Filed by Bowne Pure Compliance





Exhibit 10.68




COINSURANCE AGREEMENT




between the




AETNA LIFE INSURANCE AND ANNUITY COMPANY




(referred to as the Company)




and




LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK




(referred to as the Reinsurer)




Dated as of October 1, 1998




 


 









 







INDEX OF SCHEDULES




Schedule 1.1(A)     Policy Forms

Schedule 1.1(B)     Separate Account Assets

Schedule 1.1(C)     Separate Accounts

Schedule 1.1(D)     Third-Party Reinsurance




INDEX OF EXHIBITS




Exhibit A     Recapture Fee Formula

Exhibit B     Form of Security Trust Agreement

Exhibit C     Closing Date Liabilities Methodology

Exhibit D     Calculation of Reinsurance Trust Required Balance



 


 









 





TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	1.1 Definitions
	 	 	 	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	BASIS OF COINSURANCE AND BUSINESS COINSURED
	 	 	 	 
	2.1 Coinsurance
	 	 	 	 
	2.2 Reinsurer Extra Contractual Obligations
	 	 	 	 
	2.3 Reinstatements, Conversions and Exchanges
	 	 	 	 
	2.4 Certain Policy Elements
	 	 	 	 
	2.5 Reserves
	 	 	 	 
	2.6 Separate Account Reserves
	 	 	 	 
	2.7 Policy Changes or Reductions
	 	 	 	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	ACCOUNTINGS AND TRANSFER OF ASSETS
	 	 	 	 
	3.1 Ceding Commission
	 	 	 	 
	3.2 Transfer of Assets
	 	 	 	 
	3.3 Post-Closing Adjustments
	 	 	 	 
	3.4 Interim Monthly Accountings
	 	 	 	 
	3.5 Monthly Accountings
	 	 	 	 
	3.6 Monthly Payments
	 	 	 	 
	3.7 Delayed Payments
	 	 	 	 
	3.8 Offset Rights
	 	 	 	 
	3.9 Third-Party Reinsurance
	 	 	 	 
	3.10 Premium Taxes and Assessments
	 	 	 	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	POLICY ADMINISTRATION
	 	 	 	 
	4.1 Interim Servicing
	 	 	 	 
	4.2 Transfer of Servicing Obligations
	 	 	 	 
	4.3 Regulatory Matters
	 	 	 	 
	4.4 Policy Changes
	 	 	 	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	OVERSIGHTS
	 	 	 	 
	5.1 Oversights
	 	 	 	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	CONDITIONS PRECEDENT
	 	 	 	 
	6.1 Conditions Precedent
	 	 	 	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	DUTY OF COOPERATION
	 	 	 	 
	7.1 Cooperation
	 	 	 	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	DAC TAX
	 	 	 	 
	8.1 Election
	 	 	 	 






 


 









 





	 	 	 	 	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	INDEMNIFICATION AND RECAPTURE
	 	 	 	 
	9.1 Reinsurer’s Obligation to Indemnify
	 	 	 	 
	9.2 Company’s Obligation to Indemnify
	 	 	 	 
	9.3 Certain Definitions and Procedures
	 	 	 	 
	9.4 Security Trust Account and Recapture Rights
	 	 	 	 
	 
	 	 	 	 
	ARTICLE X
	 	 	 	 
	DISPUTE RESOLUTION
	 	 	 	 
	10.1 Other Disputes over Calculations
	 	 	 	 
	 
	 	 	 	 
	ARTICLE XI
	 	 	 	 
	INSOLVENCY
	 	 	 	 
	11.1 Insolvency Clause
	 	 	 	 
	 
	 	 	 	 
	ARTICLE XII
	 	 	 	 
	DURATION
	 	 	 	 
	12.1 Duration
	 	 	 	 
	12.2 Reinsurer’s Liability
	 	 	 	 
	12.3 Survival
	 	 	 	 
	 
	 	 	 	 
	ARTICLE XIII
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	13.1 Notices
	 	 	 	 
	13.2 Confidentiality
	 	 	 	 
	13.3 Entire Agreement
	 	 	 	 
	13.4 Waivers and Amendments
	 	 	 	 
	13.5 No Third Party Beneficiaries
	 	 	 	 
	13.6 Assignment
	 	 	 	 
	13.7 Governing Law
	 	 	 	 
	13.8 Counterparts
	 	 	 	 
	13.9 Severability
	 	 	 	 
	13.10 Schedules, Exhibits and Paragraph Headings
	 	 	 	 
	13.11 Expenses
	 	 	 	 
	13.12 No Prejudice
	 	 	 	 





 


 









 





COINSURANCE AGREEMENT




THIS COINSURANCE AGREEMENT (the “Agreement”) made by and between Aetna Life Insurance and
Annuity Company, a Connecticut domiciled stock life insurance company (the “Company”) and Lincoln
Life & Annuity Company of New York, a New York domiciled stock life insurance company (the
“Reinsurer”).



WHEREAS, the Company has issued or reinsured from other insurance companies, including
Aetna Life Insurance Company, a Connecticut domiciled stock life insurance company (“ALIC”),
certain Policies (as defined below);



WHEREAS, the Company, ALIC, the Reinsurer, and The Lincoln National Life Insurance
Company, a stock life insurance company organized under the laws of the State of Indiana, have
entered into a Second Amended and Restated Asset Purchase Agreement, dated as of May 21, 1998
(the “Asset Purchase Agreement”),



pursuant to which the Company has agreed to cede and transfer to the Reinsurer certain liabilities
arising under the Policies (as defined below) and the Post-Closing Policies (as defined below)
for the consideration specified herein and the Reinsurer has agreed to reinsure such liabilities on the terms and conditions set forth
herein; and



WHEREAS, the Company desires that the Reinsurer perform certain administrative
functions on behalf of the Company with respect to the Policies, and the Company, ALIC and
Reinsurer have entered into the NY Administrative Services Agreement of even date herewith
(the “NY Administrative Services Agreement”) pursuant to which the Reinsurer shall provide such
administrative services.



NOW, THEREFORE, in consideration of the mutual and several promises and undertakings herein
contained, and for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company and the Reinsurer agree as follows:



ARTICLE I

DEFINITIONS




1.1 Definitions. The following terms shall have the respective meanings set forth below
throughout this Agreement:



“Accounting” means an Interim Monthly Accounting or a Monthly Accounting, as applicable.



“Affiliate” means, with respect to any Person, at the time in question, any other Person
Controlling, Controlled by or under common Control with such Person. “Control” (including the
terms “Controlling,” “Controlled by” and “under common Control with”) means the possession, direct
or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the
ownership of voting securities, the holding of policyholders’ proxies by contract other than a
commercial contract for goods or non-management services, or otherwise, unless the power is the
result of an official position with or corporate office held by the Person. Except as provided
otherwise in this Agreement, control is presumed to exist if any Person, directly or indirectly,
owns, controls, holds with the power to vote, or holds shareholders’ proxies representing 25% or
more of the voting securities of any other Person, or holds or controls sufficient policyholders’
proxies, or is entitled by contract or otherwise, to nominate, appoint or to elect the majority of
the board of directors or comparable governing body of any other Person.



“ALIAC” means Aetna Life Insurance and Annuity Company, a stock life insurance company
organized under the laws of the State of Connecticut.



“ALIC” means Aetna Life Insurance Company, a stock life insurance company organized under the
laws of the State of Connecticut.



“Ancillary Agreements” means the various agreements collectively defined as “Ancillary
Agreements” in the Asset Purchase Agreement.


 


 









 





“Annual Statement” means the Company’s convention form statutory annual statement, together
with all required schedules and supplements thereto, as filed with the Insurance Department of
the State of Connecticut.



“Applicable Law” means any domestic or foreign federal, state or local statute, law,
ordinance or code, or any written rules, regulations or administrative interpretations
issued by any Governmental Authority pursuant to



any of the foregoing, and any order, writ, injunction, directive, judgment or decree of a court
of competent jurisdiction applicable to the parties hereto.



“Asset Purchase Agreement” means the Second Amended and Restated Asset Purchase Agreement by
and among the Company, ALIC, the Reinsurer and The Lincoln National Life Insurance Company, dated
as of May 21, 1998.



“Books and Records” means the originals or copies of all customer lists, policy
information, policy forms and rating plans, disclosure and other documents and filings,
including statutory filings, required under all



Applicable Laws, administrative records, reinsurance records, claim records, sales records,
underwriting records, financial records, Tax records and compliance records in the
possession or control of the Company and relating principally to the operation of the Business
including, without limitation, any database, magnetic or optical media (to the extent not
subject to licensing restrictions) and any other form of recorded, computer generated or
stored information or process, but excluding: (a) the Company’s original certificate of
incorporation, bylaws, corporate seal, licenses to do business, minute books and other corporate
records relating to corporate organization and capitalization; (b) original Tax and corporate
accounting records relating to the Business; (c) any original books and records relating to the Retained Liabilities; (d) any records that are
subject to attorney-client privilege; and (e) the Retained Contracts and any records relating
thereto.



“Business” means marketing, issuing and administering the Policies in the United States and
the other business activities reasonably related thereto, in each case as currently conducted
by the Company or, where so specified herein, as to be conducted by the Reinsurer following the
Closing Date.



“Business Day” means any day other than a Saturday, Sunday, a day on which banking
institutions in the State of Connecticut are permitted or obligated by Applicable Law to
be closed or a day on which the New York Stock Exchange is closed for trading.



“Ceding Commission” means the aggregate ceding allowance payable by the Reinsurer to the
Company in connection with the reinsurance of the Policies hereunder.



“Closing” means the closing of the transact ions contemplated by this Agreement.



“Closing Balance Sheet” means the pro forma balance sheet of the Business as of the
last day of the second month preceding the month in which the Closing shall occur, which shall be
prepared and delivered by the Company to the Reinsurer not later than the fifth day prior to the
Closing Date in accordance with Article II of the Asset Purchase Agreement.



“Closing Date” means the date on which the Closing occurs.



“Closing Date Liabilities” means, as of any date, the General Account Reserves and other
statutory liabilities relating to the Business, which shall be (a) estimated and reflected in
the Closing Balance Sheet as of the last day



of the second month preceding the month in which the Closing shall occur; and (b) subsequently
adjusted and reflected in the Revised Closing Balance Sheet and Final Closing Balance Sheet as of
11:59 p.m. Eastern Time on the last day of the month immediately preceding the month in which the Closing Date falls. The
Closing Date Liabilities shall be determined and reported in accordance with the methodology set
forth on Exhibit C.



“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder.



“Commissions” mean all commissions, expense allowances, benefit credits and other fees and
compensation payable to Producers.


 


 









 





“Connecticut SAP” means the statutory accounting principles and practices prescribed
or permitted by the Insurance Department of the State of Connecticut.



“Contract Date” means May 21, 1998.



“Distribution Agreements” mean th e agreements between the Company, on one hand, and
Producers, on the other, with respect to the Policies as of April 13, 1998.



“Effective Date” means 12:01 a.m. Eastern Time on October 1, 1998.



“Election Notice” means a notice given by the Company to the Reinsurer with respect to the
exercise of recapture or Security Trust remedies pursuant to Section 9.4 hereof.



“Event of Default” means any event described in Section 9.4 hereof which gives rise to
Recapture Rights or other remedy.



“Extra Contractual Obligations” means all liabilities or obligations arising under the
Policies and Post-Closing Policies, exclusive of liabilities or obligations arising under the
express terms and conditions of the Policies and Post-Closing Policies and the other
Liabilities, but including, without limitation, any liability for fines, penalties, forfeitures,
punitive, special, exemplary or other form of extra-contractual damages, which liabilities or
obligations arise from any act, error or omission, whether or not intentional, negligent, in bad
faith or otherwise relating to: (a) the marketing, sale, underwriting, production, issuance,
cancellation or administration of the Policies or Post-Closing Policies; (b) the
investigation, defense, trial, settlement or handling of claims, benefits, or payments under
the Policies or Post-Closing Policies; or (c) the failure to pay, the delay in payment, or
errors in calculating or administering the payment of benefits, claims or any other amounts due
or alleged to be due under or in connection with the Policies or Post-Closing Policies.



“Final Closing Balance Sheet” means the final pro forma balance sheet of the Business as of
the Closing Date prepared in accordance with Article II of the Asset Purchase Agreement.



“GAAP” means United States generally accepted accounting principles as in effect from time to
time.



“General Account Reserves” means the general account statutory reserves of the Company before
reduction for accrued for expense allowances recognized in Separate Account Reserves (without
regard to the transactions contemplated by this Agreement) with respect to the Policies or
Post-Closing Policies, as applicable, determined in accordance with Connecticut SAP.



“Governmental Authority” means any court, administrative or regulatory agency or commission,
or other federal, state or local governmental authority or instrumentality or the National
Association of Securities Dealers or national securities exchanges having jurisdiction over any
party hereto.



“Interim Monthly Accounting” shall mean a monthly accounting prepared in accordance with
Connecticut SAP and delivered by the Company to the Reinsurer in accordance with the provisions of
Section 3.4 hereof.



“Liabilities” means all gross liabilities and obligations arising out of or relating to
the Policies and Post-Closing Policies, other than the Retained Liabilities and Extra
Contractual Obligations. The Liabilities shall include, without limitation: (a) the General Account Reserves; (b) all liabilities for
incurred but not reported claims, benefits, interest on death claims or other payments
arising under or relating to the Policies and
Post-Closing Policies, whether or not (i) included within the General Account Reserves, or
(ii) incurred before or after the Effective Date; (c) all liabilities arising out of any
changes to the terms and conditions of the
Policies and Post-Closing Policies mandated by Applicable Law whether or not incurred before or
after the Effective Date; (d) premium Taxes due in respect of Premiums paid on or after the
Effective Date (without giving effect to any credits due to the Company for any guaranty fund
assessments paid by the Company prior to Closing), and all other Tax liabilities arising out of
or relating to the Business or Post-Closing Policies for periods commencing on or after the
Effective Date (except for income Taxes imposed on the Company under Subtitle A of the Code);



 


 









 






(e) assessments and similar charges in connection with participation by
the Company or Reinsurer, whether voluntary or involuntary, in any guaranty association
established or governed by any state or other jurisdiction, arising on account of
direct Premiums paid on or after the Effective Date; (f) Commissions payable with respect
to the Policies and Post-Closing Policies to or for the benefit of the Producers who marketed
or produced the Policies, in any case payable on or after the Effective Date; (g) any liability
arising under the Transferred Contracts; (h) premiums, payments, fees or other consideration or
amounts due on or after the Effective Date under any Third Party Reinsurance Agreements which
are included with the Transferred Contracts; (i) all liabilities for amounts payable on or
after the Effective Date for returns or refunds of Premiums, (j) all liabilities which relate to
(i) amounts transferred from the Separate Accounts to the Company’s general accounts
pending distribution to owners of the Variable Policies; and (ii) amounts held in the Company’s
general account pending transfer to the Separate Accounts; (iii) any insurance liabilities or
obligations arising under the Variable Policies (including any Variable Policies included
within the Post-Closing Policies) that are not payable out of the assets of the Company’s Separate
Account; and (k) all unclaimed property liabilities arising under or relating to the Policies
and Post-Closing Policies.



“LIBOR” means a rate per annum equal to the three month London Interbank Offered Rate
as published in The Wall Street Journal, Eastern Edition, in effect on the Closing Date.



“Market Value” means the market value of the assets held in a Security Trust, determined
pursuant to Section 4.01 of the Security Trust Agreement.



“Monthly Accounting” shall mean a monthly accounting prepared in accordance with
Connecticut SAP and delivered by the Reinsurer to the Company in accordance with the provisions of
Section 3.5 hereof.



“NAIC” means the National Association of Insurance Commissioners.



“Non-Guaranteed Elements” mean cost of insurance charges, loads and expense charges,
credited interest rates, mortality and expense charges, administrative expense risk charges,
variable premium rates and variable paid-up amounts, as applicable, under the Policies and
Post-Closing Policies.



“NY Administrative Services Agreement” means the NY Administrative Services Agreement by
and between the Company, ALIC and the Reinsurer of even date herewith.



“NY Modified Coinsurance Agreement” means the Modified Coinsurance Agreement between the
Company and the Reinsurer in the form of Exhibit Q to the Asset Purchase Agreement.



“Other Assets” mean the specific assets of the Company listed in Schedule 1.1(A) to the
Asset Purchase Agreement and such other fixed assets as may be mutually agreed among the parties.



“Person” means any individual, corporation, partnership, firm, joint venture, association,
joint-stock company, limited liability company, trust, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other entity.



“Policies” mean all of the Company’s individual universal life, individual corporate
owned life, individual traditional life, sponsored life and individual participating life
insurance policies and participating annuities,
together with all related binders, slips and certificates (including applications
therefor and all supplements, endorsements, riders and agreements in connection therewith)
that were delivered or issued for delivery to policyowners that were New York residents, and which have been issued or reinsured by the
Company in connection with the Business (in accordance with, and as determined by reference to,
the Company’s historical practices), which policies shall include, but not be limited to (a)
all policies issued on the policy forms included in the list of base codes set forth on Schedule
1.1(A) and which: (i) are effected, bound or issued on or prior to the Effective Date; and (ii)
are in force as of the Effective Date; or (iii) are subject to being renewed or reinstated
in accordance with their terms on the Effective Date; and (b) all individual life policies which
are required to be issued by the Company prior to or after the Effective Date following the
exercise of conversion rights in accordance with the terms of the individual life policies
coinsured by the Reinsurer under this Agreement.


 


 









 





“Policyholders” means policyholders, insureds and assignees under the Policies and
Post-Closing Policies.



“Post-Closing Policies” means the policies issued by ALIAC after the Effective Date
pursuant to Article V of the Asset Purchase Agreement.



“Premiums” means premiums, considerations, deposits and similar receipts with respect
to the Policies or Post-Closing Policies.



“Producers” mean all LBMs, MGAs, brokers, agents, general agents, COLI specialty brokers,
re-enrollers under the Company’s sponsored life products, broker-dealers, producers or other
Persons who market or produce the Policies and who (a) have been appointed by the Company, and (b)
are entitled to receive Commissions from the Company.



“Recapture Fee” means the amount determined in accordance with the formula set forth on
Exhibit A hereto, which is payable by the Reinsurer to the Company in connection with recapture of
the Policies and Post-Closing Policies by the Company pursuant to Section 9.4 hereof.



“Recapture Rights” mean the right of the Company to recapture the Policies and Post
Closing Policies pursuant to Section 9.4 hereof.



“Reinsured Liabilities” means the Liabilities reinsured pursuant to this Agreement.



“Reinsurer Extra Contractual Obligations” means: (a) all Extra Contractual
Obligations to the extent such obligations arise out of acts, errors or omissions occurring (or,
in the case of omissions, failing to occur) at any
time on or after the Effective Date by any of the Reinsurer or its directors, officers,
employees, Affiliates, agents, representatives, successors and assigns; (b) all of the
Sellers’ Extra Contractual Obligations except to the extent otherwise provided in Articles
VIII and IX of the Asset Purchase Agreement; and (c) all liabilities and obligations
(exclusive of obligations rising under the express terms and conditions of the Policies and
Post-Closing Policies and the other Liabilities) to the extent such obligations arise out of or
relate to the Company’s administration of claims, Non-Guaranteed Elements, and other aspects of
or relating to the Policies or the Post-Closing Policies on and after the Effective Date pursuant
to the recommendations from the Reinsurer pursuant to this Agreement, the NY Administrative
Services Agreement or the Transition Services Agreement.



“Required Balance” means one hundred percent (100%) of the amount equal to (a) the Reserves on
the Policies and Post-Closing Policies, plus (b) other liabilities relating to the Policies and
Post-Closing Policies, which shall be calculated in accordance with the methodology set forth
on Exhibit D hereto, minus (c) the amount of outstanding loans under the Policies and
Post-Closing Policies (to the extent such loans constitute admitted assets under Connecticut SAP).



“Reserves” means the sum of all reserves and liabilities required to be maintained by the
Company for the Policies and Post-Closing Policies issued or reinsured by it, calculated
consistent with (a) the reserve requirements, statutory accounting rules and actuarial
principles applicable to the Company under the law of each state in which the Policies and
Post-Closing Policies were issued or delivered, and (b) otherwise in accordance with the
methodologies used by the Company to calculate the reserves and liabilities for the Policies and
Post-Closing Policies in accordance with Connecticut SAP and sound actuarial principles and any
valuation bases and methods of determining reserves as provided in the forms of Policies and
Post-Closing Policies, as applicable; provided, however, the term “Reserves” shall not include the Separate Account Reserves.



“Retained Contracts” means all contracts, agreements, leases, software licenses, rights,
obligations or other commitments of the Company that (a) arise out of or are related exclusively
to any business or operation of the Company other than the Business, or (b) arise out of or are
related in any way to the Business and which, in the case of both clauses (a) and (b) herein, are
not Transferred Contracts.


 


 









 





“Retained Liabilities” means the liabilities of the Company arising solely from any of the
following: (a) premium taxes due in respect of Premiums paid prior to the Effective Date; (b)
amounts payable prior to the Effective Date for returns or refunds of Premiums; (c) Commissions
payable with respect to the Policies to or for the
benefit of Producers, in any case payable prior to the Effective Date; (d) assessments and
similar charges in connection with participation by the Company, whether voluntary or
involuntary, in any guaranty association established or governed by any state or other
jurisdiction, arising on account of direct Premiums paid prior to the Effective Date; (e) the
Retained Contracts; (f) premiums, payments, fees or other consideration or amounts due
prior to the Effective Date under the Third-Party Reinsurance Agreements; (g) death claims under
the Policies which are reported prior to the Closing Date; (h) the pending litigation
described on Schedule 3.03 to the Asset Purchase Agreement; (i) interest stabilization reserve
relating to the Policies; (j) liabilities or obligations relating to the Business to the
extent such liabilities or obligations have been accrued for on Company’s books and records as of
11:59 p.m. Eastern Time on the day immediately preceding the Effective Date in accordance
with Connecticut SAP but are not reflected on the Final Closing Balance Sheet; and (k) all
other liabilities, obligations or indemnities expressly assumed by the Company under the
terms of the Asset Purchase
Agreement, this Agreement or any Ancillary Agreement.



“Revised Closing Balance Sheet” means the pro forma balance sheet of the Business as of the
Closing Date prepared and delivered by the Company to the Reinsurer in accordance with Article II
of the Asset Purchase Agreement.



“Secured Policies” means the Policies and Post-Closing Policies secured by the Security Trust
established under Section 9.4 hereof.



“Security Trust” means a trust account established with a Trustee for the purpose of
securing the Reinsurer’s obligations to the Company in accordance with Article IX hereof.



“Security Trust Agreement” means the trust agreement governing the Security Trust, which
shall be substantially in the form of Exhibit B hereto.



“Sellers’ Extra Contractual Obligations” means all Extra Contractual Obligations to the
extent such obligations arise out of acts, errors or omissions occurring (or, in the case of
omissions, failing to occur) at any time prior to the Effective Date by the Company or its
directors, officers, employees, Affiliates, agents or representatives.



“Separate Account Assets” means the assets described on Schedule 1.1(B) hereto which
constitute the Separate Accounts.



“Separate Account Reserves” means the reserves associated with the Variable Policies
which are held in the Company’s Separate Accounts, determined in accordance with Connecticut SAP.



“Separate Accounts” means the specific separate accounts of the Company identified in Schedule
1.1(C) hereto.



“Taxes” (or “Tax” as the context may require) means any tax, however denominated, imposed
by any federal, state, local, municipal, territorial, provincial or foreign government or any
agency or political subdivision of any such government (a “Taxing Authority”), including,
without limitation, any tax imposed under Subtitle A of the Code and any net income, alternative
or add-on minimum tax, gross income, gross receipts, sales, use, gains, goods and
services, production, documentary, recording, social security, unemployment,
disability, workers’ compensation, estimated, ad valorem, value added, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp, capital
stock, occupation, personal or real property, environmental or windfall profit tax,
premiums, custom, duty or other tax, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest, penalty, addition to tax or additional
amount imposed by any Taxing Authority relating thereto.



“Termination Date” shall mean the date on which this Agreement is terminated in
accordance with the terms and conditions of Article XII hereof.



“Third-Party Reinsurance Agreements” means the reinsurance agreements identified on
Schedule 1.1(D) hereto under which the Company has ceded liabilities to non-Affiliated
reinsurers with respect to the Policies.


 


 









 





“Transferred Assets” means: (a) cash or cash equivalents equal to the amount as of the
Closing Date of (A) the Closing Date Liabilities, minus (B) the amount of outstanding loans
under the Policies (to the extent such loans constitute admitted assets under Connecticut
SAP), minus (C) the aggregate amounts ascribed to the Other Assets in the Closing Balance
Sheet, Revised Closing Balance Sheet or Final Closing Balance Sheet, as applicable, and minus
(D) the Ceding Commission; (b) as between the parties hereto, all of the Company’s rights and
interests under the Policies to receive principal and interest paid on policy loans on or after
the Effective Date; and (c) as between the parties hereto, all of the Company’s rights and
interests to premiums due or to become due, premiums deferred and uncollected, premium adjustments and any and all amounts,
payments or consideration which are or were held, received or collected by the Company on or after
the Effective Date, or which are now due or will become due from any source under or in
connection with the Policies except, however, to the extent that any such premiums, adjustments,
amounts, payments or consideration are included within clause (a) herein.



“Transferred Contracts” means: (a) the contracts, agreements, leases, software licenses,
rights, obligations or other commitments of the Company (to the extent freely assignable) used
exclusively by the Company in the Business (but excluding the Policies and the Distribution
Agreements); and (b) contracts, agreements, leases, software licenses, rights, obligations,
and other commitments relating to the Business (but excluding the Policies and the
Distribution Agreements) identified on Schedule 3.17 to the Asset Purchase Agreement or listed
on the supplement to such Schedule 3.17 contemplated by the Asset Purchase Agreement.



“Transition Services Agreement” means the Transition Services Agreement among the Company,
ALIC, The Lincoln National Life Insurance Company and the Reinsurer.



“Trustee” means a bank or trust company reasonably acceptable to the parties to this
Agreement, which acts as trustee of a Security Trust pursuant to the terms and conditions of a
Security Trust Agreement; provided, however, that such bank or trust company shall (a) possess
assets of at least $10 billion; and (b) be rated at least A1 by each of Moody’s Investors
Services, Inc. and A+ by Standard & Poor’s Corporation.



“Variable Policies” means the individual variable life insurance policies issued by the
Company, which are funded, in whole or in part, by the Separate Accounts.



ARTICLE II

BASIS OF COINSURANCE AND BUSINESS COINSURED




2.1 Coinsurance. Subject to the terms and conditions of this Agreement, the Company hereby
cedes or retrocedes, as the case may be, on a coinsurance basis to the Reinsurer as of the
Effective Date, and the Reinsurer hereby accepts and agrees to indemnity reinsure on a
coinsurance basis as of the Effective Date, one hundred percent (100%) of all Liabilities
arising under or relating to the Policies and the Post-Closing Policies. This Agreement shall not
continue or create any legal relationship whatsoever between the Reinsurer and Persons who own or
are insured under the Policies and the Post-Closing Policies. Except as expressly provided herein,
this Agreement does not reinsure any policy written by the Company or the Reinsurer after
the Effective Date. The reinsurance effected under this Agreement shall be maintained in
force, without reduction, unless such reinsurance is terminated, reduced or recaptured as
provided herein.



2.2 Reinsurer Extra Contractual Obligations. In addition to the Reinsurer’s coinsurance
of Liabilities, the Reinsurer hereby accepts and agrees to assume and discharge one hundred
percent (100%) of all Reinsurer Extra Contractual Obligations.



2.3 Reinstatements, Conversions and Exchanges. In no event shall the coinsurance provided
hereunder with respect to a particular Policy be in force and binding unless such Policy is in
force and binding as of the Effective Date; provided, however that the Policies and Post-Closing
Policies reinsured shall include (a) all Post-Closing Policies; (b) all lapsed or surrendered
Policies or Post-Closing Policies reinstated in accordance with their terms on and after the
Effective Date; and (c) all Policies or Post-Closing Policies issued on and after the
Effective Date pursuant to (i) any option provided under the terms of any Variable Policy issued
at any time by the Company for the exchange of such contract for a non-variable life insurance
contract; or (ii) any option provided under the terms
of any of the Policies or Post-Closing Policies for the conversion of such Policies or
Post-Closing Policies to an individual life insurance policy. Upon the reinstatement of any
lapsed or surrendered Policy or Post-Closing Policy, or the issuance of any exchange or converted
life insurance Policy or Post-Closing Policy, such Policy or Post-Closing Policy shall be
automatically reinsured hereunder. If the Company collects Premiums in arrears from a Policyholder or ceding company of a reinstated Policy or Post-Closing Policy, the
Company shall pay to the Reinsurer all Premiums so collected.


 


 









 





2.4 Certain Policy Elements. From and after the Effective Date, the Reinsurer may make
recommendations to the Company with respect to (a) the Non-Guaranteed Elements of the
Policies and the Post-Closing Policies; and (b) the reserving methodology related to the Policies
and the Post-Closing Policies (including changes required by Applicable Law, GAAP or Connecticut
SAP). The Company shall set all Non-Guaranteed Elements of the Policies and the
Post-Closing Policies, taking into account the recommendations of the Reinsurer with respect
thereto. Notwithstanding the foregoing, however, the Reinsurer hereby acknowledges and agrees
that any claim, liability or obligation, to the extent such claim, liability or obligation
arises out of or relates to the Company’s establishment of Non-Guaranteed Elements pursuant to
the Reinsurer’s recommendations with respect thereto, is included within the Reinsurer Extra
Contractual Obligations that the Reinsurer has expressly assumed pursuant to the Asset Purchase
Agreement, this Agreement and the other Ancillary Agreements and for which the Reinsurer has
agreed to indemnify the Company pursuant to Article IX of the Asset Purchase Agreement and Article
IX of this Agreement.



2.5 Reserves. On and after the Closing Date, the Reinsurer shall establish and
maintain as a liability on its statutory financial statements Reserves for the Policies and
the Post-Closing Policies ceded hereunder,
calculated consistent with (a) the reserve requirements, statutory accounting rules and
actuarial principles applicable to the Company under the law of the State of New York and each
state in which the Policies and the Post-Closing Policies were issued or delivered; and (b)
otherwise in accordance with the methodologies used by the Company to calculate the reserves and
liabilities for the Policies and the Post-Closing Policies in accordance with Connecticut SAP
and sound actuarial principles and any valuation bases and methods of determining
reserves as provided in the forms of Policies and Post-Closing Policies. The Reinsurer shall
provide the Company, not less than annually, with copies of all actuarial opinions and actuarial
memoranda and all reserve
evaluations pertaining to the Reserves, including, without limitation, any actuarial opinions
and reserve evaluations performed by independent actuaries, auditors or other outside
consultants. At the option of the Company, the Company may, at its own cost at any time following
the Closing, examine the Books and Records maintained by the Reinsurer and review its reserve
procedures. If the results of such examination are not reasonably satisfactory to the Company,
the Reinsurer shall, at the Company’s request and expense, obtain and deliver to the Company an
actuarial opinion as to the adequacy of the Reserves, produced by an independent actuary
acceptable to the Company. The Reinsurer shall promptly adjust the amount of the Reserves and
implement appropriate changes to its reserve procedures if an actuarial opinion, reserve
evaluation or review,
including, without limitation, any evaluation or review made by the Company, reasonably
indicates an inadequacy in the Reserves or in the Reinsurer’s reserve procedures.



2.6 Separate Account Reserves. Notwithstanding anything to the contrary herein, effective as
of the Effective Date the Company and the Reinsurer shall reinsure the Separate Account Reserves
on a modified coinsurance basis, subject to the execution and delivery of the NY Modified
Coinsurance Agreement; provided, however, that the Company shall retain, control and own all
Separate Account Assets and Separate Account Reserves whether or not the NY Modified
Coinsurance Agreement is executed and delivered.



2.7 Policy Changes or Reductions. In the event of a material change in the provisions and
conditions of a Policy or a Post-Closing Policy (provided that such change is not in violation
of Section 4.4 hereof), a corresponding change in the related coinsurance and appropriate cash
adjustments shall be made consistent with the policy change rules of the Company. If the face
amount of a Policy or a Post-Closing Policy is reduced or increased, the amount coinsured by the
Reinsurer shall be reduced or increased accordingly.


 


 









 





ARTICLE III

ACCOUNTINGS AND TRANSFER OF ASSETS




3.1 Ceding Commission. The Reinsurer shall pay to the Company on the Closing Date a Ceding
Commission in the amount of $116,487,000. The Ceding Commission shall be credited to the
Company as a reduction in the amount of cash or cash equivalents included within the Transferred
Assets to be transferred by the Company to the Reinsurer at Closing in accordance with the provisions of Sections 3.2
hereof.



3.2 Transfer of Assets. On the Closing Date, the Company shall sell, assign and transfer to
the Reinsurer as reinsurance premium all of the Company’s right, title and interest in the
Transferred Assets, including, without limitation, cash or cash equivalents in an aggregate amount (subject to adjustment
pursuant to Section 3.3 hereof) equal to the amount as of the Closing Date of: (A) Closing Date
Liabilities, minus (B) the amount of outstanding loans under the Policies (to the extent such loans
constitute admitted assets under Connecticut SAP), minus (C) the aggregate amounts ascribed to
the Other Assets, and minus (D) the Ceding Commission, all as reflected on that part of the
Closing Balance Sheet relating to the Policies reinsured hereunder.



3.3 Post-Closing Adjustments. (a) In the event that the aggregate amount of cash or cash
equivalents transferred by the Company to the Reinsurer on the Closing Date is less than the
amount of (A) Closing Date Liabilities, minus (B) the amount of outstanding loans under the
Policies (to the extent that such loans constitute admitted assets under Connecticut SAP),
minus (C) the aggregate amounts ascribed to the Other Assets, and minus (D) the Ceding
Commission, all as reflected on that part of the Final Closing Balance Sheet relating to the
Policies reinsured hereunder, the Company shall transfer to the Reinsurer additional cash or
cash equivalents equal to the amount of such difference, together with interest thereon from
and including the Closing Date to, but not including the date of, such transfer computed at LIBOR.



(b) In the event that the aggregate amount of cash or cash equivalents transferred to the
Reinsurer on the Closing Date is greater than the amount of (A) Closing Date Liabilities, minus
(B) the amount of outstanding loans under the Policies (to the extent that such loans constitute
admitted assets under Connecticut SAP), minus (C) the aggregate amounts ascribed to the Other
Assets, and minus (D) the Ceding Commission, all as reflected on the portion of the Final
Closing Balance Sheet relating to the Policies reinsured hereunder, the Reinsurer shall
transfer to the Company cash or cash equivalents equal to the amount of such difference, together
with interest thereon from and including the Closing Date to, but not including the date of, such
transfer computed at LIBOR.



3.4 Interim Monthly Accountings. The Company shall provide the Reinsurer with an
Interim Monthly Accounting as of the end of each calendar month, no later than fifteen (15)
Business Days after the end of such month; provided, however, that the first Interim Monthly
Accounting shall be provided to the Reinsurer no later than fifteen (15) Business Days after the
end of the month in which the Closing Date fell and the final Interim Monthly Accounting shall
be delivered no later than fifteen (15) Business Days after the date on which the Company is
no longer providing accounting services under the Transition Services Agreement. The
Company shall provide such Accounting in a format that is mutually acceptable to the Company and
the Reinsurer.



3.5 Monthly Accountings. Beginning with and after the first calendar month during which the
Company is no longer providing accounting services under the Transition Services Agreement, the
Reinsurer shall provide the Company with a Monthly Accounting as of the end of each calendar month,
no later than fifteen (15) Business Days after the end of such month; provided, however, that
the first Monthly Accounting shall be provided to the Company no later than fifteen (15) Business
Days after the end of the first calendar month during which the
Company is no longer providing accounting services pursuant to the Transition Services
Agreement and the Reinsurer shall deliver the final Monthly Accounting no later than fifteen (15)
Business Days after the Termination Date; provided, further, that in the event that subsequent
data or calculations require revision of the final Monthly Accounting, the required revision
and any appropriate payments shall be made in cash by the parties five (5) Business Days after
they mutually agree as to the appropriate revision. The Reinsurer shall provide such Accounting
in a format that is mutually acceptable to the Company and the Reinsurer.



3.6 Monthly Payments. If an Accounting reflects a balance due to the party to which the
Accounting is delivered and/or the Security Trust, the amount(s) shown as due shall be paid
within five (5) Business Days of the delivery of the Accounting. If (a) an Accounting
reflects a balance due the party that prepared the Accounting or the Security Trust and (b)
the party receiving the Accounting does not object to the Accounting within five (5) Business
Days of its delivery, the amount(s) shown as due shall be paid within seven (7) Business
Days after the date on which the Accounting was delivered. Any dispute over any amount shown
on an Accounting that cannot be amicably resolved by the parties shall be resolved pursuant to
the procedures set forth in Article X. If the Security Trust is established while the Company is collecting funds
pursuant to the Transition Services Agreement, the Company may remit directly to the Trustee on
behalf of the Reinsurer that portion of any amount due the Reinsurer needed to fully fund the
Security Trust and the balance only of any amount due the Reinsurer shall be remitted to the
Reinsurer.


 


 









 





3.7 Delayed Payments. If there is a delayed settlement of any payment due hereunder,
interest will accrue on such payment at the three month London Interbank Offering Rate (LIBOR) as
published in The Wall Street Journal, Eastern Edition, in effect on the day such payment is due.
For purposes of this Section 3.7, a payment will be considered overdue, and such interest
will begin to accrue, on the date which is five (5) Business Days after the date such payment is
due.



3.8 Offset Rights. Any debts or credits incurred on and after the Effective Date in
favor of or against either the Company or Reinsurer with respect to this Agreement are deemed
mutual debts or credits, as the case may be, and shall be set off, and only the balance shall be allowed or paid.



3.9 Third-Party Reinsurance. In the event the Reinsurer desires to retrocede to any
third-party reinsurer (whether or not Affiliated with the Reinsurer) any portion of the
Liabilities reinsured by it under this Agreement, the Reinsurer shall be responsible for obtaining such retrocessional coverage at its sole expense.



3.10 Premium Taxes and Assessments. The Reinsurer shall pay the Company on a monthly basis an
amount equal to two percent (2%) of the gross Premiums on the Policies and the Post-Closing
Policies collected by the Reinsurer, as an advance against the Reinsurer’s liabilities for
premium Taxes payable by the Company and assessments to the Company by state guaranty or
insolvency or similar associations or funds, to the extent that such Taxes and assessments are
allocable to Premiums paid on or after the Effective Date. Amounts payable pursuant to this
Section 3.10 shall be reflected on the Accountings delivered hereunder and shall be paid
pursuant to the provisions of Section 3.6. Not later than June 30 after each calendar year falling
within the term of this Agreement, the Company shall provide the Reinsurer with an accounting of
its actual premium Tax and guaranty fund assessment liability with respect to the Policies and the
Post-Closing Policies for such calendar year (without giving effect to any credits due to the
Company for any guaranty fund assessments paid by the Company prior to Closing). If such accounting reflects amounts owed to the Reinsurer, the Company shall
pay such amounts in cash to the Reinsurer with the accounting. If it reflects amounts owed to the
Company (including any interest or penalties relating to underpayment of estimated Taxes based on
information provided by the Reinsurer), the Reinsurer shall pay such amounts in cash to the
Company withinfive (5) Business Days of receiving the accounting. The Company shall pay or
provide the Reinsurer with the benefit of guaranty fund assessments previously reimbursed by the
Reinsurer to the extent such payments were actually utilized to reduce the Company’s tax
liabilities. The utilization of any outstanding assessments by the Company shall be determined on
a FIFO basis (those assessments made in earlier years shall be considered used first).



ARTICLE IV

POLICY ADMINISTRATION




4.1 Interim Servicing. During the period from the Effective Date through the
termination of the Transition Services Agreement with respect to each service provided by the
Company thereunder, the Company has agreed to continue to provide certain Policyholder
services for the Policies and the Post-Closing Policies.



4.2 Transfer of Servicing Obligations. On and after the date on which a service is no longer
being provided pursuant to the Transition Services Agreement, and pursuant to the NY
Administrative Services Agreement, the Reinsurer has agreed to provide Policyholder service
for the Policies and the Post-Closing Policies and to supply to the Company on a timely basis
copies of accounting and other records pertaining to such service. The parties hereby agree
that the Policies and the Post-Closing Policies shall be administrated pursuant to the NY
Administrative Services Agreement. Reinsurer’s compensation for all services provided to the
Company pursuant to the NY Administrative Services Agreement shall be included in the
reinsurance premium paid by the Company to Reinsurer pursuant to Section 3.2 above and the
Company shall not be obligated to pay any additional monies to Reinsurer for such
administrative services.


 


 









 





4.3 Regulatory Matters. If the Company or the Reinsurer receives notice of, or otherwise
becomes aware of any regulatory inquiry, investigation or proceeding relating to the Policies
or the Post-Closing Policies, the Company or the Reinsurer, as applicable, shall promptly
notify the other party thereof, whereupon the parties shall cooperate in good faith and use
their respective commercially reasonable efforts to resolve such matter in a mutually
satisfactory manner, in light of all the relevant business, regulatory and legal facts and
circumstances. The parties recognize that, as the issuing company, the Company retains ultimate
responsibility for resolution of the matters described in this section.



4.4 Policy Changes. Neither the Company nor the Reinsurer shall make any changes to the
Company’s policy forms except with the express written consent of the other party (which
consent shall not be unreasonably withheld) or if (a) the changes are required by Applicable Law
and (b) the Reinsurer gives the Company prior notice in writing of the nature of such required
changes in the manner provided by the NY Administrative Services Agreement.



ARTICLE V

OVERSIGHTS




5.1 Oversights. Inadvertent delays, errors or omissions made in connection with this
Agreement or any transaction hereunder shall not relieve either party from any liability which
would have attached had such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after discovery, and provided that
the party making such error or omission or responsible for such delay shall be responsible for any
additional liability which attaches as a result.



ARTICLE VI

CONDITIONS PRECEDENT




6.1 Conditions Precedent. This Agreement shall not become effective unless and until (a)
all state insurance regulatory authorities whose approval is required shall have approved
this Agreement in writing, and (b) all applicable waiting periods under any federal or state statute or regulation shall have expired
or been terminated.



ARTICLE VII

DUTY OF COOPERATION




7.1 Cooperation. Each party hereto shall cooperate fully with the other in all reasonable
respects in order to accomplish the objectives of this Agreement.



ARTICLE VIII

DAC TAX




8.1 Election. In accordance with Treasury Regulations Section 1.848-2(g)(8), the
Company and Reinsurer hereby elect to determine specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1)
of the Code.



(a) All uncapitalized terms used herein shall have the meanings set forth in the
regulations under Section 848 of the Code.



(b) The party with net positive consideration under this Agreement for each taxable year
shall capitalize specified policy acquisition expenses with respect to this Agreement without
regard to the general deductions limitation of Section 848(c)(1) of the Code.



(c) Both parties agree to exchange information pertaining to the amount of net consideration
under this Agreement each year to ensure consistency.


 


 









 





(d) The Company shall submit a schedule to the Reinsurer by May 1 of each year of its
calculation of the net consideration under this Agreement for the preceding taxable year. This
schedule of calculations shall be accompanied by a statement signed by an authorized representative of the Company stating that
the Company shall report such net consideration in its federal income tax return for the
preceding taxable year.



(e) The Reinsurer may contest such calculation by providing an alternative
calculation to the Company in writing within thirty (30) days after the date on which the
Reinsurer receives the Company’s calculation. If the Reinsurer does not so notify the Company, the Reinsurer shall report the net consideration
under this Agreement as determined by the Company in the Reinsurer’s federal income tax
return for the preceding taxable year.



(f) If Reinsurer contests the Company’s calculation of the net consideration under
this Agreement, the parties shall act in good faith to reach an agreement as to the correct amount
of net consideration within thirty (30) days after the date on which the Reinsurer submits its alternative calculation. If Reinsurer and
the Company reach agreement as to the amount of net consideration under this Agreement,
each party shall report such amount in its federal income tax return for the preceding taxable
year.



If, during such period, Reinsurer and the Company are unable to reach agreement, they shall
promptly thereafter cause independent accountants of nationally recognized standing
reasonably satisfactory to Reinsurer and the Company (who shall not have any material
relationship with Reinsurer or the Company), promptly to review (which review shall commence no
later than five (5) days after the selection of such independent accountants), this Agreement
and the calculations of Reinsurer and the Company for the purpose of calculating the
net consideration under this Agreement. In making such calculation, such independent
accountants shall consider only those items or amounts in the Company’s calculation as to
which the Reinsurer has disagreed.



Such independent accountants shall deliver to Reinsurer and the Company, as promptly
as practicable (but no later than sixty (60) days after the commencement of their review), a
report setting forth such calculation, which calculation shall result in a net consideration
between the amount thereof shown in the Company’s calculation delivered pursuant to Section 8.1(d)
and the amount thereof shown in Reinsurer’s calculation delivered pursuant to Section 8.1(e).
Such report shall be final and binding upon Reinsurer and the Company. The fees, costs and
expenses of such independent accountant shall be borne (i) by the Company if the difference
between the net consideration as calculated by the independent accountants and the Company’s
calculation delivered pursuant to Section 8.1(d) is greater than the difference between the net
consideration as calculated by the independent
accountants and Reinsurer’s calculation delivered pursuant to Section 8.1(e), (ii) by the
Reinsurer if the first such difference is less than the second such difference, and (iii)
otherwise equally by Reinsurer and the Company.



(g) This election shall be effective for the 1998 taxable year and for all subsequent taxable
years for which this Agreement remains in effect.



(h) Both parties agree to attach a schedule to their respective federal income tax returns
for the first taxable year ending after the date on which this election becomes effective which
identifies this Agreement as a reinsurance
agreement for which an election has been made under Treasury Regulations Section 1.848-2(g)(8).



ARTICLE IX

INDEMNIFICATION AND RECAPTURE




9.1 Reinsurer’s Obligation to Indemnify. Subject to any limitation contained in the Asset
Purchase Agreement, Reinsurer hereby agrees to indemnify, defend and hold harmless the Company and
its directors, officers, employees, representatives (excluding the Producers), Affiliates,
successors and permitted assigns (collectively, the “Company Indemnified Parties”) from and
against all Losses asserted against, imposed upon or incurred by any Company Indemnified Party
arising from: (i) the Liabilities; (ii) the Reinsurer Extra Contractual
Obligations (including, but not limited to, all claims that constitute Sellers’ Extra Contractual
Obligations but for which the Company’s indemnification obligation has expired pursuant
to Section 8.01(c) of the Asset Purchase Agreement); (iii) any breach or nonfulfillment by
Reinsurer of, or any failure by Reinsurer to perform, any of the covenants, terms or conditions
of, or any duties or obligations under, this Agreement; and (iv) any enforcement of this
indemnity.


 


 









 





9.2 Company’s Obligation to Indemnify. Subject to any limitation contained in the
Asset Purchase Agreement, the Company hereby agrees to indemnify, defend and hold harmless
the Reinsurer and its directors, officers, employees, representatives (excluding the Producers), Affiliates, successors and
permitted assigns (collectively, the “Reinsurer Indemnified Parties”) from and against all Losses
asserted against, imposed upon or incurred by any Reinsurer Indemnified Party arising from:
(i) the Retained Liabilities; (ii) Sellers’ Extra Contractual Obligations (but only to the
extent that the Company’s indemnification obligation for Sellers’ Extra Contractual
Obligations has not expired pursuant to Section 8.01(c) of the Asset Purchase Agreement); (iii)
any breach or nonfulfillment by the Company of, or any failure by the Company to perform, any of the
covenants, terms or conditions of, or any duties or obligations under, this Agreement; and
(iv) any enforcement of this indemnity.



9.3 Certain Definitions and Procedures. For purposes of this Article IX, “Loss” or “Losses”
shall mean actions, claims, losses, liabilities, damages, costs, expenses (including reasonable
attorneys’ fees), interest and penalties. In the event either Reinsurer or the Company shall have
a claim for indemnity against the other party under the terms of this Agreement, the parties
shall follow the procedures set forth in Sections 9.02, 9.03 and 9.04 of the Asset Purchase
Agreement.



9.4 Security Trust Account and Recapture Rights.



(a) Events of Default. From and after the Closing Date, any of the following occurrences
shall constitute an event that entitles the Company to require the Reinsurer to deposit and
maintain assets in a Security Trust in accordance with the terms and conditions of this Section 9.4 (individually or collectively, as
the context indicates, an “Event of Default”):




	 	(i)	 	the Reinsurer ceases to maintain any of (A) an A.M.Best Company rating
of at least B++, (B) a Standard & Poor’s Corporation insurer financial strength
rating of at least BBB-, and (C) Moody’s Investors Services, Inc. claims-paying
ability rating of at least Baa3; or
	 
	 	(ii)	 	the Reinsurer fails to (A) maintain a ratio of (i) Total Adjusted Capital
(as defined in the Risk-Based Capital (RBC) Model Act or in the rules and procedures
prescribed by the NAIC with respect thereto, in each case as in effect as of
December 31, 1997) to (ii) the Company Action Level RBC (as defined in the Risk-Based
Capital (RBC) Model Act or in the rules and procedures prescribed by the NAIC with
respect thereto, in each case as in effect as of December 31, 1997) of at least 185
percent, or (B) maintain a Standard & Poor’s Corporation’s capital adequacy ratio
(calculated in accordance with the rules and procedures in effect on the Contract
Date) of at least 115 percent; or
	 
	 	(iii)	 	(A) the Reinsurer ceases to be licensed as a life insurer or ceases to
qualify as an accredited reinsurer in a particular jurisdiction under circumstances
that would cause the Company to be denied credit for reinsurance ceded hereunder on
the financial statements filed by the Company in said jurisdiction, or (B) the
Company is denied credit for reinsurance ceded hereunder on the financial statements
filed by the Company in any jurisdiction: or
	 
	 	(iv)	 	a petition for insolvency, rehabilitation, conservation, supervision,
liquidation or similar proceeding is filed by or against the Reinsurer or its
statutory representative in any jurisdiction; or
	 
	 	(v)	 	any Person other than one of the Affiliates of the Reinsurer in existence
on the Closing Date acquires or assumes (A) Control of the Reinsurer, whether by
merger, consolidation, stock acquisition, or otherwise (including, without
limitation, the acquisition or assumption of the power to direct the Reinsurer’s
management and policies by means of a management or services agreement or other
contractual arrangement) or (B) all or substantially all of the assets or liabilities
of the Reinsurer by reinsurance (whether indemnity or assumption) or otherwise;
	 
	 	(vi)	 	this Agreement is terminated in accordance with its terms; or
	 
	 	(vii)	 	an Event of Default occurs pursuant to Section 9.07(a)(vii) of the Asset Purchase
Agreement.





The occurrence of any Event of Default shall entitle the Company to elect to require the
Reinsurer to establish a Security Trust regardless of whether or not such an occurrence constitutes
a Recapture Event, provided, that the Company has not delivered an Election Notice electing
recapture.


 


 









 





(b) Recapture Events. From and after the Closing Date, and whether or not an Event of
Default has occurred or Security Trust has been established pursuant to Section 9.4(a)
hereof, any of the following occurrences shall constitute an event that entitles the Company
to exercise the recapture remedy set forth in this Section 9.4 (individually or collectively,
as the context indicates, a “Recapture Event”):




	 	(i)	 	Reinsurer ceases to maintain any of (A) an A.M. Best Company rating of
at least B+, (B) a Standard & Poor’s Corporation insurer financial strength
rating of at least BB+, and (C) a Moody’s Investors Services, Inc.
claims-paying ability rating of at least Ba1; or
	 
	 	(ii)	 	Reinsurer fails to (A) maintain a ratio of (i) Total Adjusted Capital
(as defined in the Risk-Based Capital (RBC) Model Act or in the rules and
procedures prescribed by the NAIC with respect thereto, in each case as in
effect as of December 31, 1997) to (ii) the Company Action Level RBC (as
defined in the Risk-Based Capital (RBC) Model Act or in the rules and procedures
prescribed by the NAIC with respect thereto, in each case as in effect as of
December 31, 1997) of at least 160 percent; or (B) maintain a Standard & Poor’s
Corporation’s capital adequacy ratio (calculated in accordance with the rules
and procedures in effect on the Contract Date) of at least 100 percent; or
	 
	 	(iii)	 	a petition for insolvency, rehabilitation, conservation, supervision,
liquidation or similar proceeding is filed by or against the Reinsurer or its
statutory representative in any jurisdiction; or
	 
	 	(iv)	 	within thirty (30) calendar days of its receipt of a demand therefor
delivered pursuant to Section 9.4(d), Reinsurer fails to execute the Security
Trust Agreement or deposit and maintain asset in trust on the terms provided in
Section 9.4(f) and in the Security Trust Agreement, provided, however, that the
Company executes such Security Trust Agreement contemporaneously with the delivery
of the demand; or
	 
	 	(v)	 	this Agreement is terminated in accordance with its terms; or
	 
	 	(vi)	 	within thirty (30) calendar days of the termination of the NY
Administrative Services Agreement in accordance with its terms, (A) Reinsurer does
not take all steps necessary to arrange for a third-party administrator acceptable to
the Company in its sole discretion, reasonably exercised, to provide all
administrative services to be provided pursuant to the terminated NY Administrative
Services Agreement at the cost of Reinsurer or (B) such third-party administrator
fails to enter into an administrative service agreement with the Company,
satisfactory in form and substance to the Company in its sole discretion, reasonably
exercised; or
	 
	 	(vii)	 	a judgment or order is entered by a court of competent jurisdiction
declaring the invalidity of the Security Trust or finding that the assets held in a
Security Trust are general assets of Reinsurer or otherwise do not constitute a
“secured claim” within the meaning of the laws of Reinsurer’s domiciliary state;
or
	 
	 	(viii)	 	a Security Trust is established for the benefit of the Company pursuant to Section
9.4(a)(iii) and the Company is denied credit on its financial statements filed in
any jurisdiction with respect to the reinsurance provided by the Reinsurer,
and the Reinsurer does not take all steps necessary to enable the Company to
obtain credit on its financial statements within thirty (30) calendar days of
the Reinsurer’s receipt of written notice from the Company as to the
occurrence described herein; or
	 
	 	(ix)	 	a Recapture Event occurs pursuant to Section 9.07(b)(ix) of the Asset Purchase Agreement.





The occurrence of any Recapture Event shall entitle the Company to elect recapture remedies
hereunder regardless of whether (1) such an occurrence also constitutes an Event of Default, (2)
the Reinsurer has previously established a Security Trust or (3) the Company has previously
delivered an Election Notice requiring Reinsurer to establish a Security Trust.


 


 









 





(c) Notice to The Company. The Reinsurer shall provide the Company with:




	 	(i)	 	written notice of any downgrade in the Reinsurer’s A. M. Best Company
rating or its Standard & Poor’s Corporation insurer financial strength rating or
its Moody’s Investors Services, Inc. claims-paying ability rating within three (3)
Business Days after the Reinsurer’s receipt of notice of such adjustment;
	 
	 	(ii)	 	a written report of the calculation of the Reinsurer’s Total Adjusted Capital and Authorized
Control Level RBC (based on the Risk-Based Capital (RBC) Model Act and/or the
rules and procedures in effect as of December 31, 1997) and Standard & Poor’s
Corporation’s capital adequacy ratio (based on the rules and procedures in effect
on the Contract Date) as of the end of each calendar quarter within fifteen (15)
Business Days after the end of such quarter;
	 
	 	(iii)	 	written notice of the occurrence of any Event of Default or Recapture
Event within two (2) Business Days after its occurrence; and
	 
	 	(iv)	 	not less than annually, a written report, in form reasonably satisfactory
to the Company, certifying that no Event of Default or
Recapture Event has occurred during the period covered by such report or is
continuing as of the last day of such period, together with the appropriate
calculations and back up reasonably necessary to substantiate the basis of the
Reinsurer’s certification.





The Company may, at its own expense, review the Reinsurer’s books and records to confirm the risk
based capital calculations provided by the Reinsurer pursuant to Section 9.4(c)(ii). In addition,
Reinsurer shall (A) cooperate fully with the Company and promptly respond to the Company’s
inquiries from time to time concerning the Reinsurer’s financial condition, operating
results and any events, occurrences or other matters which arise on and after the Effective Date
and which reasonably relate to the Business or Reinsurer’s ability to perform and discharge its
obligations under the Asset Purchase Agreement, this Agreement or the Ancillary Agreements and
(B) provide to the Company such financial statements, reports, internal control letters and
reports prepared by auditors and other third parties, SAS-70 reports and other documents of the
Reinsurer as the Company may reasonably request from time to time.



(d) Election of Remedies. Upon the occurrence of any Event of Default, the Company may elect
to require the Reinsurer to maintain assets in a Security Trust for the purpose of securing the
Reinsured Liabilities under the Policies and Post-Closing Policies ceded to it pursuant to
this Agreement. Upon the occurrence of any Recapture Event, the Company may elect to recapture,
subject to the terms and conditions set forth below all, but not less than all, of the Policies
and the Post-Closing Policies ceded hereunder. The Company shall give the Reinsurer written
notice of its election (the “Election Notice”) specifying (x) the grounds for the exercise of its
remedies pursuant to this Section 9.4 and either (y) if it elects to recapture the Policies and
Post-Closing Policies, the fact of recapture, and the effective date of recapture or (z) if it
elects a Security Trust, the fact that the Reinsurer is obligated to execute the Security Trust
Agreement and to deposit and maintain assets in the Security Trust for the
purpose of securing such Reinsured Liabilities (the “Secured Policies”). The Reinsurer may
unwind and terminate a Security Trust if, prior to the second anniversary of the date on which
the Event of Default which originally gave rise to the establishment of such Security Trust
occurred, both (A) the original Event of Default has been cured or remediated, and (B) no new
Event of Default or Recapture Event has occurred; provided that (i) prior to such second
anniversary date, the Company has not properly provided an Election Notice to recapture the
Policies and Post-Closing Policies ceded by it; and (ii) the termination of the Security
Trust shall not prejudice or be deemed a waiver of the Company’s right to demand the establishment
of a new Security Trust or elect recapture upon the occurrence of any other or new Event of
Default or Recapture Event.


 


 









 





(e) Recapture. Any recapture by the Company shall not be deemed to have been consummated
until (i) the Company has given the Reinsurer an Election Notice pursuant to Section 9.4(d);
and (ii) the Company has received payment of the entire Recapture Fee as determined in accordance with Exhibit A hereto.
If the Reinsured Liabilities under the Policies and Post-Closing Policies to be recaptured are
secured pursuant to a Security
Trust established pursuant to Section 9.4(f), the Company may, in its sole discretion,
withdraw assets from the Security Trust having an aggregate Market Value (determined pursuant to
the Security Trust Agreement governing such Security Trust) not to exceed the amount of the
Recapture Fee. The Reinsurer shall promptly pay the Company the full amount of the Recapture Fee,
reduced by the amount, if any, withdrawn from the Security Trust. Following the
consummation of the recapture of Policies and Post-Closing Policies pursuant to
this Section 9.4(e), no additional premiums, deposits or other amounts payable under such
Policies and Post-Closing Policies shall be ceded to the Reinsurer hereunder.



(f) Security Trust. (i) Establishment of the Trust Account. Within thirty (30) calendar
days of the Company’s delivery to the Reinsurer of an Election Notice requiring that the Reinsurer
secure the Reinsured Liabilities ceded by the Company with a Security Trust, the Reinsurer
shall execute the Security Trust Agreement and deposit into an account with the Trustee (the
“Security Trust”), naming the Company as the sole beneficiary thereof, assets having a market
value in an amount no less than the Required Balance, for the purpose of securing the Reinsured
Liabilities under Secured Policies. The Security Trust Agreement shall be substantially in the
form of Exhibit B hereto.



(ii) Trust Assets. At the direction of the Reinsurer, the assets held in the Security
Trust shall be held in the form of (A) cash and cash-equivalents, (B) Certificates of deposit,
(C) obligations of the United States Government or its agencies, (D) investment grade bonds,
(E) whole (not participations) investment grade (as determined in accordance with the
Reinsurer’s internal rating systems) commercial mortgages; provided that the aggregate market
value of such commercial mortgages held in the Security Trust shall not exceed 15 percent of the
aggregate market value of the assets held in the Security Trust, and (F) straight Ginnie Mae,
Freddie Mac and Fannie Mae 30-year mortgage-backed securities rated AA+ and above; provided that the aggregate
market value of such mortgage-backed securities held in the Security Trust shall not exceed
15 percent of the aggregate market value of the assets held in the Security Trust; and provided,
further, that in the event a Security Trust is established pursuant to Section 9.4(a)(v), the
assets held in the Security Trust may be invested in accordance with the Reinsurer’s internal
investment policies for its individual life insurance business, a copy of which has been
provided to the Company. The aggregate Market Value of the assets held in the Security Trust
shall at all times be at least equal to the Required Balance. As long as the Security Trust
Agreement remains in force, the Reinsurer shall calculate the Required Balance as of the last day
of each calendar month and report the amount of the Required Balance to the Company and the
Trustee within ten (10) Business Days after the end of such month. In connection with such
calculation, the Company shall direct the Trustee to make the payment to the Reinsurer of any
amounts in the Security Trust which exceed the Required Balance, and Reinsurer shall promptly
deposit such additional permitted assets as may be necessary to increase the Market Value of
the Security Trust assets to the Required Balance. The form and duration of assets to be held
in the Security Trust shall be appropriate in light of the Reinsured Liabilities under the
Secured Policies. Prior to delivering any assets for deposit in the Security Trust, the Reinsurer shall execute assignments or endorsements in blank of all of the
Reinsurer’s right, title and interest in such assets (according to procedures set forth in
the Security Trust Agreement), so that the Company, or the Trustee upon the Company’s direction,
may whenever necessary negotiate title to any such assets without consent or signature from the
Reinsurer or any other entity.



(iii) Permitted Withdrawals. The Company may withdraw assets from the Security Trust at
any time and from time to time, notwithstanding any other provisions of the Asset Purchase
Agreement, this Agreement or any other Ancillary Agreement, and such assets may be utilized
and applied by the Company, or any successor by operation of law of the Company, including,
without limitation, any liquidator, rehabilitator, receiver or conservator of the Company,
without diminution because of insolvency on the part of the Company or Reinsurer; provided,
however, that the Company may only withdraw such assets for one or more of the following purposes:




	 	(A)	 	to reimburse the Company for any Reinsured Liabilities under the Secured Policies paid
by the Company to the extent not paid by the Reinsurer when due;
	 
	 	(B)	 	to make payment to the Reinsurer of any amounts that exceed the Required Balance;
	 
	 	(C)	 	to pay all or any portion of any Recapture Fee due in
connection with the recapture the Secured Policies; or
	 
	 	(D)	 	to pay any other amounts that are due to the Company under
this Agreement, the Asset Purchase Agreement or any of the Ancillary
Agreements to the extent not paid directly to Company by Reinsurer when due.




 


 









 





(g) Resort to Collateral. Notwithstanding the remedies contemplated by this Section 9.4,
the other Ancillary Agreements and the Asset Purchase Agreement, the Company may, in its
sole discretion, require direct payment by the Reinsurer of any sum in default under the Asset
Purchase Agreement, this Agreement or any other Ancillary Agreement in lieu of exercising the
remedies in this Section 9.4, and it shall be no defense to any such claim that the Company might
have had recourse to the Security Trust or recapture remedy.



(h) Certain Remedies. The Company and Reinsurer acknowledge that any damage caused to the
Company by reason of the breach by the Reinsurer or any of its successors in interest of this
Section 9.4 could not be adequately compensated for in monetary damages alone; therefore, each
party agrees that, in addition to any other remedies at law or otherwise, the Company shall
be entitled to specific performance of this Section 9.4 or an injunction to be issued by a
court of competent jurisdiction pursuant to Section 13.7 hereof restraining and enjoining any
violation of this Section 9.4, in addition to such other equitable or legal remedies as such court
may determine. The Company and Reinsurer hereby release, waive and discharge any and all claims
and causes of action asserting in any way that: (a) any Security Trust is not valid, binding or enforceable;
and (b) any remedy of the Company including, without limitation, the Company’s recapture and
Security Trust remedies hereunder and under Article IX of the Asset Purchase Agreement is not
valid, binding or enforceable. The Company and the Reinsurer are forever estopped and barred
from making any such assertion in any context or forum whatsoever.



ARTICLE X

DISPUTE RESOLUTION




10.1 Other Disputes over Calculations. After the Closing Date, any dispute between the
parties with respect to the calculation of amounts which are to be calculated, reported, or which
may be audited pursuant to this Agreement (other than disputes relating to: (i) the Closing Balance
Sheet, which shall be resolved in accordance with the Asset Purchase Agreement; or (ii)
calculations relating to DAC tax, which shall be resolved in accordance with Article VIII
hereof), which cannot be resolved by the parties within sixty (60) calendar days, shall be
referred to an independent accounting firm of national recognized standing (which shall not have
any material relationship with the Reinsurer or the Company) mutually agreed to by the parties;
provided, however, that where the dispute involves an actuarial issue, the dispute shall
instead be referred to an independent actuarial firm of national recognized standing (which
shall not have any material relationship with the Reinsurer or the Company) mutually agreed to by
the parties. There shall be no appeal from the decision made by such firm except that,
pursuant to Section 11.07 of the Asset Purchase Agreement, either party may petition a
court having jurisdiction over the parties and subject matter to reduce the arbitrator’s
decision to judgment. The fees charged by the accounting firm or actuarial firm, as applicable, to
resolve the dispute shall be allocated between the Company and the Reinsurer by such firm in
accordance with its judgment as to the relative merits of the parties’ positions in respect of
the dispute.



ARTICLE XI

INSOLVENCY




11.1 Insolvency Clause. In the event of the insolvency of the Company, all coinsurance made,
ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the
Reinsurer directly to the Company or to its liquidator, receiver or statutory successor on the
basis of the liability of the Company under the Policies and Post-Closing Policies without
diminution because of the insolvency of the Company. It is understood, however, that in the event
of the insolvency of the Company, the liquidator or receiver or statutory successor of the
Company shall give written notice of the pendency of a claim against the Company on a Policy
or Post-Closing Policy within a reasonable period of time after such claim is filed in the
insolvency proceedings and that during the pendency of such claim the Reinsurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated any defense or defenses
which it may deem available to the Company or its liquidator or receiver or statutory successor. It is further understood that the
expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the
Company as part of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense undertaken by the
Reinsurer.


 


 









 





ARTICLE XII

DURATION




12.1 Duration. This Agreement shall continue in force until such time that the Reinsurer’s
liability with respect to all Policies and Post-Closing Policies reinsured hereunder is
terminated pursuant to Section 12.2.



12.2 Reinsurer’s Liability. The liability of the Reinsurer under this Agreement with
respect to any Policy or Post-Closing Policy will begin simultaneously with that of the
Company, but not prior to the Effective Date. The Reinsurer’s liability with respect to any Policy will terminate on the earliest of: (a)
the date such Policy or Post-Closing Policy is recaptured in accordance with Section 9.4; or
(b) the date the Company’s liability on such Policy or Post-Closing Policy is terminated in accordance with its terms. Termination of
the Reinsurer’s liability under clauses (a) and (b) herein is subject to the Company’s actual
receipt of payments which discharge such liability in full in accordance with the provisions
of this Agreement. In no event shall the interpretation of this Section 12.2 imply a unilateral
right of the Reinsurer to terminate this Agreement.



12.3 Survival. Notwithstanding the other provisions of this Article XII, the terms and
conditions of Article I, VIII, IX and X and Section 13.2 shall remain in full force and effect
after the Termination Date.



ARTICLE XIII

MISCELLANEOUS




13.1 Notices. Any notice or other communication required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly given when (a) mailed by United States
registered or certified mail, return receipt requested, (b) mailed by overnight express mail
or other nationally recognized overnight or same-day delivery service or (c) delivered in person
to the parties at the following addresses:




If to the Company, to:




Aetna Life Insurance and Annuity Company

151 Farmington Avenue

Hartford, Connecticut 06156

Attention: Chief Financial Officer




With copies (which shall not constitute notice) to:




Aetna Retirement Services, Inc.

151 Farmington Avenue

Hartford, Connecticut 06156

Attention: General Counsel




Lord, Bissell & Brook

115 South LaSalle Street

Chicago, Illinois 60603

Attention: James R. Dwyer




If to the Reinsurer, to:




Lincoln Life & Annuity Company of New York

120 Madison Street, Suite 1700

Syracuse, NY 13202

Attention: Philip L. Holstein




With a copy (which shall not constitute notice) to:




Sutherland, Asbill & Brennan LLP

1275 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Attention: David A. Massey



Either party may change the names or addresses where notice is to be given by providing notice
to the other party of such change in accordance with this Section 13.1.


 


 









 





13.2 Confidentiality. Each of the parties shall maintain the confidentiality of
all information related to the Policies and Post-Closing Policies and all other information
denominated as confidential by the other party provided to it in connection with this
Agreement, and shall not disclose such information to any third parties without prior written
consent of the other party, except as may be permitted by Sections 5.18 and 11.02 of the Asset
Purchase Agreement.



13.3 Entire Agreement. This Agreement, the other Ancillary Agreements, the Asset Purchase
Agreement, the other agreements contemplated hereby and thereby, and the Exhibits and the
Schedules hereto and thereto contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements, written or oral, with respect thereto.



13.4 Waivers and Amendments. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof. Such waiver must be in writing and must
be executed by an executive officer of such party. A waiver on one occasion shall not be deemed
to be a waiver of the same or any other term or condition on a future occasion. This Agreement may
be modified or amended only by a writing duly executed by an executive officer of the Company and
the Reinsurer, respectively.



13.5 No Third Party Beneficiaries. This Agreement constitutes an indemnity reinsurance
agreement solely between the Company and the Reinsurer, and is intended solely for the benefit of
the parties hereto and their permitted successors and assigns, and it is not the intention of the
parties to confer any rights as a third-party beneficiary to this Agreement upon any other Person
as to the Transferred Assets or any other term, condition or provision of this Agreement.



13.6 Assignment. This Agreement shall not be assigned by either of the parties hereto without
the prior written approval of the other party.



13.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO ITS
CONFLICTS OF LAW DOCTRINE. ALL ISSUES RELATING TO VENUE AND JURISDICTION SHALL
BE GOVERNED BY SECTION 11.07 OF THE ASSET PURCHASE AGREEMENT.



13.8 Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.



13.9 Severability. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law or if determined by a court of competent
jurisdiction to be unenforceable, and if the
rights or obligations of the Company or the Reinsurer under this Agreement will not be materially
and adversely affected thereby, such provision shall be fully severable, and this Agreement will
be construed and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain
in full force and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.



13.10 Schedules, Exhibits and Paragraph Headings. Schedules and Exhibits attached
hereto are made a part of this Agreement. Paragraph headings are provided for reference
purposes only and are not made a part of this Agreement.


 


 









 





13.11 Expenses. Except as explicitly provided to the contrary herein or in the Asset Purchase
Agreement, each party shall be solely responsible for all expenses it incurs in connection with
this Agreement or in consummating the transactions contemplated hereby or performing the
obligations imposed hereby, including, without limitation, the cost of its attorneys, accountants
and other professional advisors.



13.12 No Prejudice. The parties agree that this Agreement has been jointly negotiated
and drafted by the parties hereto and that the terms hereof shall not be construed in favor of
or against any party on account of its participation in such negotiations and drafting.



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective
this 1st day of October, 1998.



AETNA LIFE INSURANCE AND ANNUITY COMPANY




LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK