of March 19, 2007 and effective as of March 1,
2007 (the "Effective Date") (the "Agreement"), by and among Lincoln Life &
Annuity Company of New York, a stock insurance company organized and existing
under the laws of and domiciled in the State of New York (hereinafter the
"Grantor"), ING Life Insurance and Annuity Company, a stock insurance company
organized and existing under the laws of and domiciled in the State of
Connecticut (such insurer and its successors by operation of law, including,
without limitation, any liquidator, rehabilitator, receiver or conservator
thereof, being hereinafter referred to as the "Beneficiary"), The Bank of New
York, a New York banking corporation as trustee and as secured party, for the
benefit of the Beneficiary (such bank, in its capacity as trustee and as secured
party, being referred to as the "Trustee"), and The Bank of New York, a New York
banking corporation, as securities intermediary, (such bank, in its capacity as
securities intermediary, being referred to as the "Securities Intermediary").

 

WITNESSETH:

 

WHEREAS, the Beneficiary (formerly named Aetna Life Insurance and Annuity
Company) is a party to the Coinsurance Agreement dated October 1, 1998, as
amended effective March 1, 2007 (as amended, the "LNL Coinsurance Agreement")
with The Lincoln National Life Insurance Company ("LNL"); and

WHEREAS, the Beneficiary is also a party to the Coinsurance Agreement dated
October 1, 1998, as amended effective March 1, 2007 (as amended, the "LLANY
Coinsurance Agreement") with the Grantor; and

WHEREAS, pursuant to an Assignment and Assumption Agreement dated the date of
this Agreement, the Grantor has succeeded to the interests of LNL under the LNL
Coinsurance Agreement (except as otherwise specified in the Assignment and
Assumption Agreement); and

WHEREAS, as consideration for the Beneficiary's consent to the assignment of the
LNL Coinsurance Agreement pursuant to the Assignment and Assumption Agreement,
the Grantor agreed to secure payment of the Secured Obligations; and

WHEREAS, the Grantor desires to establish with the Trustee a trust account (the
"Trust Account") and transfer to the Trustee for deposit in the Trust Account
cash and other Assets in an amount equal to the Required Amount in order to
secure and to fund payment of the Secured Obligations; and

WHEREAS, the Trustee has agreed to act as Trustee hereunder and, in accordance
with the terms hereof, to hold cash or other Assets in trust in the Trust
Account on the terms herein set forth.

 

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NOW, THEREFORE, for and in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:

 

1.

Deposit of Assets in the Trust Account: Security Interest

 

(a)          Effective as of the Effective Date and upon delivery of this
Agreement, the Grantor hereby establishes a Trust Account and the Trustee hereby
accepts the Trust Account herein created and declared upon the terms provided
herein and shall administer the Trust Account as Trustee and, with respect to
the security interest granted in Section 1 (h) hereof, as secured party for the
exclusive benefit of the Beneficiary. The Grantor shall establish and the
Trustee shall maintain the Trust Account as a securities account at The Bank of
New York as Securities Intermediary with regard to the Trust Account. The
Trustee shall be the entitlement holder with respect to the Trust Account. The
Trust Account shall be subject to withdrawal by the Beneficiary and the Grantor
as provided herein. The Trustee and its lawfully appointed successors are
authorized and shall have power to receive such cash and other Assets as the
Grantor transfers to or vests in the Trustee or places under the Trustee's
possession and control, and to hold, invest, reinvest, manage and dispose of the
same for the uses and purposes and in the manner and according to the provisions
hereinafter set forth. All such trusteed assets at all times shall be maintained
as a trust account, separate and distinct from all other assets of the Trustee,
and shall be continuously maintained by the Trustee.

 

(b)          Effective as of the Effective Date and upon delivery of this
Agreement, the Grantor will transfer to the Trustee, for deposit to the Trust
Account, cash and such other Assets as may be designated by the Grantor in an
amount equal to the Required Amount as of the calendar quarter immediately
preceding the Effective Date, which the Grantor and the Beneficiary agree is
USD$2,723,848,944. The initial Assets are listed on Exhibit A.

 

 

(c)

Within fifteen Business Days after the end of each calendar quarter:

 

(i)           the Grantor shall determine the Required Amount as of the last day
of the calendar quarter just ended. For purposes of this Agreement, the Required
Amount shall be determined by the Grantor in accordance with the standards for
calculating reserves set forth in Section 2.5 of the LNL Coinsurance Agreement
and Section 2.5 of the LLANY Coinsurance Agreement;

 

(ii)         if the Valuation Report for the Assets as of the last day of the
calendar quarter just ended shows that the fair market value of the Assets is
less than the Required Amount as of the last day of such quarter, then, within
five Business Days after the later to occur of receipt of the Valuation Report
and Grantor's determination of the Required Amount, the Grantor shall transfer
cash or other Assets to the Trust Account in an amount equal to such deficiency;

 

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(iii)         the Grantor shall provide both the Beneficiary and the Trustee a
certificate signed by an authorized officer of Grantor setting forth the amounts
described in (i) and (ii), if applicable, and including reasonable supporting
detail of such computations and certifying that the Assets in the Trust Account
comply with the Investment Policy.

 

 

(d)         To the extent that the Beneficiary disagrees with the Grantor's
calculation of the Required Amount or the certification that the Assets comply
with the Investment Policy, the Beneficiary shall notify both the Grantor and
the Trustee in writing within ten Business Days of the Beneficiary's receipt of
the certificate described in Section l(c)(iii). If the Beneficiary and the
Grantor resolve the dispute then Beneficiary will provide written notice of that
fact to Trustee within three Business Days of the resolution of the dispute. If
the Grantor and the Beneficiary cannot resolve the disagreement within ten
Business Days of the Beneficiary notifying the Grantor of its disagreement, such
dispute between the Beneficiary and the Grantor regarding the Grantor's
determination of the Required Amount shall be resolved pursuant to Article X of
the LNL Coinsurance Agreement. The Trustee shall have no duty, responsibility or
obligation whatsoever to participate in any such dispute resolution process
between the Beneficiary and the Grantor. If the resolution of any such dispute
results in the Required Amount being increased above the Grantor's
determination, then within five Business Days following such resolution, the
Grantor shall deposit into the Trust Account additional Assets in an amount
equal to such increase.

 

(e)          The Grantor hereby represents, warrants and covenants (i) that any
Assets transferred to the Trustee for deposit to the Trust Account will be in
such form that the Beneficiary, upon satisfaction of the conditions set forth in
Section 2 (a), and the Trustee, upon written direction by the Beneficiary, may
negotiate any such Assets without consent or signature from the Grantor or any
other person in accordance with the terms of this Agreement; and (ii) that all
Assets transferred to the Trustee for deposit to the Trust Account will consist
only of cash (United States legal tender) and Eligible Securities.

 

(f)           All Assets in the Trust Account shall be valued at their current
fair market value in U.S. dollars as determined by the Trustee exercised in a
reasonable manner as described below. Within ten Business Days after the end of
each month the Trustee shall send to the Beneficiary and the Grantor a written
report regarding the valuation of the Assets at the end of such month (the
"Valuation Report"). Each report shall include a fair market value valuation of
all Assets in the Trust Account in accordance with the asset prices provided by
the market makers or such other appropriate independent sources of valuation, by
an independent nationally recognized pricing service to which the Trustee
subscribes in the normal conduct of its business (e.g., Interactive Data,
Merrill Lynch, Bloomberg, Lehman Brothers Inc., etc.). The Trustee shall not be
liable for an incorrect fair market valuation of Assets caused by the use of
inaccurate or erroneous prices provided by such pricing services or sources. If
the price is not available as set forth above, the Trustee can obtain the price
by retaining, at the expense of the Grantor and pursuant to the written
recommendation of the Grantor's investment manager, a major independent
securities valuation

 

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firm to appraise the value of such Assets. If the Grantor or the Beneficiary
disputes the fair market value of the Assets in the Trust Account as set forth
in the Valuation Report, then within ten Business Days following receipt of the
Valuation Report, the Grantor or the Beneficiary, as the case may be, will
notify the other party of its dispute regarding the valuation (the "Valuation
Dispute Notice"). The Valuation Dispute Notice shall contain sufficient
information to support the disputing party's valuation. The Trustee shall not be
a party to any dispute between the Grantor and Beneficiary relating to the
valuation of Assets set forth in the Valuation Report, but shall be provided
with a copy of any Valuation Dispute Notice delivered by the Grantor or
Beneficiary under this provision. The non-disputing party has five Business Days
from the receipt of the Valuation Dispute Notice to agree with the disputing
party's valuation or provide its own reasonable valuation of the specific Assets
in dispute (the "Asset Response"). During no more than four Business Days after
the Asset Response, the parties to the dispute will continue to work to resolve
the disagreement, failing which they shall disclose to each other their final
and last best proposal ("Proposal" as hereinafter defined) no later than the end
of such four Business Day period. For purposes hereof, a "Proposal" of a party
to the dispute shall consist of the valuation correction and related information
supporting the valuation correction. If no resolution of disagreements is
reached on or prior to the Business Day following such four Business Days, the
parties to the dispute will on such next following Business Day submit their
final and last best Proposal (previously disclosed to the other party as
provided above) to arbitration by a major independent securities valuation firm,
the identity of which shall be mutually agreed, and the parties to the dispute
will abide by the result of such arbitration, which arbitration process shall
require the arbitrator to select one of the two final and last best Proposals.
The cost of such arbitration shall be shared equally by the Beneficiary and
Grantor. To the extent feasible, and at the joint written direction of the
Grantor and the Beneficiary, the Trustee shall adopt the valuation methodology
underlying the valuation adopted in arbitration or agreed to by the Beneficiary
and the Grantor.

 

(g)          Pending resolution of any dispute with respect to valuation of
Assets, the Grantor and Beneficiary will continue to follow the requirements of
this Agreement based on the Trustee's Valuation Report as submitted. Upon
resolution of any dispute regarding the valuation, the Trustee will take the
action hereunder that it would otherwise have been required to take, if any. If
resolution of any such dispute results in the fair market value of the Assets in
the Trust Account being less than the Required Amount, then, within five
Business Days of such resolution, the Grantor will transfer cash or other assets
to the Trust Account in an amount equal to such deficiency.

 

h)            In order to secure the timely and complete payment and performance
of each and all of the Grantor's Secured Obligations, the Grantor hereby grants
to the Trustee, as agent of and as secured party for the exclusive benefit of
the Beneficiary, a security interest in the Grantor's right, title and interest
in the Trust Account and the Assets (including without limitation any residual
interest therein). The Trustee, as entitlement holder for the benefit of the
Beneficiary of all rights associated with the Assets and the Trust Account,
shall have control (as defined in the UCC) of the

 

5

 

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Assets and Trust Account for the purpose of perfecting the interest granted
hereby and shall issue entitlement orders to the Securities Intermediary as
instructed by the Grantor and the Beneficiary in accordance with the terms of
this Agreement. The Grantor hereby authorizes the Beneficiary to file or to
instruct the Trustee to file UCC-I Financing Statements with respect to the
Trust Account and the Assets for which such a financing statement is
appropriate, and hereby appoints the Beneficiary as attorney-in-fact for the
purpose of signing Grantor's name on any such financing statements. The Trustee
shall, at the written direction of the Beneficiary, file the completed UCC-I
Financing Statements delivered to the Trustee by the Beneficiary with respect to
the Security Trust Account and the Assets.

 

2.

Withdrawal of Assets from the Trust Account.

 

(a)          The Beneficiary shall have the right, at any time and from time to
time, to instruct the Trustee to withdraw Assets from the Trust Account for the
reasons specified in Section 2(f) only, by providing written notice to both the
Grantor and the Trustee (the "Beneficiary Withdrawal Notice"), in an amount and
for the reason as are specified in such Beneficiary Withdrawal Notice. The
Beneficiary Withdrawal Notice may designate a party (the "Designee") other than
the Beneficiary to whom Assets specified therein shall be delivered. The
Beneficiary need present no statement or document in addition to a Beneficiary
Withdrawal Notice in order to withdraw any Assets. A copy of the form of the
Beneficiary Withdrawal Notice is attached as Exhibit B. Such Beneficiary
Withdrawal Notice shall be effective and shall be honored by the Trustee
promptly after delivery to the Trustee.

 

(b)          Upon a Beneficiary Withdrawal Notice becoming effective, the
Trustee shall immediately take any and all steps necessary to transfer,
absolutely and unequivocally, all right, title and interest in the Assets
specified in such Beneficiary Withdrawal Notice, and shall deliver such Assets
to or for the account of the Beneficiary or such Designee as specified in such
Beneficiary Withdrawal Notice.

 

(c)          If no Triggering Event has occurred and provided that any dispute
with Beneficiary as described in Sections I (d) or l(t) has been satisfactorily
resolved, then no more than once per quarter, the Grantor shall have the right
to instruct the Trustee to withdraw Assets from the Trust Account for the reason
specified in Section 2(g)(1) only, upon written notice to the Trustee (the
"Grantor Withdrawal Notice"), in the amount specified in such Grantor Withdrawal
Notice. The Grantor Withdrawal Notice may specify that the Assets are to be
delivered to itself, a Designee or the Beneficiary. The Grantor need present no
statement or document in addition to a Grantor Withdrawal Notice in order to
withdraw any assets. A copy of the Grantor Withdrawal Notice is attached as
Exhibit D. Such Grantor Withdrawal Notice shall be effective and shall be
honored by the Trustee promptly after the latest to occur of the following: (i)
the Grantor Withdrawal Notice is delivered to the Trustee; (ii) ten Business
Days after the Grantor provides the certificate described in Section I (c )(iii)
to both the Beneficiary and the Trustee if the Beneficiary has not objected in
writing as described in Section led) during that ten Business Day period; and
(iii) if

 

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the Trustee has received a written notice of disagreement from Beneficiary as
described in Section 1 (d), when the Trustee receives written notification from
the Beneficiary that the dispute has been resolved. As part of the Grantor
Withdrawal Notice, the Grantor shall certify that each withdrawal has been made
for the purposes specified in Section 2(g)(1). If a Beneficiary Withdrawal
Notice is outstanding when the Trustee receives a Grantor Withdrawal Notice,
then the Beneficiary Withdrawal Notice shall be honored first.

 

(d)          Upon a Grantor Withdrawal Notice becoming effective, the Trustee
shall immediately take any and all steps necessary to transfer the Assets
specified in such Grantor Withdrawal Notice, and shall deliver such Assets to or
for the account of the Grantor or such Designee as specified in such Grantor
Withdrawal Notice.

 

(e)          Except as expressly permitted by Section 3 of this Agreement, in
the absence of a Beneficiary or Grantor Withdrawal Notice, the Trustee shall not
allow substitutions or withdrawals of any Assets from the Trust Account.

 

(f)           The Beneficiary hereby covenants to the Grantor that it will use
and apply any withdrawn assets, without diminution because of the insolvency of
the Beneficiary or the Grantor, for the following purposes only:

 

(1)          to reimburse the Beneficiary for any Reinsured Liabilities under
the Policies and the Post Closing Policies reinsured under the LNL Coinsurance
Agreement or the LLANY Coinsurance Agreement paid by the Beneficiary to the
extent not paid by the Grantor when due;

 

(2)         to pay any amounts that are due to the Beneficiary under the LNL
Coinsurance Agreement or the LLANY Coinsurance Agreement to the extent not paid
directly to the Beneficiary by the Grantor when due;

 

(3)          to pay all or any portion of the Recapture Fee due in connection
with the recapture of the Policies and the Post Closing Policies under the LNL
Coinsurance Agreement or the LLANY Coinsurance Agreement; or

 

(4)          to pay any other amounts that are due to the Beneficiary under any
of the Ancillary Agreements.

 

(g)          The Grantor hereby covenants to the Beneficiary that it will remove
assets from the Trust Account for the following purposes only:

 

(1)          to reduce the amount held in the Trust Account by the excess, if
any, of the fair market value of the Assets as shown in the Valuation Report for
the Assets as of the

 

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last day of the calendar quarter just ended, over the Required Amount as of the
last day of such quarter in accordance with this Section 2; or

 

(2)          to substitute assets held in the Trust Account with other
securities of equivalent or higher value and equivalent or higher quality in
accordance with Section 3 of this Agreement.

 

(h)

Procedures for Withdrawals after Grantor Credit Event.

 

(1)          If Grantor ceases to maintain an A. M. Best Company financial
strength rating of at least B++, a Grantor Credit Event shall have occurred.

 

(2)          After a Grantor Credit Event occurs and Beneficiary has received
notice thereof pursuant to Section 9.1 (c) of the LNL Coinsurance Agreement and
the LLANY Coinsurance Agreement, Beneficiary shall notify Trustee of the fact in
writing, and the following procedures shall be used for withdrawals by Grantor.

 

 

(a)

Grantor shall provide each Grantor Withdrawal Notice to both the Trustee and the
Beneficiary.

 

 

(b)

Trustee shall follow the procedures described in Sections 2(c) and 2(d) above
except that a Grantor Withdrawal Notice shall not be honored until Trustee shall
have received a written confirmation permitting the withdrawal from the
Beneficiary.

 

 

(c)

Beneficiary shall permit the withdrawal if (A) it receives written certification
from the Grantor that such withdrawal is required to pay policy benefits
pursuant to the LLANY Coinsurance Agreement and/or the LNL Coinsurance
Agreement; (B) the condition to withdrawal in Section 2(g)(1) has been met; and
(C) no Recapture Event has occurred.

 

(i)

Procedures for Withdrawals after Grantor Event of Default.

 

(1)          If Grantor's ceases to maintain am A. M. Best Company financial
strength rating of at least B+, a Grantor Event of Default shall have occurred.

 

(2)          After the occurrence of a Grantor Event of Default and Beneficiary
has received notice thereof from the Grantor pursuant to Section 9.1 (c) of the
LNL Coinsurance Agreement and the LLANY Coinsurance Agreement, the Beneficiary
shall notify Trustee of the fact in writing and the following procedures shall
be followed for withdrawals by Grantor.

 

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(a)

Grantor shall provide each Grantor Withdrawal Notice to both the Trustee and the
Beneficiary.

 

 

(b)

Trustee shall follow the procedures described in Sections 2(c) and 2(d) above
except that a Grantor Withdrawal Notice shall not be honored until Trustee shall
have received from the Beneficiary a written confirmation permitting the
withdrawal.

 

 

(c)

After the occurrence of a Grantor Event of Default, Beneficiary may, in its sole
discretion, decline to permit a withdrawal to be made pursuant to an outstanding
Grantor Withdrawal Notice.

 

(j)           The Trustee may rely and shall be protected in acting upon a
Grantor Withdrawal Notice and/or Beneficiary Withdrawal Notice and shall not
incur any liability to anyone resulting from actions taken by the Trustee in
reliance in good faith on such instructions.

 

(k)          The Trustee shall have no responsibility whatsoever to determine
that any Assets withdrawn from the Trust Account pursuant to Section 2 of this
Agreement will be used and applied in the manner contemplated by paragraphs (f)
and (g) of this Section 2.

 

(1)          The Trustee shall be entitled to conclusively rely upon any notice
of a Triggering Event that it reasonably believes to be from the Beneficiary.
The Trustee shall not be responsible to determine that a Triggering Event has
occurred.

 

3.

Redemption, Investment and Substitution of Assets.

 

(a)          The Trustee shall surrender for payment all maturing Assets and all
Assets called for redemption and deposit the proceeds of any such payment in the
Trust Account.

 

(b)          The Grantor hereby notifies the Trustee and the Beneficiary that it
has retained the services of Delaware Investment Advisors ("DIA") as its
investment manager for all Assets, which may be held in the Trust Account. The
Grantor will cause DIA to follow the Investment Policy for Assets held in the
Trust Account. The Grantor agrees that all investments and substitutions of
securities permitted by this Section will be and remain in compliance with the
relevant limitations of the applicable insurance laws and the Investment Policy.
The Trustee shall follow the instructions of DIA regarding the settlement of
trades and not accept the direction of any other investment manager without the
Grantor's prior written consent. The Trustee shall forward a copy of any notice,
statement, or report that it is required to provide to the Grantor, to DIA also
Substitutions made pursuant to this Section 3, shall not be subject to the
withdrawal provisions of Section 2.

 

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(c)          The Grantor shall be responsible for investing and reinvesting
Assets. From time to time, at the written order and direction of the Grantor or
DIA, the Trustee shall invest Assets as specified by the Grantor or DIA.

 

(d)          From time to time, and subject to all applicable provisions of this
Agreement, the Grantor or DIA may direct the Trustee to substitute Assets of
equivalent or higher value and quality for other Assets presently held in the
Trust Account in accordance with the Investment Policy and relevant limitations
of applicable insurance laws. The Trustee shall have no responsibility
whatsoever to determine the value of such substituted securities.

 

(e)          Any instruction or order concerning such investments or
substitutions of securities shall be referred to herein as an "Investment
Order". The Trustee shall execute Investment Orders and settle securities
transactions by itself or by means of an agent or broker. The Trustee shall not
be responsible for any act or omission or for the solvency of any such agent or
broker. The Trustee shall not be liable except for its own negligence, willful
misconduct or lack of good faith.

 

(f)           When the Trustee is directed to deliver Assets against payment,
delivery will be made in accordance with generally accepted market practice.

 

(g)          When Trustee is directed to deliver Assets against payment,
delivery will be made in accordance with generally accepted market practice.

 

(h)          Any loss incurred from any investment pursuant to the terms of this
Section 3 shall be borne exclusively by the Trust Account.

 

4.

Crediting of Income.

 

All payments of interest, dividends and other income in respect of Assets in the
Trust Account shall be posted and credited by the Trustee to the Trust Account.
Trustee may debit the Trust Account to recoup any interest, dividend or other
income automatically posted and credited on the payment date to the Trust
Account which is not subsequently received by the Trustee.

 

5.

Right to Vote Assets.

 

The Trustee shall forward all annual and interim stockholder reports and all
proxies and proxy materials relating to the Assets in the Trust Account to the
Grantor and DIA. The Grantor and/or DIA shall have the full and unqualified
right to vote any Assets in the Trust Account and to exercise any and all
proprietary rights not inconsistent with this Agreement with respect to any
securities or other property forming a part of the Trust Account.

 

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6.     Additional Rights and Duties of the Trustee and the Securities
Intermediary.

 

(a)          The Trustee shall notify the Grantor and the Beneficiary in writing
within ten (10) days following each deposit to, withdrawal from, or substitution
of Assets in, the Trust Account.

 

(b)          Before accepting any Asset for deposit to the Trust Account, the
Trustee shall determine that such Asset is in such form that the Beneficiary or
the Trustee, upon direction by the Beneficiary may, negotiate such Asset without
consent or signature from the Grantor or any person other than the Trustee in
accordance with the terms of this Agreement.

 

(c)          The Trustee shall have no responsibility whatsoever to determine
that any Assets in the Trust Account are or continue to be assets which comply
with the Investment Policy, any terms or conditions of the LNL Coinsurance
Agreement or the LLANY Coinsurance Agreement, or any applicable insurance laws.

 

(d)          The Trustee shall hold all Assets in a safe place at the Trustee's
office in the United States, except that the Trustee may deposit any Assets in
the Trust Account in a book-entry account maintained at the Federal Reserve Bank
of New York or in depositories such as the Depository Trust Company. Assets may
be held in the name of a nominee maintained by the Trustee or by any such
depository.

 

(e)          The Trustee shall accept and open all mail directed to the Grantor
or the Beneficiary in care of the Trustee and shall forward such mail to the
party to whom it is directed.

 

(f)           The Trustee shall furnish to the Grantor and the Beneficiary a
statement of all Assets in the Trust Account at the inception of the Trust
Account and monthly, in accordance with Section l(f) hereof.

 

(g)          The Trustee shall keep full and complete records of the
administration of the Trust Account. Upon the request of the Grantor or the
Beneficiary, the Trustee shall promptly permit the Grantor or the Beneficiary,
their respective agents, employees or independent auditors to examine, audit,
excerpt, transcribe, and copy, during the Trustee's normal business hours, any
books, documents, papers, and records relating to the Trust Account or the
Assets.

 

(h)          Unless otherwise provided in this Agreement, the Trustee is
authorized to follow and rely upon all instructions given by officers named in
incumbency certificates furnished to the Trustee from time to time by the
Grantor, DIA, and the Beneficiary, respectively, and by attorneys-in-fact acting
under written authority furnished to the Trustee by the Grantor, DIA or the
Beneficiary, including, without limitation, instructions given by letter,
facsimile transmission, telegram, teletype, cablegram or electronic media, if
the Trustee reasonably believes such instructions to be genuine and to have been
signed, sent or presented by the proper party or parties. The Trustee shall be
liable only for its own negligence, willful misconduct or lack of

 

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good faith and, except for such liability, will not incur any liability to
anyone resulting from actions taken by the Trustee in reliance in good faith on
such instructions given in accordance with this Agreement, including without
limitation, any liability in executing instructions (i) from any
attorney-in-fact or investment manager prior to receipt by it of notice of the
revocation of the written authority of the attorney-in-fact or investment
manager, or (ii) from any officer of the Grantor, the Beneficiary, or DIA named
in an incumbency certificate delivered hereunder prior to receipt by it of a
more current certificate.

 

(i)           The duties and obligations of the Trustee shall only be such as
are specifically set forth in this Agreement, as it may from time to time be
amended, and no implied duties or obligations shall be read into this Agreement
against the Trustee. The Trustee shall not be liable except for its own
negligence, willful misconduct or lack of good faith, and in no event shall the
Trustee be liable for special, punitive, or consequential losses or damages
arising in connection with this Agreement.

 

(j)           No provision of this Agreement shall require the Trustee to take
any action which, in the Trustee's reasonable judgment, would result in any
violation of this Agreement or any provision of law. If any third party asserts
a lien against any of the Assets, the Trustee shall promptly notify both the
Grantor and the Beneficiary of such claim.

 

(k)          The Trustee shall not be responsible for the existence, genuineness
or value of any of the Assets or for the validity, perfection, priority or
enforceability of the liens on any of the Assets, whether impaired by operation
of law or by reason of any action or omission to act on its part hereunder,
except to the extent such action or omission constitutes negligence, lack of
good faith or willful misconduct on the part of the Trustee, for the validity of
title to the Assets, for insuring the Assets or for the payment of taxes,
charges, assessments or liens upon the Assets subject to the requirement of good
faith, reasonableness and the lack of negligence or willful misconduct on the
part of the Trustee.

 

(1)          The Trustee shall not incur any liability for not performing any
act or fulfilling any duty, obligation, or responsibility hereunder by reason of
any occurrence beyond the control of Trustee including but not limited to any
act or provision of any present or future law or regulator or governmental
authority, terrorism, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication facility. The
Trustee will use everything within its reasonable control to bring its systems
and operations back into operation in compliance with the terms of this
Agreement and in conjunction with Trustee's operations contingency plan, an
updated copy of which shall be provided to either the Grantor or the Beneficiary
upon request.

 

(m)         The Securities Intermediary agrees that it will comply with
entitlement orders issued by the Trustee in accordance with the terms of this
Agreement, and that such compliance is not subject to any conditions,
qualifications or further consents. The Securities Intermediary will not comply
with entitlement orders issued by any other person.

 

12

 

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(n)          The Securities Intermediary hereby waives any right of
counterclaim, bankers' liens, liens or perfection rights as securities
intermediary with respect to the Assets, the proceeds thereof and the Trust
Account.

 

7.

The Trustee's Compensation, Expenses, etc.

 

(a)          The Grantor shall pay the Trustee, as compensation for its services
under this Agreement, a fee which shall be mutually agreed upon in writing by
the Trustee and which shall be updated no more frequently than annually. The
Grantor shall payor reimburse the Trustee for all of the Trustee's appropriate
expenses and disbursements in connection with its duties under this Agreement
(including attorney's fees and expenses), except any such expense or
disbursement as may arise from the Trustee's negligence, willful misconduct, or
lack of good faith. The Trustee shall notify the Grantor of all expenses and
disbursements on a quarterly basis ("Trustee Invoice"). The Trustee Invoice
shall state the nature and amount of such expenses and disbursements and such
other information as the Grantor may reasonably request to make such payment to
the Trustee. The Grantor shall pay such expenses and disbursements within a
reasonable period of time after its receipt and review of such Trustee Invoice,
unless the Trustee and Grantor agree otherwise in writing.

 

(b)          The Trustee may not invade the Trust Account Assets for the purpose
of paying compensation to or reimbursing expenses of the Trustee. The Grantor
hereby indemnifies the Trustee for, and holds it harmless against, any loss,
liability, costs or expenses (including attorney's fees and expenses) incurred
or made without negligence, willful misconduct or lack of good faith on the part
of the Trustee, arising out of or in connection with the performance of its
obligations in accordance with the provisions of this Agreement, including any
loss, liability, costs or expenses arising out of or in connection with the
status of the Trustee and its nominee as the holder of record of the Assets. The
Grantor hereby acknowledges that the foregoing indemnities shall survive the
resignation or discharge of the Trustee or the termination of this Agreement.

 

(c)          No Assets shall be withdrawn from the Trust Account or used in any
manner for paying compensation to, or reimbursement or indemnification of, the
Trustee.

 

8.

Resignation or Removal of the Trustee.

 

(a)          The Trustee may resign at any time by giving not less than 90 days
written notice thereof to the Beneficiary and to the Grantor. The Trustee may be
removed by the Grantor's delivery of not less than 30 days written notice of
removal to the Trustee and the Beneficiary. Such resignation or removal shall
become effective on the acceptance of appointment by a successor Trustee and the
transfer to such successor Trustee of all Assets in the Trust Account in
accordance with paragraph (b) of this Section 8.

 

13

 

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(b)          Upon receipt by the Beneficiary and the Grantor of the Trustee's
notice of resignation or by the Trustee and the Beneficiary of the Grantor's
notice of removal, the Grantor and the Beneficiary shall appoint a successor
Trustee. Any successor Trustee shall be a bank that is a member of the Federal
Reserve System or chartered in the State of New York and shall not be a Parent,
a Subsidiary or an Affiliate of the Grantor or the Beneficiary. Upon the
acceptance of the appointment as Trustee hereunder by a successor Trustee and
the transfer to such successor Trustee of all Assets in the Trust Account, the
resignation or removal of the Trustee shall become effective. Thereupon, such
successor Trustee shall succeed to and become vested with all the rights,
powers, privileges and duties of the resigning or removed Trustee, and the
resigning or removed Trustee shall be discharged from any future duties and
obligations under this Agreement, but the resigning or removed Trustee shall
continue to be entitled to the benefits of the indemnities provided herein for
the Trustee as well as responsible for its obligations, acts and omissions taken
while acting as Trustee.

 

9.

Termination of the Trust Account.

 

Both Grantor and Beneficiary shall notify the Trustee in writing if (i) the
Beneficiary exercises its right to recapture under the LNL Coinsurance Agreement
and the LLANY Coinsurance Agreement, and (ii) the Grantor pays the Beneficiary
the Recapture Fee under the LNL Coinsurance Agreement and the LLANY Coinsurance
Agreement. Upon receipt of such notice, this Trust Account shall automatically
terminate. Barring such an automatic termination event, this Agreement shall
continue in effect as long as either the LNL Coinsurance Agreement or the LLANY
Coinsurance Agreement remains in effect. The Grantor and the Beneficiary shall
provide Trustee with at least 15 days written notice prior to the effective date
of any termination. Upon termination of this Agreement, after satisfaction of
any outstanding Beneficiary Withdrawal Notices, or deduction of amounts required
to satisfy any outstanding Beneficiary Withdrawal Notices, and upon receipt of
certification of the Beneficiary that the Grantor has no further obligation to
maintain the Trust Account, all assets not previously withdrawn by the
Beneficiary shall be delivered by the Trustee to the Grantor or to its order.

 

10.

Representations and Warranties

 

(a)          The Trustee represents and warrants that the Trustee is a
corporation duly incorporated, validly existing and in good standing under the
laws of New York and has the corporate power and authority to carry on its
business as now being conducted. The Trustee is duly qualified and authorized to
do business and is in good standing as a banking corporation in each
jurisdiction where the Assets are maintained. The Trustee is also a Securities
Intermediary, as defined by the Uniform Commercial Code, as adopted in each
state in which the Trustee maintains Assets, and the Trustee is at all times
acting in its capacity as a Securities Intermediary with respect to the Assets.
In addition, the Trustee is a member of the Federal Reserve System and is not an
Affiliate of the Grantor or the Beneficiary.

 

14

 

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(b)          The Trustee represents and warrants that the Trustee has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Trustee and the consummation of the
transactions contemplated by this Agreement by the Trustee have been duly and
validly authorized by all necessary corporate action on the part of the Trustee.
This Agreement constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms, except as
such enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, reorganization, or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.

 

(c)          The Trustee represents and warrants that the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated by this Agreement do not and will not (1) violate or conflict with
the Trustee's corporate charter or by-laws; or (2) violate or conflict with any
law or governmental regulation, or any judicial, administrative or arbitration
order, award, judgment, writ, injunction or decree applicable to the Trustee.

 

(d)          The Trustee represents and warrants that it is not an Affiliate of
either the Grantor or the Beneficiary .

 

(e)          The Grantor represents and warrants that the Grantor is a stock
life insurance company duly incorporated, validly existing and in good standing
under the laws of New York and has the corporate power and authority to carry on
its business as now being conducted.

 

(f)           The Grantor represents and warrants that the Grantor has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Grantor and the consummation of the
transactions contemplated by this Agreement by the Grantor have been duly and
validly authorized by all necessary corporate action on the part of the Grantor.
This Agreement constitutes the legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms, except as
such enforceability may be limited by applicable laws relating to bankruptcy,
insolvency, reorganization, or affecting creditors' rights generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.

 

(g)          The Grantor represents and warrants that the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated by this Agreement do not and will not (1) violate or conflict with
the Grantor's corporate charter or by-laws; or (2) violate or conflict with any
law or governmental regulation, or any judicial, administrative or arbitration
order, award, judgment, writ, injunction or decree applicable to the Grantor.

 

15

 

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(h)          The Grantor represents and warrants that it has succeeded to The
Lincoln National Life Insurance Company's interest in the LNL Coinsurance
Agreement pursuant to the Assignment and Assumption Agreement.

 

(i)           The Beneficiary represents that it has entered into the
Coinsurance Agreements listed on Exhibit C.

 

(j)           The Beneficiary represents and warrants that the Beneficiary is a
stock life insurance company duly incorporated and validly existing under the
laws of the State of Connecticut and has the corporate power and authority to
carry on its business as now being conducted.

 

(k)          The Beneficiary represents and warrants that the Beneficiary has
all requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement by the Beneficiary and the
consummation of the transactions contemplated by this Agreement by the
Beneficiary have been duly and validly authorized by all necessary corporate
action on the part of the Beneficiary. This Agreement constitutes the legal,
valid and binding obligation of the Beneficiary, enforceable against the
Beneficiary in accordance with its terms, except as such enforceability may be
limited by applicable laws relating to bankruptcy, insolvency, reorganization,
or affecting the rights of creditors of insurance companies generally and except
to the extent that injunctive or other equitable relief is within the discretion
of a court.

 

(1)          The Beneficiary represents and warrants that the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement do not and will not (1) violate or
conflict with the Beneficiary's corporate charter or by-laws; or (2) violate or
conflict with any law or governmental regulation, or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or decree
applicable to the Beneficiary.

 

11.

Definitions.

 

Except as the context shall otherwise require, the following terms shall have
the following meanings for all purposes of this Agreement (the definitions to be
applicable to both the singular and the plural forms of each term defined if
both forms of such term are used in this Agreement):

 

The term "Affiliate" with respect to any corporation shall mean a corporation
which directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such corporation.

 

The term "Assets" shall mean all cash and Eligible Securities deposited in the
Trust Account by the Grantor or on the Grantor's behalf, including proceeds from
the disposition or reinvestment

 

16

 

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of such deposits, plus interest, dividends, and any other income generated by
such deposits, and the term "Asset" shall mean any individual one of the Assets.

 

The term "Asset Response" shall have the meaning set forth in Section 1(f).

 

The term "Assignment and Assumption Agreement shall have the meaning set forth
in the recitals of this Agreement.

 

The term "Beneficiary Withdrawal Notice" means a notice substantially in the
form of the specimen notice attached to this Agreement as Exhibit B, signed by
the Beneficiary.

 

The term "control" (including the related terms "controlled by" and "under
common control with") shall mean the ownership, directly or indirectly, of more
than 10% of the voting stock of a corporation.

 

The term "Designee" shall have the meaning set forth in Section 2(a).

 

The term "DIA" shall have the meaning set forth in Section 3(b).

 

The term "Effective Date" shall mean March 1, 2007.

 

The term "Eligible Securities" shall mean and include any and all securities and
other investments that are permitted under New York insurance law as admitted
assets in the preparation of the statutory annual statement filed by the
Grantor, other than real estate, and permitted pursuant to the investment policy
included as Exhibit E.

 

The term "Grantor Withdrawal Notice" means a notice substantially in the form of
the specimen notice attached to this Agreement as Exhibit D, signed by the
Grantor.

 

The term "Investment Order" shall have the meaning set forth in Section 3(e).

 

The term "Investment Policy" shall mean the investment policy set forth in
Exhibit E.

 

The term "LLANY Coinsurance Agreement" shall have the meaning set forth in the
recitals of this Agreement.

 

The term "LNL" shall have the meaning set forth in the recitals of this
Agreement.

 

The term "LNL Coinsurance Agreement" shall have the meaning set forth in the
recitals of this Agreement.

 

The term "Parent" shall mean an institution that, directly or indirectly,
controls another institution.

 

17

 

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The terms "person" shall mean and include an individual, a corporation, a
partnership, an association, a trust, an unincorporated organization or a
government or political subdivision thereof.

 

The term "Proposal" shall have the meaning set forth in Section 1(f).

 

The term "Required Amount" shall mean 102% of the amount needed to fund all of
the Reinsured Liabilities under the LNL Coinsurance Agreement and the LLANY
Coinsurance Agreement combined.

 

The term "Secured Obligations" shall mean any and all obligations, liabilities
and indebtedness of the Grantor to the Beneficiary of any and every kind and
nature, howsoever created, arising or evidenced, whether now or hereafter
existing, whether now due or to become due, whether primary, secondary, direct,
indirect, absolute, contingent or otherwise (including, without limitation,
obligations of performance), whether several, joint or joint and several, and
arising under or in connection with the LNL Coinsurance Agreement, LLANY
Coinsurance Agreement, or any other Ancillary Agreement.

 

The term "Subsidiary" shall mean an institution controlled, directly or
indirectly, by another institution.

 

The term "Triggering Event" shall mean any of the following: a Grantor Event of
Default, a Recapture Event, or a Grantor Credit Event.

 

The term "Trustee Invoice" shall have the meaning set forth in Section 7(a).

 

The term "UCC" shall mean the Uniform Commercial Code.

 

The term "Valuation Dispute Notice" shall have the meaning set forth in Section
1(f).

 

The term "Valuation Report" shall have the meaning set forth in Section 1(f).

 

Other capitalized terms shall have the meanings ascribed to them in the LNL
Coinsurance Agreement and the LLANY Coinsurance Agreement, as applicable.

 

12.

Governing Law.

 

This Agreement shall be subject to and governed by the laws of the State of New
York, without giving effect to the conflict of laws provisions thereof;
including, without limitation, matters related to the security interest granted
pursuant to this Agreement. Each party waives trial by jury in any judicial
proceeding involving, directly or indirectly, any matter (whether sounding in
tort,

 

18

 

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contract, or otherwise) in any way arising out of or related to this Agreement
or the relationship established hereunder. This provision is a material
inducement for the parties to enter into this Agreement.

 

13.

UCC

 

This Trust Agreement is intended to be a Security Agreement under the UCC for
the purpose of creating a security interest in assets in the Trust Account. Such
security interest shall not in any way limit the rights of the Grantor to
withdraw assets from the Trust Account pursuant to the

terms of Section 2.

 

14.

Successors and Assigns.

 

Except as expressly permitted by Section 8 of this Agreement, no party to this
Agreement may assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the parties. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective permitted successors and assigns including,
without limitation, those who become successors to the parties by operation of
law.

 

15.

Severability.

 

In the event that any provision of this Agreement shall be declared invalid or
unenforceable by any regulatory body or court having jurisdiction, such
invalidity or unenforceability shall not affect the. validity or enforceability
of the remaining portions of this Agreement.

 

16.

Entire Agreement.

 

This Agreement constitutes the entire agreement among the Parties, and there are
no understandings or agreements, conditions or qualifications relative to this
Agreement other than those fully expressed in this Agreement.

 

17.

Amendments.

 

This Agreement may be modified or otherwise amended, and the observance of any
term of this Agreement may be waived, only if such modification, amendment or
waiver is in writing and signed by the Parties.

 

18.

Notices, etc.

 

Unless otherwise provided in this Agreement, all notices, directions, requests,
demands, acknowledgments, notifications, and other communications required or
permitted to be given or made under the terms hereof shall be in writing and
shall be delivered personally, sent by

19

 

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registered or certified mail, postage prepaid, or by overnight courier with
written confirmation of delivery. Any such notice shall be deemed given when so
delivered personally, or if mailed, on the date shown the receipt thereof, or if
sent by overnight courier, on the date shown on the written confirmation of
delivery and when addressed as follows:

 

If to the Grantor:

 

Lincoln Life & Annuity Company of New York

1300 S. Clinton St.

F ort Wayne, IN 46802

Attention: Keith Ryan, Second Vice President

 

Lincoln Life & Annuity Company of New York

100 Madison Street

Suite 1860

Syracuse, N.Y. 13202

Attention: Robert Sheppard, Second Vice President and General Counsel

 

With a concurrent copy to DIA:

 

Delaware Investment Advisors

2005 Market Street

Philadelphia, P A 19103

Attention: Rich Millard

 

If to the Beneficiary:

 

ING Life Insurance and Annuity Company

c/o ING North American Insurance Corporation

5780 Powers Ferry Road

Atlanta, GA 30327-4390

Attention: Treasurer

 

With a concurrent copy to:

 

ING North American Insurance Corporation

5780 Powers Ferry Road

Atlanta, GA 30327-4390

Attention: Corporate General Counsel

 

20

 

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And

 

ING Life Insurance and Annuity Company

151 Farmington Ave

Hartford, CT 06156

Attention: MaryEllen Thibodeau TS31 Counsel

 

If to the Trustee:

 

The Bank of New York

101 Barclay, 8W

New York, New York 10286

Attention: Karen Vaporean

Facsimile: (212) 815-5877

 

If to the Securities Intermediary:

 

The Bank of New York

101 Barclay, 8W

New York, New York 10286

Attention: Karen Vaporean

Facsimile: (212) 815-5877

 

Each Party may from time to time designate a different address for notices,
directions, requests, demands, acknowledgments and other communications by
giving written notice of such change to the other Parties as provided in this
section.

 

19.

Headings.

 

The headings of the Sections and the Table of Contents have been inserted for
convenience of reference only and shall not be deemed to constitute a part of
this Agreement.

 

20.

Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall constitute an original, but such counterparts
together shall constitute but one and the same Agreement.

 

21

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.

 

 

LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK

 

 

 

By:

/s/   Keith J. Ryan

Name:

Keith J. Ryan

Title:

Second Vice President

 

 

ING LIFE INSURANCE AND ANNUITY COMPANY

 

 

 

By:

/s/   David S. Pendergrass

Name:

David S. Pendergrass

Title:

SVP & Treasurer

 

 

THE BANK OF NEW YORK, as Trustee

 

 

 

By:

/s/   Karen Vaporean

Name

Title:

 

 

THE BANK OF NEW YORK, as Securities Intermediary

 

 

 

By:

/s/   Karen Vaporean

Name:

Title:

 

 

 

23

 

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EXHIBIT B

Form of Beneficiary Withdrawal Notice

 

From:

("Beneficiary")

 

To:

The Bank of New York [or its successor] (the "Trustee"]

 

Date:

 

Re:

Trust Agreement dated as of __________ among Lincoln Life & Annuity Company of
New York (the "Grantor"), ING Life Insurance and Annuity Company (the
"Beneficiary"), The Bank of New York, (the "Trustee"), and The Bank of New York
(the "Securities Intermediary") ("Trust Agreement") and Trust Account
#__________

 

Dear Sirs:

 

We hereby give you notice pursuant to Section 2(a) of the Trust Agreement that
the Beneficiary is entitled to withdraw the sum of $_________________ from the
Trust Account. Beneficiary hereby certifies that such withdrawal is for one or
more of the purposes set forth in Section 2(f) of the Trust Agreement. Payment
should be immediately made to _________________________ by the following method:
______________________________________________________.

 

The Beneficiary hereby demands payment of the above-specified amount in
accordance with Section 2(a) of the Trust Agreement.

 

Yours faithfully,

 

______________________________

Name:

Title:

 

Name:

Title:

For and on behalf of the Beneficiary

 

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EXHIBIT C

Reinsurance Agreements

 

Coinsurance Agreement between the Aetna Life Insurance and annuity Company and
The Lincoln National Life Insurance Company dated as of October 1, 1998.

 

Coinsurance Agreement between the Aetna Life Insurance and Annuity Company and
Lincoln Life & Annuity Company of New York dated as of October 1, 1998.

 

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EXHIBIT D

Form of Grantor Withdrawal Notice

 

From:

("Grantor")

 

To:

The Bank of New York [or its successor] (the "Trustee"]

 

Date:

 

Re:

Trust Agreement dated as of ___________ among the Lincoln Life & Annuity Company
of New York (the "Grantor"), ING Life Insurance and Annuity Company (the
"Beneficiary"), The Bank of New York (the "Trustee" and The Bank of New York
(the "Securities Intermediary" ("Trust Agreement") and Trust Account
#_____________

 

Dear Sirs:

 

We hereby give you notice pursuant to Section 2(c) of the Trust Agreement that
the Grantor is entitled to withdraw the sum of $___________________ from the
Trust Account. The Grantor hereby certifies that this withdrawal is for the
purpose set out in Section (2)(g)(I) of the Trust Agreement. The Grantor
certifies that this notice is being given more than IO Business Days after the
certification described in Section I (c )(iii) of the Trust Agreement was
delivered to the Beneficiary, and, to the best of Grantor's knowledge and
belief, there is no dispute outstanding between the Beneficiary and the Grantor
pursuant to either section 1(d) or l(f) of the Trust Agreement at the present
time. Payment should be immediately made to____________________ by the following
method:_________________________________________________________.

 

The Grantor hereby demands payment of the above-specified amount in accordance
with Section 2(c) of the Trust Agreement.

 

Yours faithfully,

 

Name:

Title:

 

Name:

Title:

For and on behalf of the Grantor

 

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EXHIBIT E

 

INVESTMENT POLICY FOR TRUST ACCOUNT

 

Regulation: New York Investment Law

Portfolio Manager: Delaware Investment Advisers ("Delaware")

 

Company Description:

 

Lincoln Life & Annuity Company of New York ("LNY") is a wholly owned-subsidiary
of The Lincoln National Life Insurance Company, an insurance company
headquartered in Fort Wayne, Indiana. This Investment Policy applies to the
trust account ("Trust Account") established for the benefit of ING Life
Insurance and Annuity Company with the Bank of New York as trustee.

 

Investment Objective:

 

The primary objective is to maximize GAAP investment income net of cost of
capital, consistent with the long-term preservation of capital and due
consideration given to the impact of income taxes. Overall investment strategy
will be executed within the context of prudent asset/liability management and
the constraints of applicable law and regulation.

 

Asset Categories:

Maximum % of Admitted Assets1

 

Direct Short Term Investments2

20%

 

Government Bonds

100%

 

Corporate Bonds

100%

 

Mortgage-Backed Securities

20%3

 

Asset-Backed Securities

20%

 

Convertible Bonds and Bonds w/Warrants

5%

 

Convertible Preferreds

5%

 

1 Admitted assets are those assets reported as of the last day of the most
recently concluded annual statement year adjusted pursuant to Section 1405(b) of
the New York Insurance Law. Non-admitted assets are assumed to have a market
value of $0 for all mark-to-market calculations.

2 All direct short term investments should be Al/Pl.

3 Total for CMBS, agency and non-agency CMOs (excluding volatile tranches) and
pass-throughs.

 

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Total Global Limit for Convertibles

5%

 

Less Liquid Investments:

 

Private Placements

40%4

 

Mortgage Loans

20%

 

Total Less Liquid Investments

40%

 

I.

Equity-related Securities

 

Preferred Stocks

10%

 

Total equity-related securities (including convertibles)

12%

 

Tax-Advantaged Securities: Tax Exempts

 

Tax Exempts

2%

 

Foreign Investments:5

 

 

Canadian

10%

 

Other Foreign

9%

Additional Restrictions Below:

 

Jurisdictions with Top 3 Credit Ratings

8%

 

 

Maximum per Country (Top 3 Ratings)

6%

 

Jurisdictions with Other Ratings

4%

 

Maximum per Country (Other Ratings)

2%

 

Other Investments (Basket):6

 

Total non-New York and New York investments Combined

10%

 

Mortgage Loan/Personal Property/Real Property

 

or Interest therein/Equity

5%

 

Foreign

2%

 

High Yield Investments (non-convertible) [Applies to all Fixed Income
Investments]:

 

NAIC Grade 3-4-5-6

8%

 

NAIC Grade 4-5-6

3%

 

4

Must be Investment Grade at time of transfer to trust, subsequent downgrades
accepted to BB.

5

Foreign assets will either be dollar denominated or the foreign currency will be
100% hedged back to USD. 1 value of any such foreign currency hedge will be
counted as part of the foreign assets limit.

6

Basket transactions are not intended to be used to breach maximum limits listed
in this Investment Policy but r: to provide the Investment Manager the
flexibility to consider innovative investments for inclusion in the trust.

 

 

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NAIC Grade 5-6

1%

 

Derivative Transactions Policy: Delaware will use derivative transactions on
behalf of LNY in accordance with the guidelines and restrictions of the LNY
Statement of Policy, Guidelines and Internal control Procedures for Derivative
Transactions, as in effect from time to time.

 

Permitted Investments: Any investment is allowed to the extent the investment is
permitted by New York Insurance Investment Law and does not exceed the
limitations in this policy statement. Notwithstanding the foregoing, investments
in affiliates of LNY are not permitted.

 

Diversification:

Securities:

 

-

The maximum investment in anyone issuer, institution, real estate property, or
borrower is limited to 2% of admitted assets with the exception of US Government
and Agency obligations and Agency Mortgage-Backed Securities (see attached table
for single issuer limits by credit quality)

 

-

The maximum exposure per sector (e.g., Financial, Utility, Industrial, etc.) is
40% of admitted assets

 

-

The maximum exposure per industry (e.g. Banking, Electrical, Basic Industry,
etc.) is 15% of admitted assets

 

Mortgage Loans and Real Estate:

-

No single mortgage loan acquisition may exceed 2% of admitted assets (see
attached table for single issuer limits by credit quality).

-

No single acquisition may exceed $20 million without approval of the Chief
Executive Officer or the Chief Financial Officer of LNY.

 

Target Duration

 

The target duration of the Trust Account will be set at the individual portfolio
policy statements and will be based on the characteristics of the liabilities in
the particular portfolio. The duration should be maintained within a range of
the greater of .5yrs or 20% of the target duration.

 

Approved by: Lincoln Life & Annuity Company of New York Investment Committee

 

Date:

 

 

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Proposed Single Issuer Limits by Credit Ratings:

 

 

Public and Private Bonds

Commercial

Mortgages

 

Rating

as a % of AUM

as a % of AUM

Rating

AAA

1.5%

2.0%

1

AA

1.5%

2.0%

2

A

1.5%

2.0%

3

BBB

1.0%

1.0%

4

BB

0.5%

0.25%

5

B and below

 

0.13%

 

0.07%

 

6-8

 

 

Overall Portfolio Credit Quality by Linear Credit Rating:

 

Rating

% of portfolio

A- or higher

50%

BBB- or higher

93%