Filed by Bowne Pure Compliance





Exhibit 10.67




INDEMNITY REINSURANCE AGREEMENT




This INDEMNITY REINSURANCE AGREEMENT (this “Agreement”), dated as of January 1, 1998, is made
by and between Connecticut General Life Insurance Company, a Connecticut domiciled stock life
insurance company (“Cedent”), and Lincoln Life & Annuity Company of New York, a New York domiciled
stock life insurance company (“Reinsurer”) and a wholly owned subsidiary of The Lincoln
National Life Insurance Company, an Indiana domiciled stock life insurance company.



WHEREAS, Cedent has agreed to cede and transfer to Reinsurer the Coinsured Contracts (as
defined below) for the consideration specified herein and Reinsurer has agreed to reinsure the
General Account Liabilities (as defined below) of Cedent under the Coinsured Contracts on the terms
and conditions set forth herein.



NOW THEREFORE, in consideration of the mutual covenants and promises contained herein and upon
the terms and conditions set forth herein, the parties hereto agree as follows:



ARTICLE II

DEFINITIONS




The following terms shall have the respective meanings set forth below throughout the
Agreement:



“Acquisition Agreement” means the Second Amended and Restated Asset Transfer and Acquisition
Agreement entered into by and among CIGNA, Connecticut General Corporation, Cedent, CIGNA Life
Insurance Company, Lincoln National Corporation, The Lincoln National Life Insurance Company and
Reinsurer dated as of July 27, 1997.



“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.



“Agreement” means this Indemnity Reinsurance Agreement.



“Annual Rate” means the value of r in the expression (l + r)n/365 -1, where “n” is equal to
the number of days for which interest is to be computed and the result of the expression is the
interest factor for computing the applicable interest amounts.



“Cash Equivalents” means, as of any particular date, money market funds, marketable
obligations issued or guaranteed by the United States Government, certificates of deposit, bankers’
acceptances and other similar liquid investments, in each case, with a maturity date of not more
than 90 days from the date on which any such instrument is transferred pursuant to the terms of
this Agreement, the market value of which on the date of transfer will be counted as equivalent to
cash for purposes of satisfying the aggregate amount of cash and Cash Equivalents required to be
transferred as described in Article III hereof.



“Cedent” shall have the meaning set forth in the introductory paragraph hereof.



“Cedent Separate Account Liabilities” means those insurance liabilities that are reflected in
the Cedent Separate Accounts and that relate to the Coinsured Contracts.



“Cedent Separate Accounts” means the separate accounts of Cedent described on Schedule 1.03
hereto.



“Ceding Commission” means $                    .



“CIGNA” means CIGNA Corporation, a Delaware corporation.


 


 









 





“Code” means the Internal Revenue Code of 1986, as amended. Any citation to a section of the
Code includes a citation to any successor statutory provision.



“Coinsured Contracts” means (i) the In-Force Contracts, and (ii) the Post-Closing Contracts.



“COLI Business” shall have the meaning as set forth in the Acquisition Agreement.



“Connecticut SAP” means the statutory accounting principles and practices prescribed or
permitted by the Insurance Department of the State of Connecticut as applied on a basis consistent
with those utilized in the preparation of 1996 Annual Statements of Cedent submitted to the
Insurance Department of the State of Connecticut.



“Contractholder” shall mean the holder of any Coinsured Contract.



“DAC Adjustment” shall have the meaning set forth in Section 12.02(a) hereof.



“Effective Date” shall have the meaning set forth in Article II hereof.



“Extra Contractual Obligations” means all liabilities for compensatory, consequential,
exemplary, punitive or similar damages which relate to or arise in connection with any alleged or
actual act, error or omission by Cedent or any of its Affiliates prior to the Effective Date
hereof, whether intentional or otherwise, or from any reckless conduct or bad faith by Cedent or any of its Affiliates prior to
the Effective Date hereof, or in connection with any such alleged or actual act, error or omission
on and after the Effective Date hereof by the Reinsurer or any of its Affiliates acting on behalf
of Cedent or any of its Affiliates pursuant to this Agreement or otherwise, in each case whether in
connection with the handling of any claim under any of the Coinsured Contracts or in connection
with the issuance, delivery, cancellation or administration of any of the Coinsured Contracts;
provided, that no Section 10.04 Seller Obligation, as such term is defined in the Acquisition
Agreement, shall be deemed to be an Extra Contractual Obligation.



“Final Recapture Statement” shall have the meaning set forth in Section 3.02(d) hereof.



“General Account Liabilities” means all general account insurance liabilities and obligations
arising under the Coinsured Contracts, including, without limitation (i) the General Account
Reserves, (ii) the amounts included in lines 12, 12a, 19, and 25 of the Liabilities, Surplus and
Other Funds page of the NAIC Annual Statement Blank (1996 format), (iii) any Extra Contractual Obligations, (iv) liabilities and
obligations associated with Cedent’s separate account SA-8T, (v) premium taxes due in respect

of premiums, deposits and other consideration paid on or after the Effective Date with respect to
the Coinsured Contracts and (vi) guaranty fund or other premium based assessments due based on such
premiums, deposits and other consideration, net of any premium tax credits of Cedent arising out of
any such assessments, but excluding (x) the Cedent Separate Account Liabilities, and (y) any
general account liabilities which relate to (A) amounts transferred from the Cedent Separate
Accounts to the general account of Cedent pending distribution to holders of the Coinsured
Contracts and (B) amounts held in the general account of Cedent pending transfer to the Cedent
Separate Accounts.



“General Account Other Insurance Assets” means all general account other admitted insurance
assets of Cedent arising under the Coinsured Contracts determined pursuant to Connecticut SAP as
such amounts would have been included in lines 12.1, 12.2, 12.3, 15, 16 and 17 of the Assets page
of the NAIC Annual Statement Blank (1996 format).



“General Account Reserves” means the general account statutory reserves of Cedent (without
regard to this Agreement) with respect to the Coinsured Contracts determined pursuant to
Connecticut SAP, as such reserves would have been included in lines 1, 2, 3, 4.1, 4.2, 5, 6, 7.1,
7.2, 7.3, 8, 9, 10.1, 10.2, 10.3, 11.1, 11.2, 11.3 and 11.4 of the Liabilities, Surplus and Other Funds page of the NAIC Annual
Statement Blank (1996 format), excluding however, any general account statutory reserve adjustments
in relation to Cedent Separate Account Liabilities.


 


 









 





“In-Force Contracts” means all individual life insurance (other than contracts included in the
COLI Business), health insurance and annuity contracts owned by residents of the State of New York
and issued through CIGNA’s Individual Insurance Division by Cedent on the forms described on
Schedule 1.01 hereto and in effect on the Effective Date (including all supplements, endorsements,
riders and ancillary agreements in connection therewith).



“Income Tax Regulations” means the temporary and final regulations issued under the Code. Any
citation to a section of the Income Tax Regulations includes a citation to any successor regulatory
provision.



“NAIC” means the National Association of Insurance Commissioners.



“90-Day Treasury Rate” means the annual yield rate, on the date to which 90-Day Treasury Rate
relates, of actively traded U.S. Treasury securities having a remaining duration to maturity of
three months, as such rate is published under “Treasury Constant Maturities” in Federal Reserve
Statistical Release H.15(519).



“Outward Reinsurance” shall have the meaning set forth in Article II hereof.



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



“Post-Closing Contracts” means all individual life insurance (other than contracts included
within the COLI Business), health insurance and annuity contracts of the types which are described
on Schedule 1.02 hereto (including all supplements, endorsement, riders and ancillary agreements in
connection therewith) that are delivered or issued for delivery to a resident of the State of New
York through CIGNA’s Individual



Insurance Division by Cedent prior to the second anniversary of the Effective Date at the written
request of Reinsurer in accordance with Section 5.34 of the Acquisition Agreement.



“Post-Recapture Extra Contractual Obligations” means Extra Contractual Obligations which
relate to or arise in connection with any alleged or actual act, error or omission by Reinsurer or
any of its Affiliates (including by Reinsurer or its Affiliates acting on behalf of Cedent or any
of its Affiliates pursuant to this Agreement or otherwise) on or before the Recapture Date, whether
intentional or otherwise, or from any



reckless conduct or bad faith by Reinsurer or any of its Affiliates (including by Reinsurer or its
Affiliates acting on behalf of Cedent or any of its Affiliates pursuant to this Agreement or
otherwise), in connection with the handling of any claim under any of the Coinsured Contracts or in
connection with the issuance, delivery, cancellation or administration of any of the Coinsured
Contracts.



“Preliminary Recapture Statement” shall have the meaning set forth in Section 3.02(b) hereof.



“Proposed Recapture Statement” shall have the meaning set forth in Section 3.02(d) hereof.



“Recapture Date” shall have the meaning set forth in Section 3.02(a) hereof.



“Reinsurer” shall have the meaning set forth in the introductory paragraph hereof.



“Third Party Actuary” shall have the meaning set forth in Section 3.02(d) hereof.



“Trigger Date” means the last day of the time period specified in Section 5.20(c) of the
Acquisition Agreement in the event that the Reinsurer is required to take any of the actions
specified in Sections 5.20(a)(i), (ii) and (iii) thereof during such time period and fails to take
any such actions.



“Umpire” shall have the meaning set forth in Article XIII.


 


 









 





ARTICLE III

BUSINESS REINSURED




Upon the terms and subject to the conditions and other provisions of this Agreement, effective
as of 12:01 a.m., Eastern Time, on                     , 1997 (the “Effective Date”), Cedent hereby cedes to
Reinsurer and Reinsurer hereby accepts and indemnity reinsures, on a coinsurance basis, 100% of the
General Account Liabilities outstanding as of the Effective Date or arising thereafter, net of
reinsurance recoveries received by Cedent under reinsurance cessions with respect to the Coinsured
Contracts other than pursuant to this Agreement (“Outward Reinsurance”).



ARTICLE IV

TERMINATION AND RECAPTURE




Section 3.01. Termination. The reinsurance provided under this Agreement shall terminate as
to each Coinsured Contract on any date as of which such Coinsured Contract is recaptured as
provided below in this Article III, but shall otherwise continue indefinitely as to all Coinsured
Contracts.



Section 3.02. Recapture. (a) If Reinsurer fails to take one of the actions specified in
clauses (i), (ii) and (iii) of Section 5.20(a) of the Acquisition Agreement under the circumstances
described therein on or prior to the Trigger Date, then Cedent shall have the right, upon 10 days’
written notice to Reinsurer, to recapture the Coinsured Contracts that have not expired, effective
as of the first day of the month following the Trigger Date (the “Recapture Date”). In the event
that the Coinsured Contracts that have not expired are recaptured pursuant to this Article III, a
net accounting and settlement with respect to the General Account Liabilities relating to Coinsured
Contracts that have not expired shall be undertaken by the parties hereto pursuant to the
provisions set forth below in this Section 3.02.



(b) On the Recapture Date, Reinsurer will deliver to Cedent a statement of the General
Account Other Insurance Assets, General Account Liabilities, the amount of the participating
surplus with respect to the Coinsured Contracts and the amount of any contract loans under the
Coinsured Contracts that have not expired, each as of the end of the second month preceding the month in which the Recapture Date
falls (the “Preliminary Recapture Statement”), together with a certification of the chief financial
officer of Reinsurer that (i) the Preliminary Recapture Statement was prepared in accordance with
Connecticut SAP, and (ii) the General Account Reserves set forth therein (A) were determined in
accordance with generally accepted actuarial standards consistently applied, (B) were fairly stated
in accordance with sound actuarial principles, (C) were based on actuarial assumptions that were
appropriate for Cedent’s obligations under the related Coinsured Contracts, and (D) met the
requirements of Connecticut SAP.



(c) On the Recapture Date, Reinsurer shall transfer to Cedent (i) invested assets, cash and
Cash Equivalents having an aggregate value sufficient to satisfy the obligations represented by the
General Account Liabilities plus the amount of the participating surplus with respect to the
Coinsured Contracts less the amount of any contract loans under the Coinsured Contracts that have not expired and less the
amount of General Account Other Insurance Assets and (ii) the General Account Other Insurance
Assets, each as determined by Reinsurer and set forth on the Preliminary Recapture Statement. Cash
shall be transferred by Reinsurer to Cedent by wire transfer of immediately available funds in U.S.
Dollars. Invested assets and Cash Equivalents shall be transferred by such instruments of transfer
as are reasonably acceptable to Cedent. Invested assets transferred pursuant to this Section
3.02(c) shall be valued at their market value as of the Recapture Date. As specified in Section
6.02 hereof, Cedent shall, from and after the Recapture Date, be entitled to receive and retain all
contract loan repayments under the Coinsured Contracts that have not expired. Recapture shall be
deemed to occur upon the receipt by Cedent of such invested assets, cash and Cash Equivalents and
such General Account Other Insurance Assets, free of all liens or other encumbrances.


 


 









 





(d) Reinsurer shall, on or before the date that is 30 days after the Recapture Date, prepare
a statement of the General Account Other Insurance Assets, General Account Liabilities, the amount
of the participating surplus with respect to the Coinsured Contracts and the amount of any contract
loans under the Coinsured Contracts that have not expired, each as of the close of business on the
last day of the month preceding the month in which the Recapture Date falls (the “Proposed Recapture Statement”),
together with a certification of the chief financial officer of Reinsurer to the same effect with
respect to the Proposed Recapture Statement as of the date thereof as the certification provided by
such officer with respect to the Preliminary Recapture Statement as of the date thereof pursuant to
Section 3.02(b). Promptly after its preparation, Reinsurer shall deliver copies of the Proposed
Recapture Statement to Cedent. Cedent shall have the right to review the Proposed Recapture
Statement and comment thereon for a period of 45 days after receipt thereof. Reinsurer agrees that
Cedent and its accountants and other agents may have access to the accounting records of Reinsurer
relating to its preparation of the Proposed Recapture Statement for the purpose of conducting its
review. Any changes in the Proposed Recapture Statement that are agreed to by Reinsurer and Cedent
within 45 days of the aforementioned delivery of such statement by Reinsurer shall be incorporated
into a final recapture statement as of the close of business on the last day of the month preceding
the month in which the Recapture Date falls (the “Final Recapture Statement”). In the event that
Reinsurer and Cedent are unable to agree within such 45-day period on the manner in which any item
or items should be treated in the prepa ration of the Final Recapture Statement, or upon (i) the
amount of invested assets, cash and Cash Equivalents that is sufficient to satisfy the obligations
represented by the General Account Liabilities plus the amount of participating surplus with
respect to the Coinsured Contracts less the amount of any contract loans under the Coinsured
Contracts that have not expired and less the amount of General Account Other Insurance Assets or
(ii) the amount of the General Account Other Insurance Assets, separate written reports of such
item or items shall be made in concise form and shall be referred to a nationally-known firm of
independent actuaries selected by Cedent and approved by the Reinsurer, which approval shall not
unreasonably be withheld (the “Third Party Actuary”). The Third
Party Actuary shall determine within 14 days the manner in which such item or items shall be
treated on the Final Recapture Statement; provided, however, that the dollar amount of each item in
dispute shall be determined between the range of dollar amounts proposed by Cedent and Reinsurer,
respectively; further provided, however, that in no event shall the amount of invested assets, cash
and Cash Equivalents that is deemed to be sufficient to satisfy the obligations represented by the
General Account Liabilities less the amount of any contract loans under the Coinsured Contracts
that have not expired be less than the amount
of the General Account Liabilities less the amount of any such contract loans. The determinations
by the Third Party Actuary as to the items in dispute shall be in writing and shall be binding and
conclusive on the parties and shall be so reflected in the Final Recapture Statement. The fees,
costs and expenses of retaining the Third Party Actuary shall be shared equally between the
parties. Such determination shall be binding and conclusive on the parties. Following the
resolution of all disputed items, Reinsurer shall prepare the Final Recapture Statement and shall
deliver copies of such statement to Cedent.



(e) In the event the aggregate amount of invested assets, cash and Cash Equivalents and
General Account Other Insurance Assets reflected on the Preliminary Recapture Statement and
transferred to the Cedent on the Recapture Date is less than an amount equal to the General Account
Liabilities plus the amount of participating surplus with respect to the Coinsured Contracts less
the amount of any contract loans under the Coinsured Contracts that have not expired less the
amount of General Account Other Insurance Assets, each as reflected on the Final Recapture
Statement, Reinsurer shall transfer to Cedent additional cash or Cash Equivalents equal to the
amount of such difference, together with interest thereon from and including the Recapture Date to
but not including the date of such transfer computed at an Annual Rate equal to the 90-Day Treasury
Rate in effect as of the Recapture Date. In the event the aggregate amount of invested assets,
cash and Cash Equivalents, and General Account Other Insurance Assets reflected on the Preliminary
Recapture Statement and transferred to Cedent on the Recapture Date is more than an amount equal to
the General Account Liabilities plus the amount of participating surplus with respect to the
Coinsured Contracts less the amount of any contract loans under the Coinsured Contracts that have
not expired less the amount of General Account Other Insurance Assets, each as reflected on the
Final Recapture Statement, Cedent shall transfer to Reinsurer cash or Cash Equivalents in the
amount of such difference, together with interest thereon computed at an Annual Rate as specified
above from and including the Recapture Date to but not including the date of such transfer.



(f) If at any time after the Recapture Date Cedent or any of its Affiliates is required to
make any payment in respect of any Post Recapture Extra Contractual Obligations, Reinsurer will,
promptly upon Cedent’s demand therefor, pay the amount thereof to Cedent.


 


 









 





ARTICLE IV

TERRITORY




This Agreement shall apply to Coinsured Contracts covering lives and risks wherever resident
or situated.



ARTICLE V

CHANGES; CREDITING RATES




Section 5.01. Contract Changes or Reserve Assumption Changes. Cedent, on its own initiative,
shall not change (a) the terms and conditions of any Coinsured Contracts or (b) the assumptions and
methods used by Cedent to establish the General Account Reserves. Reinsurer shall share
proportionately, on a 100% coinsurance basis, in any changes in the terms or conditions of any
Coinsured Contracts or changes in the assumptions and methods used to establish the General Account
Reserves, whether effected by Reinsurer or its Affiliates acting pursuant to this Agreement or
otherwise or by reason of the requirements of any regulatory authority having jurisdiction over
Cedent or otherwise required by law or by Connecticut SAP, provided that prior to effectuating any
such change Cedent shall promptly notify Reinsurer of such proposed change.



Section 5.02. Non-Guaranteed Elements. Cedent shall set all non-guaranteed elements of the
Coinsured Contracts from and after the Effective Date, taking into account the recommendations of
Reinsurer with respect thereto.



ARTICLE VI

TRANSFER OF ASSETS; CONTRACT LOANS; CEDING COMMISSION




Section 6.01. Asset Transfer. As consideration for the indemnity reinsurance of the General
Account Liabilities by Reinsurer hereunder, Cedent hereby agrees to transfer to Reinsurer in
accordance with the terms of the Acquisition Agreement (i) investment assets having a statutory
statement carrying value on the books of Cedent equal to (a) the General Account Liabilities as of the close of business on the
last day of the month preceding the month in which the Effective Date falls plus (b) the amount of
the participating surplus with respect to the Coinsured Contracts as of such date less (c) the
amount of any contract loans under the Coinsured Contracts as of such date and less (d) the amount
of the General Account Other Insurance Assets as of such date and (ii) the General Account Other
Insurance Assets as of the close of
business on the last day of the month preceding the month in which the Effective Date falls. As
additional consideration for the assumption of the General Account Liabilities by Reinsurer,
Reinsurer shall be entitled to 100% of all premiums, deposits and other considerations to the
extent received on or after the
Effective Date by Cedent or Reinsurer with respect to the general account portion of the Coinsured
Contracts net of reinsurance premiums and all other amounts payable on or after the Effective Date
with respect to the Outward Reinsurance. Cedent shall promptly remit to Reinsurer (but in no event
later than 72 hours following the receipt of any such premiums, deposits and other considerations)
any such amounts received by it in respect of any of the Coinsured Contracts and hereby assigns to
Reinsurer all of its rights to such premiums, deposits and other considerations payable to Cedent.



Section 6.02. Contract Loans. (a) As further consideration for the indemnity reinsurance of
the General Account Liabilities hereunder, Reinsurer shall, subject to the provisions of this
Section 6.02, be entitled to all contract loan repayments (including both principal and interest)
under the Coinsured Contracts.



(b) Cedent shall, from and after the Recapture Date, have the right to retain or otherwise
receive all contract loan repayments under the Coinsured Contracts.



Section 6.03. Ceding Commission. As consideration for the reinsurance ceded by Cedent to
Reinsurer of the Coinsured Contracts and the acquisition by Reinsurer of rights in respect of such
Coinsured Contracts, Reinsurer shall pay Cedent the Ceding Commission as of the Effective Date by
including such amount in the Purchase Price (as defined in the Acquisition Agreement) payable by
Reinsurer on the Closing Date under the Acquisition Agreement. Reinsurer shall provide Cedent its
allocation of the Ceding Commission among the life insurance and non-cancelable disability
insurance, other health insurance, and annuity contracts included in the Coinsured Contracts.


 


 









 





ARTICLE VII

INSOLVENCY




Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming
effective hereunder, the reinsurance shall be payable by Reinsurer on the basis of the liability of
Cedent under the Coinsured Contracts reinsured on an indemnity basis, directly to Cedent or to its
conservator, liquidator, receiver or other statutory successor without diminution because of (i) the insolvency,
liquidation or rehabilitation of Cedent, (ii) the appointment of a conservator, receiver,
liquidator or statutory successor of Cedent, or (iii) the failure of the conservator, receiver,
liquidator or statutory successor of Cedent to pay all or a portion of any claim. It is agreed
that any conservator, receiver, liquidator or statutory successor of Cedent shall give prompt
written notice to Reinsurer of the pendency or submission of a claim under any such Coinsured
Contracts within a reasonable time after such claim is filed in the receivership, conservation,
insolvency or liquidation proceeding. During the pendency of such claim, Reinsurer may
investigate such claim and interpose, at its own expense, in the proceeding where such claim is to
be adjudicated, any defense available to Cedent or its conservator, receiver, liquidator or
statutory successor except where: (i) the Coinsured Contract specifies another payee of such
reinsurance in the event of the insolvency of Cedent and (ii) Reinsurer, with the consent of the
direct insureds has assumed such policy obligations of Cedent as its direct obligations to the
payees under such Coinsured
Contracts, in substitution for the obligations of Cedent to such payees. The expense thus incurred
by Reinsurer is chargeable against Cedent, subject to the approval of the court, as a part of the
expense of insolvency, liquidation or rehabilitation to the extent of a proportionate share of the
benefit which accrues to Cedent solely as a result of the defense undertaken by Reinsurer.



ARTICLE VIII

OFFSETS




Any debts or credits between Cedent and Reinsurer arising under this Agreement are deemed
mutual debts or credits, as the case may be, and shall be netted or set off, as the case may be,
and only the balance shall be allowed or paid hereunder.



ARTICLE IX

RIGHTS WITH RESPECT TO GENERAL ACCOUNT LIABILITIES




Reinsurer’s reinsurance of the General Account Liabilities is intended for the sole benefit of
the parties to this Agreement and shall not create any right on the part of any other party,
including, without limit, any Contractholder, insured, claimant or beneficiary, against Reinsurer
or any legal relation between any Contractholders, insureds, claimants or beneficiaries and
Reinsurer.



ARTICLE X

ERRORS AND OMISSIONS




Inadvertent delays, errors or omissions made by either Cedent or Reinsurer in connection with
this Agreement or any transaction hereunder shall not relieve the other party from any liability
which would have attached to such party had such delay, error or omission not occurred, provided
that the party causing such delay, error or omission rectifies the sa me as soon as possible after its discovery thereof.
If, as a result of any such delay, error or omission, there is a delay in the transfer of funds to
be transferred pursuant hereto, the party responsible for such delay, error or omission shall pay,
to the party to whom such funds are to be transferred, interest on the amount of funds to be transferred from the date of
such delay, error or omission to and including the date of such transfer of funds at a rate equal
to the 90-Day Treasury Rate.


 


 









 





ARTICLE XI

DUTY OF COOPERATION




Section 11.01. Cooperation Generally. Each party hereto shall cooperate fully with the other
in all reasonable respects in order to accomplish the objectives of this Agreement. The duty of
cooperation shall apply, but not be limited, to regulatory matters and to litigation matters
involving third parties.



Section 11.02. Product Tax Cooperation. Cedent shall, at Reinsurer’s written request and
sole cost and expense, cooperate fully with Reinsurer in obtaining such relief as Reinsurer shall
reasonably require (including obtaining a waiver from, or entering into a settlement or closing
agreement with, the Internal Revenue Service or an affected policyholder) with respect to any
non-compliance by Cedent or Reinsurer with any product tax requirement or limitation contained in
the Code (including without limitation Sections 72,101,817,7702 and 7702A of the Code) regarding
any Coinsured Contract; provided, however, that this Section 11.02 shall apply only if Reinsurer’s
written request is not given prior to the last day of the twentieth calendar month following the
month in which the Closing Date falls. Cedent shall permit Reinsurer to participate in any
discussions, negotiations or settlements with the Internal Revenue Service or any affected
policyholder pursuant to this Section 11.02 and, to the extent Cedent is not adversely affected
by such actions, to control such discussions, negotiations or settlements.



ARTICLE XII

DEFERRED ACQUISITION COSTS




Section 12.01. Section 848 Election. (a) Each of Cedent and Reinsurer acknowledges that it
is subject to taxation under Subchapter L of the Code and hereby makes the election contemplated by
Section 1.848-2(g)(8) of the Income Tax Regulations with respect to this Agreement. Each of Cedent
and Reinsurer (i) agrees that such election is effective for the taxable year of each party that
includes the Effective Date and



for all subsequent years during which this Agreement remains in effect and (ii) warrants that it
will take no action to revoke the election.



(b) Pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations, each of Cedent and
Reinsurer hereby agrees (i) to attach a schedule to its federal income tax return for its first
taxable year ending on or after the Effective Date that identifies this Agreement as a reinsurance
agreement for which the joint election under Section 1.848-2(g)(8) has been made, (ii) that the party with net positive
consideration, as defined in Section 848 of the Code and the Income Tax Regulations thereunder, for
this Agreement for each taxable year will capitalize its specified policy acquisition expenses with
respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1)
of the Code, and (iii) to exchange information pertaining to the amount of net consideration, as
defined in Section 848 of the Code and the Income Tax Regulations thereunder, under this Agreement each year to ensure consistency.
Reinsurer shall prepare and execute duplicate copies of the schedule described in the preceding
sentence as soon as possible after the Effective Date and submit them to Cedent for execution.
Cedent shall execute the copies and return one of them to Reinsurer within 30 days of Cedent’s receipt of such copies.



Section 12.02. DAC Adjustment. (a) For purposes of this Agreement, the term “DAC
Adjustment” is calculated as follows: First, for each taxable year with respect to each category
of Coinsured Contracts, “the gross amount incurred by the reinsurer with respect to this Agreement”
(as defined in Section 1.848-2(f)(2)(i)(A) of the Income Tax Regulations) for such category (but
not including any DAC Adjustment incurred in such year) is multiplied by the applicable percentage
set forth in Section 848 (c)(1) of the Code for such category. The sum, if any, from the preceding
sentence is then reduced by the amortization allowed Cedent under Section 848(a)(2) of the Code for
such category, but only with regard to amounts capitalized per this Agreement under Section
1.848-2(f)(2)(i)(A). The result for a category, whether positive or negative, is then multiplied
by the quotient of: tr/(1-(tr x (1+Y))), where tr = the maximum applicable marginal corporate
federal income tax rate (as defined in Section 11(b)(1)(D) of the Code) for the taxable year, and Y
= the applicable percentage set forth in Section 848(c)(1) for such category of Coinsured
Contracts. The aggregate amount of such calculations for all categories of Coinsured Contracts for
a taxable year (whether positive or negative) is the DAC Adjustment for the year.


 


 









 





(b) Within 60 days of the end of Cedent’s taxable year, Cedent shall calculate the DAC
Adjustment for the year and submit such calculations to Reinsurer for review. If, within 30 days
of Reinsurer’s receipt of such calculations, Reinsurer shall not have objected in writing to such
calculations, the calculations shall become final. If, within 15 days of any objection in writing to such calculations, Cedent and
Reinsurer shall not have agreed in writing to such calculations (in which case the calculations
shall become final), any disputed aspects of the calculations shall be resolved by the Third Party
Accountant (as defined in the Acquisition Agreement) within 30 days of the submission of the
dispute to the Third Party Accountant by Cedent or Reinsurer. The decision of the Third Party
Accountant shall be final (and the resulting calculations shall be final), and the costs, expenses, and fees of the Third Party
Accountant shall be borne equally by Cedent and Reinsurer.



(c) If the amount of the DAC Adjustment for any taxable year of Cedent is positive, Reinsurer
shall pay such amount to Cedent within 15 days of the date on which the calculations of the DAC
Adjustment become final. If the amount of the DAC adjustment for any taxable year of Cedent
negative, Cedent shall pay such amount to Reinsurer within 15 days of the date on which the
calculations of the DAC Adjustment become final.



(d) Notwithstanding any other provision of this Section 12.02, the term “gross amount
incurred by the reinsurer with respect to this Agreement” shall not include (i) all or any part of
the Ceding Commission or (ii) the consequences of any recapture of the Coinsured Contracts pursuant
to Section 3.02 hereof.



(e) In the event that Section 848 of the Code or the Income Tax Regulations thereunder are
amended after the date hereof and any change is made to the amortization period under Section
848(a)(2), the capitalization percentages in Section 848(c)(1), or the definition of the term
“gross amount incurred by the reinsurer with respect to the reinsurance agreement” in Section
1.848-2(f)(2)(i)(A) of the Income Tax Regulations, Cedent and Reinsurer shall cooperate in good
faith to modify the definition of the term “DAC Adjustment” to reflect such change, consistent with the principles and assumptions originally
used in defining that term in this Agreement.



ARTICLE XIII

ARBITRATION




Any dispute arising out of or relating to the interpretation, performance or breach of this
Agreement, including the formation or validity hereof, shall be submitted for decision to a panel
of three arbitrators. Notice requesting arbitration must be in writing and sent certified or
registered mail, return receipt requested.



One arbitrator shall be chosen by each party and the two arbitrators shall, before instituting
the hearing, choose an impartial third arbitrator (the “Umpire”) who shall preside at the hearing.
If either party fails to appoint its arbitrator within 30 days after being requested to do so by
the other party, the latter, after 10 days notice by certified or registered mail of its intention
to do so, may appoint the second arbitrator.



If the two arbitrators are unable to agree upon the selection of the Umpire within 30 days of
their appointment, then each arbitrator shall submit to the other a list of three Umpire
candidates. Each arbitrator shall strike the names of two candidates from the other arbitrator’s
list, and the Umpire shall be selected from the two remaining candidates by a lot drawing procedure
determined by the two arbitrators.



Unless the parties otherwise agree all arbitrators shall be disinterested active or former
officers of insurance or reinsurance companies.



Within 30 days after notice of appointment of all arbitrators, the panel shall meet and
determine a schedule for the conduct of the arbitration, including hearings. The panel shall be
relieved of all judicial formality and shall not be bound by the strict rules of procedure and
evidence. The panel shall determine where the arbitration shall take place. To the extent and
only to the extent that the provisions of this Agreement are ambiguous or unclear, the panel shall
make its decision considering the custom and practice of the applicable insurance and reinsurance
business. Insofar as the arbitration panel looks to substantive
law, the law of New York shall govern. The decision of any two arbitrators when rendered in
writing shall be final and binding. The panel is empowered to grant interim relief as it may deem
appropriate.


 


 









 





The panel shall render its decision, which shall be in writing and state the reasons therefor,
within 60 days following the termination of hearings. Judgment upon the award may be entered in
any court having jurisdiction thereof. Each party shall bear the expense of its own arbitrator and
shall jointly and equally bear with the other party the cost of the Umpire. The remaining costs of
the arbitration shall be allocated by the panel. The panel may, at its discretion, award such
further costs and expenses as it considers appropriate, including but not limited to interest
(determined at the Panel’s discretion) and attorneys’ fees, to the extent permitted by law.



ARTICLE XIV

MISCELLANEOUS PROVISIONS




Section 14.01. Notices. Any notice required or permitted hereunder shall be in writing and
shall be delivered personally (by courier or otherwise), telegraphed, telexed, sent by facsimile
transmission or sent by certified or registered mail, postage prepaid and return receipt requested,
or by express mail. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, three days after the date of deposit in the United States
mails, as follows:




	 	(1)	 	If to Reinsurer to:
	 
	 	 	 	Lincoln Life & Annuity Company of New York

120 Madison Street, Suite 1700

Syracuse, New York 13202

Attention: Philip L. Holstein

Telecopier No.: (315) 428-8419
	 
	 	 	 	With concurrent copies to:
	 
	 	 	 	The Lincoln National Life Insurance Company

1300 South Clinton Street

P.O. Box 1110

Fort Wayne, Indiana 48601-1110

Attention: Carl L. Baker

Telecopier No.: (219) 455-5135
	 
	 	 	 	Sutherland, Asbill & Brennan LLP

1275 Pennsylvania Avenue, N.W.

Washington, D.C. 20004

Attention: David A. Massey

Telecopier No.: (202) 637-3593
	 
	 	(2)	 	If to Cedent to:
	 
	 	 	 	Connecticut General Life Insurance Company

900 Cottage Grove Road

Hartford, Connecticut 06152-2302

Attention: David C. Kopp

Telecopier No.: (860) 726-5315
	 
	 	 	 	With a concurrent copy to:
	 
	 	 	 	Milbank, Tweed, Hadley & McCloy

1 Chase Manhattan Plaza

New York, New York 10005

Attention: G. Malcolm Holderness

Telecopier No.: 212-530-5219




 


 









 





Any party may, by notice given in accordance with this Agreement to the other party, designate
another address or person for receipt of notices hereunder.



Section 14.02. Amendment. This Agreement may not be modified, changed, discharged or
terminated, except by an instrument in writing signed by an authorized officer of each of the
parties hereto.



Section 14.03. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same instrument. Each counterpart may
consist of a number of copies



hereof each signed by less than all, but together signed by all, of the parties hereto.



Section 14.04. No Third Party Beneficiaries. Nothing in this Agreement is intended or shall
be construed to give any Person, other than the parties hereto, their successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.



Section 14.05. Assignment. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, permitted assigns and legal representatives.
Neither this Agreement, nor any right hereunder, may be assigned by either party (in whole or in
part) without the



prior written consent of the other party hereto.



Section 14.06. Governing Law. SUBJECT TO ARTICLE XIII HEREOF, THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.



Section 14.07. Credit for Ceded Reinsurance. Reinsurer shall take at its own expense all
actions, and maintain all licenses, permits and authorizations, as are necessary in order for
Cedent to receive credit for reinsurance ceded hereunder as reported in Cedent’s financial
statements.



Section 14.08. Entire Agreement. This Agreement, together with the Acquisition Agreement and
the other Ancillary Agreements (as defined in the Acquisition Agreement), constitutes the entire
agreement between the parties relating to the indemnity reinsurance of the Coinsured Contracts, and
there are no other



agreements between the parties hereto, either existing or contemplated, written or oral, relating
thereto.



Section 14.09. No Reinsurance Intermediary. The parties acknowledge that there is no
reinsurance intermediary entitled to a fee from either Cedent or Reinsurer by reason of acting as a
broker in soliciting, negotiating or procuring the making of this Agreement or any binder for this
Agreement.



IN WITNESS WHEREOF, Cedent and Reinsurer have executed this Agreement as of the date first
above written.



CONNECTICUT GENERAL LIFE INSURANCE COMPANY




and




LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK