Exhibit 10.29


 


COINSURANCE
AGREEMENT


 


 


between


 


ATHENE
LIFE RE LTD.


 


and


 


AMERICAN
EQUITY INVESTMENT LIFE INSURANCE COMPANY


 


effective
as of July 1, 2009


 


 


Treaty Number 070109


 


(CD Annuity Transaction)


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I GENERAL PROVISIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Defined Terms

  	
  1

  
	
  Section 1.02

  	
  Other Definitional Provisions

  	
  6

  
	
   

  	
   

  
	
  ARTICLE II COVERAGE

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Scope of Coverage

  	
  6

  
	
  Section 2.02

  	
  Underwriting of Policies Subject to
  Reinsurance

  	
  7

  
	
  Section 2.03

  	
  Retention

  	
  7

  
	
  Section 2.04

  	
  Policy Changes

  	
  7

  
	
  Section 2.05

  	
  Reinstatement of Surrendered Policies

  	
  8

  
	
  Section 2.06

  	
  Misstatement of Fact

  	
  8

  
	
  Section 2.07

  	
  Credited Rates and Non-Guaranteed Elements

  	
  8

  
	
  Section 2.08

  	
  Programs of Internal Replacement

  	
  8

  
	
   

  	
   

  
	
  ARTICLE III REINSURED PREMIUMS

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Reinsurance Premiums

  	
  8

  
	
   

  	
   

  
	
  ARTICLE IV POLICY EXPENSES

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Commissions and Policy Issuance Fee

  	
  9

  
	
  Section 4.02

  	
  Administration Fee

  	
  9

  
	
  Section 4.03

  	
  Renewal Commissions

  	
  9

  
	
   

  	
   

  
	
  ARTICLE V C-4 RISK CHARGE

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  C-4 Risk Charge

  	
  9

  
	
   

  	
   

  
	
  ARTICLE VI GUARANTY FUND ASSESSMENTS

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Guaranty Fund Assessments

  	
  9

  
	
   

  	
   

  
	
  ARTICLE VII CLAIMS

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Claims Payment

  	
  10

  
	
  Section 7.02

  	
  Claims Settlement

  	
  10

  
	
  Section 7.03

  	
  Recoveries

  	
  10

  
	
   

  	
   

  
	
  ARTICLE VIII REPORTING AND SETTLEMENTS

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Ceding Company Reporting

  	
  11

  
	
  Section 8.02

  	
  Reinsurer Reporting

  	
  12

  
	
  Section 8.03

  	
  Settlements

  	
  12

  
	
   

  	
   

  
	
  ARTICLE IX CREDIT FOR REINSURANCE

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  Reserves

  	
  14

  
	
  Section 9.02

  	
  Form of Security

  	
  14

  
	
  Section 9.03

  	
  Funds Withheld Account

  	
  15

  
	
  Section 9.04

  	
  Reinsurance Trust

  	
  17

  
	
  Section 9.05

  	
  Letters of Credit

  	
  19

  
	
  Section 9.06

  	
  Priority of Withdrawal

  	
  20

  



 

















 


	
  Section 9.07

  	
  Investment Management

  	
  20

  
	
   

  	
   

  
	
  ARTICLE X ADMINISTRATION

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Policy Administration

  	
  21

  
	
  Section 10.02

  	
  Record Keeping

  	
  21

  
	
   

  	
   

  
	
  ARTICLE XI TERM AND TERMINATION

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Duration of Agreement

  	
  22

  
	
  Section 11.02

  	
  Termination

  	
  22

  
	
  Section 11.03

  	
  Termination Payment

  	
  23

  
	
  Section 11.04

  	
  Survival

  	
  24

  
	
   

  	
   

  
	
  ARTICLE XII RECAPTURE

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 12.01

  	
  Recapture

  	
  24

  
	
   

  	
   

  
	
  ARTICLE XIII ERRORS AND OMISSIONS

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 13.01

  	
  Errors and Omissions

  	
  24

  
	
   

  	
   

  
	
  ARTICLE XIV DISPUTE RESOLUTION

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 14.01

  	
  Negotiation

  	
  24

  
	
  Section 14.02

  	
  Arbitration

  	
  25

  
	
   

  	
   

  
	
  ARTICLE XV INSOLVENCY

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 15.01

  	
  Insolvency

  	
  26

  
	
   

  	
   

  
	
  ARTICLE XVI TAXES

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 16.01

  	
  Taxes

  	
  27

  
	
  Section 16.02

  	
  Premium Tax

  	
  28

  
	
  Section 16.03

  	
  Excise Tax

  	
  28

  
	
   

  	
   

  
	
  ARTICLE XVII REPRESENTATIONS, WARRANTIES
  AND COVENANTS

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 17.01

  	
  Representations and Warranties of the
  Ceding Company

  	
  28

  
	
  Section 17.02

  	
  Covenants of the Ceding Company

  	
  30

  
	
  Section 17.03

  	
  Representations and Warranties of the
  Reinsurer

  	
  31

  
	
  Section 17.04

  	
  Covenants of the Reinsurer

  	
  32

  
	
   

  	
   

  
	
  ARTICLE XVIII MISCELLANEOUS

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 18.01

  	
  Currency

  	
  33

  
	
  Section 18.02

  	
  Interest

  	
  33

  
	
  Section 18.03

  	
  Right of Setoff and Recoupment

  	
  33

  
	
  Section 18.04

  	
  No Third Party Beneficiaries

  	
  33

  
	
  Section 18.05

  	
  Amendment

  	
  33

  
	
  Section 18.06

  	
  Notices

  	
  33

  
	
  Section 18.07

  	
  Consent to Jurisdiction

  	
  34

  
	
  Section 18.08

  	
  Service of Process

  	
  35

  
	
  Section 18.09

  	
  Inspection of Records

  	
  35

  
	
  Section 18.10

  	
  Confidentiality

  	
  35

  
	
  Section 18.11

  	
  Successors

  	
  36

  



 


ii

















 


	
  Section 18.12

  	
  Entire Agreement

  	
  36

  
	
  Section 18.13

  	
  Severability

  	
  36

  
	
  Section 18.14

  	
  Construction

  	
  36

  
	
  Section 18.15

  	
  Non-Waiver

  	
  36

  
	
  Section 18.16

  	
  Further Assurances

  	
  37

  
	
  Section 18.17

  	
  Governing Law

  	
  37

  
	
  Section 18.18

  	
  Counterparts

  	
  37

  



 


	
  Schedules

  
	
  I.

  	
  Reinsured Policy Forms

  
	
  II.

  	
  Underwriting Guidelines

  
	
   

  
	
  Exhibits

  
	
  A.

  	
  Monthly Accounting Report

  
	
  B.

  	
  Quarterly Accounting Report

  
	
  C.

  	
  Reinsured Policies Report

  
	
  D.

  	
  Trust Agreement

  
	
  E.

  	
  Investment Management Agreement

  



 


iii






 












 


COINSURANCE
AGREEMENT


 


This
COINSURANCE AGREEMENT (the “Agreement”), effective as of July 1,
2009, is made by and between AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY,
an insurance company organized under the laws of the State of Iowa (the “Ceding
Company”) and ATHENE LIFE RE LTD., a reinsurance company organized under
the laws of Bermuda (the “Reinsurer”).


 


WITNESSETH:


 


WHEREAS, the Ceding Company desires to cede and the Reinsurer desires
to accept a specified quota share of the Reinsured Policies (as defined below)
subject to the terms, conditions and limitations contained herein.


 


NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the Ceding Company and the Reinsurer hereby agree as follows:


 


ARTICLE
I




GENERAL PROVISIONS


 


Section 1.01             Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings:


 


“Action” shall mean
any claim, action, suit, arbitration or proceeding by or before any
governmental authority.


 


“Administration
Fee” shall have the meaning specified in Section 4.02.


 


“Affiliate”
shall mean, with respect to any person, any other person that directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with such specified person; provided, that “control”
(including, with correlative meanings, “controlled by” and “under common
control with”), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of voting
securities, by agreement or otherwise.


 


“Agreement”
shall have the meaning specified in the Preamble hereto.


 


“Authorized
Representative” shall have the meaning specified in Section 15.01(a).


 


“Business
Day” shall mean any day other than a Saturday, Sunday or any other day on
which banking institutions are authorized or required by law or executive order
to close in Des Moines, Iowa or Hamilton, Bermuda.


 


“C-4
Risk Charge” shall have the meaning specified in Section 5.01.


 


1

















 


“Ceded
Reserves” shall have the meaning set forth in Section 9.01.


 


“Ceding
Company” shall have the meaning specified in the Preamble hereto.


 


“Claims”
shall have the meaning specified in Section 7.01.


 


“Commissions”
shall have the meaning specified in Section 4.01.


 


“Contested
Claim” shall have the meaning specified in Section 7.02(b).


 


“Effective
Date” shall mean July 1, 2009.


 


“Embedded
Value” shall mean the present value of (a) projected
future investment earnings on the Ceded Reserves, determined based on the asset
portfolio as of the date as of which the calculation is made, minus (b) the
Quota Share of projected future Claims, minus (c) future Policy
Expenses, each determined (i) from the date as of which the calculation is
made to the date on which no Reinsured Policy is projected to be outstanding, (ii) based
on the pricing assumptions and policy decrements for the Reinsured Policies and
Reinsured Liabilities as used by the Ceding Company and the Reinsurer on the
Effective Date and (iii) based on a discount rate equal to ten percent
(10%); provided, however, that the Embedded Value shall in no
event be less than zero (0).


 


“Embedded
Value Report” shall have the meaning specified in Section 11.03(c).


 


“Excluded
Liabilities” shall mean (i) Extra-Contractual Obligations, (ii) any
liabilities other than liabilities related to partial surrenders, full
surrenders, death claims, annuity payouts under Supplementary Contracts or
other contractual benefits under the Reinsured Policies and (iii) any ex gratia payments made by the Ceding Company (i.e., payments the Ceding Company is not required to make
under the terms of the Reinsured Policies).


 


“Extra-Contractual
Obligations” shall mean any liabilities or
obligations not arising under the express terms and conditions of, or in excess
of the applicable policy limits of, the Reinsured Policies, including
liabilities or obligations for fines, penalties, taxes, fees, forfeitures,
compensatory damages, and punitive, special, treble, bad faith, tort, exemplary
or other forms of extra-contractual damages awarded against or paid by the
Ceding Company, which liabilities or obligations arise from any act, error or
omission committed by the Ceding Company, whether or not intentional,
negligent, in bad faith or otherwise relating to (i) the form, marketing,
sale, underwriting, production, issuance, cancellation or administration of the
Reinsured Policies, (ii) the investigation, defense, trial, settlement or
handling of claims, benefits or payments under the Reinsured Policies, (iii) 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 Reinsured Policies, or (iv) the failure of
the Reinsured Policies to qualify for their intended tax status.


 


“Factual
Information” shall have the meaning specified in Section 17.01(d).


 


“Funds
Withheld Account” shall have the meaning specified in Section 9.02(a).


 


2

















 


“Funds Withheld
Adjustment” shall mean, as of any date of determination, an amount equal to
(a) Ceded Reserves minus (b) the Statutory Carrying Value of
assets held in the Funds Withheld Account minus (c) the market
value of assets held in any Reinsurance Trust minus (d) the amount
available under outstanding Letters of Credit minus (e) any amounts
due and unpaid by the Ceding Company under Sections 8.03(a), (b) or
(c).


 


“Funds
Withheld Amount” shall mean, as of the relevant date of determination, the Statutory
Carrying Value of all assets deposited in the Funds Withheld Account.


 


“Funds
Withheld Excess Withdrawals” shall have the meaning specified in Section 9.03(f).


 


“Gross
Reserves” shall
mean the gross reserves of the Ceding Company in respect
of the Reinsured Policies, as determined in accordance with Section 9.01.


 


“Guaranty
Fund Assessment” shall mean an assessment or similar charge arising on account
of or in connection with participation, whether voluntary or involuntary, in
any guaranty association or comparable entity established or governed by any
state or other jurisdiction.


 


“IMR”
shall mean the interest maintenance liability reserve with
respect to the assets in the Funds Withheld Account determined in accordance
with SAP, consisting of after-tax unamortized deferred gains and losses in
respect of such assets.


 


“Initial
Deposit Amount” shall mean $3,050,000.00.


 


“Investment Management
Agreement” shall have the meaning specified in Section 9.07(a).


 


“Investment Manager”
shall have the meaning specified in Section 9.07(a).


 


“Letter
of Credit” shall have the meaning specified in Section 9.02(c).


 


“Letter
of Credit Excess Withdrawal” shall have the meaning specified in Section 9.05(c).


 


“Material
Adverse Effect” shall mean, with respect to either the Ceding Company or
the Reinsurer, a material adverse effect upon (a) the
business, operations, properties, financial condition, prospects or assets of
such party, (b) the ability of such party to perform and comply with its
obligations hereunder, (c) the validity, legality or enforceability of
this Agreement, or (d) the timing or amount of the cash flows attributable
to the business reinsured under this Agreement.


 


“Monthly
Accounting Period” shall have the meaning specified in Section 8.01(a).


 


“Monthly
Accounting Report” shall have the meaning specified in Section 8.01(a).


 


“Monthly
Net Settlement Amount” shall have the meaning specified in Section 8.03(b).


 


3

















 


“Net
Settlement Amount” shall mean the Monthly Net Settlement Amount or the
Quarterly Net Settlement Amount, as applicable.


 


“Non-Payment
Event” shall have the meaning specified in Section 11.02(b).


 


“Non-Public
Personal Information” shall have the meaning
specified in Section 18.10(c).


 


“Objection
Notice” shall have the meaning specified in Section 9.03(h).


 


“Permitted
Assets” shall mean cash, securities listed by the
Securities Valuation Office of the National Association of Insurance
Commissioners and qualifying as admitted assets of the Ceding Company under the
applicable laws of the State of Iowa, or any other form of security acceptable
to the Iowa Insurance Commissioner, or any combination of the above.


 


“Permits”
shall have the meaning specified in Section 17.01(g).


 


“Person”
shall mean and include an individual, a corporation, a partnership, an
association, a trust, an unincorporated organization or a government or
political subdivision thereof.


 


“Policy
Expenses” shall have the meaning specified in Section 4.02.


 


“Policy Issuance Fee”
shall have the meaning specified in Section 4.01.


 


“Premium
Tax” shall have the meaning specified in Section 16.02.


 


“Proprietary
Information” shall have the meaning specified in Section 18.10(b).


 


“Qualified
U.S. Financial Institution” shall mean an institution that is (a) organized
or licensed under the laws of the Unites States or any state of the United
States; (b) is regulated, supervised and examined by federal or state
authorities having regulatory authority over banks and trust companies; and (c) has
been determined by either the Iowa Insurance Commissioner, or the securities
valuation office of the National Association of Insurance Commissioners, to meet
such standards of financial condition and standing as are considered necessary
and appropriate to regulate the quality of financial institutions whose letters
of credit will be acceptable to the Iowa Insurance Commissioner.


 


“Quarterly
Accounting Period” shall have the meaning specified in Section 8.01(b).


 


“Quarterly
Accounting Report” shall have the meaning specified in Section 8.01(b).


 


“Quarterly
Net Settlement Amount” shall have the meaning specified in Section 8.03(c).


 


“Quota
Share” shall be eighty percent (80%).


 


“Receiver”
shall have the meaning specified in Section 11.03(a).


 


“Reinsurance
Premiums” shall have the meaning specified in Section 3.01.


 


4

















 


“Reinsurance
Trust” shall have the meaning specified in Section 9.02(b).


 


“Reinsurance
Trust Excess Withdrawals” shall have the meaning specified in Section 9.04(f).


 


“Reinsured Liabilities”
shall mean the liabilities of the Ceding Company that relate to partial
surrenders, full surrenders, death claims, annuity payouts under Supplementary
Contracts and other contractual benefits, in each case, under the Reinsured
Policies; provided that in no case shall “Reinsured Liabilities” include
any Excluded Liabilities.


 


“Reinsured
Policies” shall mean all single premium deferred annuity contracts on the
policy forms listed on Schedule I, including any amendments, riders or
endorsements attached thereto and all Supplementary Contracts, written by the
Ceding Company on or following the Effective Date through, but excluding, the
date this Agreement is terminated.


 


“Reinsured
Policies Report” shall have the meaning specified in Section 8.01(c).


 


“Reinsurer”
shall have the meaning specified in the Preamble hereto.


 


“Renewal Commissions”
shall have the meaning specified in Section 4.03.


 


“SAP”
shall mean the statutory accounting principles and practices
prescribed or permitted for Iowa life insurance companies by the Iowa Insurance
Division.


 


“Similar
Policy Form” shall have the meaning specified in Section 2.01(d).


 


“Statutory
Carrying Value” shall mean, with respect to any asset held by the Ceding
Company in the Funds Withheld Account, as of the relevant date of
determination, the amount permitted to be carried by the Ceding Company as an
admitted asset consistent with SAP, as such amount is adjusted in accordance
with Section 9.03(h).


 


“Supplementary
Contracts” shall mean all supplementary contracts, whether with or without
life contingencies, issued by the Ceding Company in exchange for a Reinsured
Policy.


 


“Terminal
Accounting Period” shall have the meaning specified in Section 8.01(b).


 


“Termination
Effective Date” shall mean the date on which the liability of the Reinsurer
with respect to all of the Reinsured Policies is terminated pursuant to Section 11.02(b),
(c) or (d) or the effective date of the rejection of
this Agreement by any Receiver.


 


“Underwriting
Guidelines” shall mean the underwriting guidelines set forth
in Schedule II, as amended in accordance with Section 2.02(b).


 


“U.S. GAAP” means accounting principles generally accepted in
the United States.


 


5

















 


Section 1.02             Other Definitional
Provisions.


 


(a)                                  For purposes of
this Agreement, the words “hereof,” “herein,” “hereby” and other words of
similar import refer to this Agreement as a whole, including all Schedules and
Exhibits to this Agreement, unless otherwise indicated.


 


(b)                                 Whenever the
singular is used herein, the same shall include the plural, and whenever the
plural is used herein, the same shall include the singular, where appropriate.


 


(c)                                  The term “including”
means “including but not limited to.”


 


(d)                                 Whenever used
in this Agreement, the masculine gender shall include the feminine and neutral
genders and vice versa.


 


(e)                                  The Schedules
and Exhibits hereto are hereby incorporated by reference into the body of this
Agreement.


 


(f)                                    All references
herein to Articles, Sections, Subsections, Paragraphs, Exhibits and Schedules
shall be deemed references to Articles and Sections and Subsections and
Paragraphs of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require.


 


(g)                                 All terms
defined in this Agreement shall have the defined meaning when used in any
Schedule, Exhibit, certificate, report or other documents attached hereto or
made or delivered pursuant hereto unless otherwise defined therein.


 


ARTICLE
II



COVERAGE


 


Section 2.01             Scope of Coverage.


 


(a)                                  This Agreement shall be effective as of 12:01 A.M. on the
Effective Date.


 


(b)                                 This Agreement is an agreement for indemnity reinsurance made solely
between the Ceding Company and the Reinsurer.


 


(c)                                  Subject to the
terms, conditions and limits of this Agreement (including the exclusion from
coverage of Excluded Liabilities), the Ceding Company shall automatically cede
and the Reinsurer shall automatically reinsure the Quota Share of the Reinsured
Liabilities.


 


(d)                                 The Ceding
Company shall deliver notice to the Reinsurer ten (10) Business Days prior
to issuing contracts on policy forms that are substantially similar to the
forms set forth on Schedule I or issuing contracts providing
substantially similar economic benefits to policyholders as to be provided by
the Reinsured Policies (each a “Similar Policy Form”).  The Reinsurer shall have the right to amend Schedule
I to add any Similar Policy Form to Schedule I and include
contracts on any Similar Policy Form as Reinsured Policies under this 


 


6

















 


Agreement.  The Ceding Company
shall provide to the Reinsurer any additional information relating to any
Similar Policy Form or contracts written on any Similar Policy Form as
is reasonably requested by the Reinsurer from time to time.


 


(e)                                  Subject to the
terms, conditions and limits of this Agreement (including the exclusion from
coverage of Excluded Liabilities and excluding the investment performance of
the assets in the Funds Withheld Account), the Reinsurer shall follow the
fortunes of the Ceding Company, and to that end the Reinsurer’s liability for
the Reinsured Policies shall be identical to that of the Ceding Company and
shall be subject to the same risks, terms, conditions, interpretations,
waivers, modifications, alterations and cancellations as the respective
insurances of the Ceding Company, subject in each case to the Ceding Company’s
duty to adhere to the Underwriting Guidelines and its obligations pursuant to Article X.


 


(f)                                    Notwithstanding
anything to the contrary herein, the Reinsurer shall not be liable for any
Excluded Liabilities.


 


Section 2.02             Underwriting of Policies Subject to Reinsurance.


 


(a)                                  The Reinsurer
shall only be required to automatically reinsure policies which have been
underwritten in accordance with the Underwriting Guidelines.


 


(b)                                 The Ceding
Company shall not, without the prior written consent of the Reinsurer, make any
changes to the Underwriting Guidelines which are material to the business
reinsured under this Agreement.  Any
policies written by the Ceding Company after any such changes are made to the
Underwriting Guidelines without the prior written consent of the Reinsurer
shall only be Reinsured Policies hereunder if the Reinsurer consents to
including such policies as Reinsured Policies.


 


Section 2.03             Retention.  The Ceding Company shall retain, net and
unreinsured, at its own risk and liability, twenty percent (20%) of the
liabilities with respect to each of the Reinsured Policies, and the Ceding
Company shall not transfer, assign, convey, reinsure or otherwise dispose of
its share of the liabilities with respect to the Reinsured Policies without the
prior written consent of the Reinsurer; provided that the Ceding Company
may reinsure any or all of such retention to a wholly-owned subsidiary of the
Ceding Company if: (a) such wholly-owned subsidiary of the Ceding Company
is contractually required to retain such amounts at its own risk and liability
without the benefit of reinsurance and (b) the Ceding Company continues to
provide all claim management and administration services with respect to such
policies retained by such wholly-owned subsidiary of the Ceding Company in
accordance with Article X.


 


Section 2.04             Policy  Changes.


 


(a)                                  The Ceding
Company will not, without the prior written consent of the Reinsurer,
terminate, amend, modify or waive any provision or provisions of the Reinsured
Policies which are material to the business reinsured under this Agreement.


 


(b)                                 Any such
terminations, amendments, modifications or waivers made without the prior
written consent of the Reinsurer shall be disregarded for purposes of this 


 


7

















 


Agreement, and the reinsurance with respect to the affected policy will
continue as if such termination, amendment, modification or waiver had not been
made.


 


Section 2.05             Reinstatement of Surrendered Policies.  If a Reinsured
Policy that has been surrendered is reinstated according to its terms and the
Ceding Company’s reinstatement policies, the Reinsurer will, upon notification,
automatically reinstate the reinsurance with respect to such Reinsured Policy; provided,
that, to the extent that the reinstatement of such Reinsured Policy requires
payment of premiums in arrears or reimbursement of claims paid, the Ceding
Company shall pay to the Reinsurer all Reinsurance Premiums in arrears and the
Quota Share of all reimbursements of Claims paid on such Reinsured Policy.


 


Section 2.06             Misstatement of Fact.  In the event of a change in
the amount payable under a Reinsured Policy due to a misstatement in fact, the
Reinsurer’s liability with respect to such Reinsured Policy will change
proportionately. The Reinsured Policy will be rewritten from commencement on
the basis of the adjusted amounts using premiums and such other terms based on
the correct facts, and the proper adjustment for the difference in Reinsurance
Premiums, without interest, will be made.


 


Section 2.07             Credited Rates and
Non-Guaranteed Elements.  The
Ceding Company will be responsible for determining credited interest rates and
other non-guaranteed elements of the Reinsured Policies; provided, that
the Reinsurer may provide recommendations regarding credited interest rates and
other non-guaranteed elements of the Reinsured Policies to the Ceding Company
and, if so provided, the Ceding Company will not unreasonably take actions that
contravene such recommendations and the Ceding Company may not change the
credited interest rate or any other non-guaranteed elements on existing
Reinsured Policies without the Reinsurer’s consent.


 


Section 2.08             Programs of
Internal Replacement.  The Ceding
Company shall not solicit, or allow its Affiliates to solicit, directly or
indirectly, policy holders of the Reinsured Policies in connection with any
program of internal replacement.  The
term “program of internal replacement” means any program sponsored or supported
by the Ceding Company or any of its Affiliates that is offered to a class of
policy owners and in which a Reinsured Policy or a portion of a Reinsured
Policy is exchanged for another policy that is written by the Ceding Company or
any Affiliate of the Ceding Company or any successor or assignee of any of
them.


 


ARTICLE III


 


REINSURED PREMIUMS


 


Section 3.01             Reinsurance Premiums.  The payment of Reinsurance Premiums is a
condition precedent to the liability of the Reinsurer under this
Agreement.  The Ceding Company shall pay
to the Reinsurer the Quota Share of the gross premiums received by the Ceding
Company with respect to the Reinsured Policies (the “Reinsurance Premiums”).  Such Reinsurance Premiums shall be payable in
accordance with Section 8.03.


 


8

















 


ARTICLE IV


 


POLICY EXPENSES


 


Section 4.01             Commissions and Policy
Issuance Fee.  In
connection with the issuance of each Reinsured Policy, the Reinsurer shall pay
to the Ceding Company an expense allowance related to such Reinsured Policy in
an amount equal to (a) the Quota Share of commissions paid by the Ceding
Company in connection with the sale of such Reinsured Policy, which amount
shall not exceed three and one-half percent (3.50%) of the initial premium of
such Reinsured Policy (the “Commissions”) plus (b) a per
policy issuance fee equal to the Quota Share of $145 (the “Policy Issuance
Fee”).


 


Section 4.02             Administration Fee.  On a monthly basis, the Reinsurer shall pay
to the Ceding Company an expense allowance related to all Reinsured Policies
(the “Administration Fee” and, together with the Commissions and the
Policy Issuance Fees, the “Policy Expenses”) in an amount equal to the
Quota Share of (a) $3.00 multiplied by (b) (i) the number
of Reinsured Policies in force on the first day of the relevant month plus
the number of Reinsured Policies in force on the last day of the relevant
month, divided by (ii) two (2). 
A three percent (3%) per annum inflation factor will be added to the
Administration Fee commencing on the first anniversary of this Agreement.  The Policy Expenses shall be payable by the
Reinsurer to the Ceding Company in accordance with Section 8.03.


 


Section 4.03             Renewal Commissions.  The Reinsurer shall pay its Quota Share of
any renewal commissions paid by the Ceding Company for any Reinsured Policies
(the “Renewal Commissions”); provided that the Reinsurer has
agreed in writing to the payment of such Renewal Commissions prior to the
payment thereof by the Ceding Company. 
Such Renewal Commissions shall be payable in accordance with Section 8.03.


 


ARTICLE V


 


C-4 RISK CHARGE


 


Section 5.01             C-4 Risk Charge.  The Reinsurer will reimburse the Ceding
Company for the economic cost of funding the statutory risk-based-capital
associated with C-4 Risk (the “C-4 Risk Charge”) quarterly in an amount
equal to 23 basis points per annum (0.23%) multiplied by the average of
Ceded Reserves during the relevant quarterly period.  The C-4 Risk Charge shall be payable in
accordance with Section 8.03.


 


ARTICLE VI


 


GUARANTY FUND ASSESSMENTS


 


Section 6.01             Guaranty Fund
Assessments.  The
Reinsurer shall reimburse the Ceding Company for the Quota Share of any
Guaranty Fund Assessments paid by the Ceding Company with respect to any
Reinsured Policy.  To the extent there is
any recovery of Guaranty Fund Assessments paid by the Reinsurer, the Ceding
Company shall promptly pay the Quota Share of such recovery to the Reinsurer.


 


9

















 


ARTICLE
VII


 


CLAIMS


 


Section 7.01             Claims  Payment.  Subject to Section 7.02,  the Reinsurer shall pay to the Ceding Company the Quota
Share of the Claims paid by the Ceding Company in accordance with Section 8.03.  “Claims” will
consist of claims, net of applicable surrender charges and market value
adjustments, if any, for benefits related to partial surrenders, full
surrenders, death claims, annuity payouts under Supplementary Contracts and
other contractual benefits under the Reinsured Policies.  Claims shall not include annuitizations under
the Reinsured Policies, any Excluded Liabilities or any liabilities other than
the Reinsured Liabilities.


 


Section 7.02             Claims Settlement.


 


(a)                                  The Ceding
Company is responsible for the settlement of Claims in accordance with Article X,
applicable law and policy terms.


 


(b)                                 The Ceding
Company will notify the Reinsurer promptly of its intention to investigate,
contest, compromise or litigate any Claim involving a Reinsured Policy (any
such claim, a “Contested Claim”). 
The Ceding Company will provide the Reinsurer all relevant information
and documents, as such become available, pertaining to Contested Claims and
will promptly report any developments during the Reinsurer’s review.


 


(c)                                  Subject to Section 2.01(f) relating
to Excluded Liabilities, the Reinsurer will reimburse the Ceding Company for
its Quota Share of the reasonable expenses of any contest or compromise of a
Claim, and will share in the reduction of liability in the same
proportion.  If the Reinsurer so elects,
it may discharge its liability with respect to any Contested Claim by paying to
the Ceding Company its Quota Share of such Claim as originally presented to the
Ceding Company and, thereafter, will have no obligation to the Ceding Company
for reimbursement of expenses related to the contest of such Claim and will not
share in any subsequent reduction in liability relating to such Claim.


 


(d)                                 If the
Reinsurer does not elect to discharge its liability with respect to any
Contested Claim as set forth in Section 7.02(c), the Ceding Company
will promptly advise the Reinsurer of all significant developments, including
notice of legal proceedings (including, but not limited to, consumer complaints
or actions by governmental authorities) initiated in connection with such
Contested Claim.


 


Section 7.03             Recoveries.  Subject to Section 7.02(c), if the
Ceding Company obtains any recoveries in respect of a Claim paid by it in
accordance with the terms of any Reinsured Policy, the Ceding Company shall
promptly pay to the Reinsurer the Quota Share of such recoveries.


 


10






 












 


ARTICLE
VIII


 


REPORTING
AND SETTLEMENTS


 


Section 8.01             Ceding Company Reporting.


 


(a)                                  Within eight (8) Business Days following the end of each calendar
month other than a calendar month following which a Quarterly Accounting Report
will be delivered under Section 8.01(b), the Ceding Company shall
deliver to the Reinsurer an accounting report (a “Monthly Accounting Report”)
substantially in the form set forth in Exhibit A for the
immediately preceding calendar month (a “Monthly Accounting Period”).


 


(b)                                 Within eight (8) Business Days following the end of each calendar
quarter and any Termination Effective Date, the Ceding Company shall deliver to
the Reinsurer an accounting report (a “Quarterly Accounting Report”)
substantially in the form set forth in Exhibit B for the
immediately preceding calendar quarter (a “Quarterly Accounting Period”)
or, in the case of termination, the period from the end of the immediately
preceding Quarterly Accounting Period to the date on which this Agreement is
terminated (the “Terminal Accounting Period”), as applicable.


 


(c)                                  Within eight (8) Business Days following the end of each Monthly
Accounting Period, the Ceding Company shall deliver to the Reinsurer a report
of the Reinsured Policies (a “Reinsured Policies Report”) substantially
in the form set forth in Exhibit C and seriatim
information with respect to each of the Reinsured Policies which shall be
redacted such that it does not include information identifiable to an
individual policyholder.


 


(d)                                 The Ceding Company shall deliver to the Reinsurer (i) a copy of
its unaudited annual statement (Blue Book) within eight (8) Business Days
following the filing thereof with the Iowa Insurance Division but no later than
March 1 of each year, (ii) a copy of its audited annual statutory
financial statements within eight (8) Business Days following the filing
thereof with the Iowa Insurance Division but no later than June 1 of each
year, (iii) a copy of its unaudited quarterly statutory financial
statements within eight (8) Business Days following the filing thereof
with the Iowa Insurance Division but no later than forty-five (45) calendar
days after the end of each calendar quarter, (iv) a copy of the audited
annual financial statements of American Equity Investment Life Holding Co. within
eight (8) Business Days following the filing thereof with the United
States Securities and Exchange Commission but no later than March 31 of
each year and (v) a copy of the unaudited quarterly financial statements
of American Equity Investment Life Holding Co. within eight (8) Business
Days following the filing thereof with the United States Securities and
Exchange Commission but no later than May 31, August 31 and November 30
of each year, as applicable.


 


(e)                                  Upon request,
the Ceding Company will promptly provide the Reinsurer with any additional
information related to the Reinsured Policies which the Reinsurer requires in
order to complete its financial statements.


 


(f)                                    The Ceding
Company acknowledges that timely and correct compliance with the reporting
requirements of this Agreement are a material element of the Ceding 


 


11

















 


Company’s responsibilities hereunder and an important basis of the
Reinsurer’s ability to reinsure the risks hereunder.  Consistent and material non-compliance with
reporting requirements, including extended delays, will constitute a material
breach of the terms of this Agreement.


 


Section 8.02             Reinsurer Reporting.  The
Reinsurer shall deliver to the Ceding Company (a) a copy of its audited
annual statutory financial statements or unaudited annual statutory financial
statements, in each case, within eight (8) Business Days following the
filing thereof with the Bermuda Monetary Authority, which filing is due by April 30
of each year, and (b) a copy of its unaudited quarterly statutory
financial statements within eight (8) Business Days after the completion
thereof but no later than sixty (60) calendar days after the end of each
quarter.


 


Section 8.03             Settlements.


 


(a)                                  Until such time
that credit for reinsurance is not provided through the Funds Withheld Account
as specified in Section 9.02(a), a daily settlement amount shall be
calculated on each Business Day by the Ceding Company on the basis of
Reinsurance Premiums with respect to Reinsured Policies issued during the
previous Business Day, Commissions and Policy Issuance Fees with respect to
Reinsured Policies issued during the previous Business Day and Claims paid by
the Ceding Company during the previous Business Day.  On each Business Day, the Ceding Company
shall effectuate the payment of such daily settlement amount by (i) depositing
such Reinsurance Premiums, net of any Commissions and Policy Issuance Fees then
due, into the Funds Withheld Account and (ii) withdrawing the Quota Share
of such Claims from the Funds Withheld Account.


 


(b)                                 The net balance
payable under this Agreement for each Monthly Accounting Period (as set forth
in the applicable Monthly Accounting Report, the “Monthly Net Settlement
Amount”) shall be payable as follows:


 


(i)                                     if the Monthly
Net Settlement Amount indicated in the Monthly Accounting Report is positive,
the Ceding Company shall deposit such amount into the Funds Withheld Account,
or, if a Funds Withheld Account is not being used to provide credit for reinsurance,
pay such amount to the Reinsurer, on the date of delivery of the Monthly
Accounting Report to the Reinsurer; or


 


(ii)                                  if the Monthly
Net Settlement Amount indicated in the Monthly Accounting Report is negative,
the Ceding Company shall withdraw the absolute value of such negative amount
from the Funds Withheld Account on the date that is five (5) Business Days
following the delivery of the Monthly Accounting Report to the Reinsurer; provided,
that if the absolute value of such negative Monthly Net Settlement Amount is
greater than the Statutory Carrying Value of the assets in the Funds Withheld
Account as of the last day of the relevant Monthly Accounting Period, then the
Reinsurer shall pay the amount of such difference to the Ceding Company no later
than eight (8) Business
Days after the receipt by the Reinsurer of the applicable Monthly Accounting
Report.


 


12

















 


(c)                                  The net balance
payable under this Agreement for each Quarterly Accounting Period and any
Terminal Accounting Period (as set forth in the applicable Quarterly Accounting
Report, the “Quarterly Net Settlement Amount”) shall be payable as
follows:


 


(i)                                     if the
Quarterly Net Settlement Amount indicated in the Quarterly Accounting Report is
positive, the Ceding Company shall deposit such amount into the Funds Withheld
Account, or, if a Funds Withheld Account is not being used to provide credit
for reinsurance, pay such amount to the Reinsurer, on the date of delivery of
the Quarterly Accounting Report to the Reinsurer; and


 


(ii)                                  if the
Quarterly Net Settlement Amount indicated in the Quarterly Accounting Report is
negative, the Ceding Company shall withdraw the absolute value of such negative
amount from the Funds Withheld Account on the date that is five (5) Business
Days following the delivery of the Quarterly Accounting Report to the
Reinsurer; provided, that if the absolute value of such negative
Quarterly Net Settlement Amount is greater than the Statutory Carrying Value of
the assets in the Funds Withheld Account as of the last day of the relevant
Quarterly Accounting Period, then the Reinsurer shall pay the amount of such
difference to the Ceding Company no later than eight (8) Business Days after
the receipt by the Reinsurer of the applicable Quarterly Accounting Report.


 


(d)                                 The Funds
Withheld Adjustment payable under this Agreement for each Quarterly Accounting
Period and any Terminal Accounting Period (as set forth in the applicable
Quarterly Accounting Report) shall be payable as follows:


 


(i)                                     if the Funds
Withheld Adjustment is positive, the Reinsurer shall deposit Permitted Assets
with a Statutory Carrying Value equal to such positive amount into the Funds
Withheld Account no later than eight (8) Business
Days after the receipt by the Reinsurer of the applicable Quarterly Accounting
Report; provided that, if credit for reinsurance is being provided
through a Reinsurance Trust or a Letter of Credit pursuant to Section 9.02,
the Reinsurer may satisfy its obligations pursuant to this Section 8.03(d)(i) by
depositing Permitted Assets with a market value equal to such positive amount
in a Reinsurance Trust or providing a Letter of Credit with an available amount
equal to such positive amount, in each case, no later than eight (8) Business
Days after the receipt by the Reinsurer of the applicable Quarterly Accounting
Report;


 


(ii)                                  if the Funds
Withheld Adjustment is negative, on the date of delivery of the Quarterly
Accounting Report, the Ceding Company shall withdraw the absolute value of such
negative amount from the Funds Withheld Account and pay the absolute value of
such negative amount to the Reinsurer; provided, that, if the absolute
value of such negative amount is greater than the Statutory Carrying Value of
the assets held in the Funds Withheld Account, the Ceding Company shall permit
the Reinsurer to withdraw assets from any Reinsurance Trust and/or reduce the
available amount of any Letter of Credit in an amount equal to the absolute
value of such negative amount.


 


(e)                                  Any amount due under
this Agreement shall be paid by wire transfer of immediately available funds to
the account or accounts designated by the recipient.


 


13

















 


ARTICLE IX


 


CREDIT FOR REINSURANCE


 


Section 9.01             Reserves.  The Reinsurer shall
establish reserves in respect of the Reinsured Policies (the “Ceded Reserves”)
in an amount equal to the Quota Share of the Gross Reserves.  The Gross Reserves shall be calculated in
good faith on a seriatim basis by the Ceding
Company in accordance with SAP, using the highest valuation interest rates
permitted under SAP guidelines for the liabilities ceded.  In no event shall Gross Reserves include (a) additional
actuarial reserves (as used in connection with SAP), if any, established by the
Ceding Company as a result of its annual cash flow testing, (b) any asset
valuation reserves (as used in connection with SAP) established by the Ceding
Company, or (c) any other reserve not directly attributable to specific
Reinsured Policies.


 


Section 9.02             Form of Security.  The Reinsurer shall ensure that the Ceding
Company will receive credit for the reinsurance effected hereunder on its
statutory financial statements filed in the State of Iowa and all other states
in which it must file statutory financial statements.  In order to provide the Ceding Company with
such credit for reinsurance for the Ceded Reserves, the Reinsurer shall:


 


(a)                                  request the
Ceding Company to establish a segregated account (the “Funds Withheld
Account”), pursuant to a trust agreement attached as Exhibit D,
with a Qualified United States Financial Institution meeting the requirements
set forth in Section 9.03;


 


(b)                                 establish a
United States trust account (a “Reinsurance Trust”) (naming the
Reinsurer as the grantor and the Ceding Company as the beneficiary) with a
Qualified United States Financial Institution meeting the requirements set
forth in Section 9.04;


 


(c)                                  cause to remain
in full force and effect one or more letters of credit (each, a “Letter of
Credit”) meeting the requirements set forth in Section 9.05;


 


(d)                                 utilize any
other method permitted by the Iowa Insurance Division (including becoming
licensed as a life insurance company in the State of Iowa); or


 


(e)                                  provide a
combination of items (a), (b), (c) and (d) above.


 


The Reinsurer shall determine the method by which the Reinsurer
provides credit for reinsurance hereunder for the Ceded Reserves, as long as
such method is set forth in this Section 9.02; provided,
that any election by the Reinsurer to secure its obligations hereunder for the
Ceded Reserves through the use of any method other than that set forth in Section 9.02(a) shall
be subject to the consent of the Ceding Company (such consent not to be
unreasonably withheld); provided, further, no consent of the
Ceding Company shall be required if the Ceding Company is in breach of any
provision of this Agreement and such breach has not been cured within fifteen
(15) Business Days after the Reinsurer has provided notice of such breach to
the Ceding Company.  If the relevant laws
or regulations of the State of Iowa are amended or there is a change in legal
status by either the Ceding Company or the Reinsurer subsequent to the
Effective Date of this Agreement, and if, as a result of such change, a
different amount or a different type of security is necessary to maintain the
Ceding Company’s credit for reinsurance, the Reinsurer 


 


14

















 


may, subject to the consent of the Ceding Company (such consent not to
be unreasonably withheld), adjust the amount of security or change the type of
security to comply with the revised requirements.  Such adjustments may include reducing the
security in or terminating in its entirety the Funds Withheld Account, any
Reinsurance Trust or any Letter of Credit. 
The Reinsurer and the Ceding Company will cooperate in good faith to
effectuate this provision.  Furthermore,
in the event at any time the Funds Withheld Account, any Reinsurance Trust or
any Letter of Credit becomes unnecessary in order for the Ceding Company to
receive credit for reinsurance under this Agreement, the Ceding Company and the
Reinsurer shall cooperate in good faith to terminate the Funds Withheld
Account, any Reinsurance Trust or any Letter of Credit, and all other terms and
conditions of this Agreement shall remain in full force and effect.


 


Section 9.03             Funds Withheld Account.


 


(a)                                  On August 18,
2009, the Ceding Company deposited Permitted Assets with a Statutory Carrying
Value, as of the date of such deposit, equal to the Initial Deposit Amount in
the Funds Withheld Account.


 


(b)                                 The Funds
Withheld Amount so held in the Funds Withheld Account shall increase or
decrease at the end of each Business Day, Monthly Accounting Period and
Quarterly Accounting Period based on the settlement procedures set forth in Section 8.03.


 


(c)                                  The Ceding
Company shall establish and maintain an account payable to the Reinsurer on its
statutory books and records in the amount of the Funds Withheld Amount.  The assets constituting the Funds Withheld
Amount shall be invested in and consist only of Permitted Assets and shall be
valued according to their Statutory Carrying Value.


 


(d)                                 The Funds
Withheld Account shall remain in effect for as long as the Reinsurer has
outstanding obligations under this Agreement, until the Reinsurer effectuates
the provision of all of the reinsurance credit required to be provided to the
Ceding Company hereunder through the use of any method other than the method
set forth in Section 9.02(a) or until earlier terminated by
mutual agreement.  The Funds Withheld
Account shall be established and maintained by the Ceding Company exclusively
for the purposes set forth in this Agreement.


 


(e)                                  Notwithstanding
any other provision hereof, assets held in the Funds Withheld Account may be withdrawn
by the Ceding Company at any time and shall be utilized and applied by the
Ceding Company or any of its successors in interest by operation of law,
including any liquidator, rehabilitator, receiver or conservator of the Ceding
Company, without diminution because of insolvency on the part of the Ceding
Company or the Reinsurer, only for the following purposes:


 


(i)                                     to reimburse
the Ceding Company for the Quota Share of premiums which are returned to the
owners of the Reinsured Policies because of cancellations of such Reinsured
Policies;


 


(ii)                                  to reimburse
the Ceding Company for the Quota Share of Claims paid pursuant to the
provisions of the Reinsured Policies;


 


15

















 


(iii)                               to pay any
other amounts which the Ceding Company claims are due under this Agreement; and


 


(iv)                              to pay any Net
Settlement Amount or Funds Withheld Adjustment due from the Ceding Company to
the Reinsurer.


 


Notwithstanding the foregoing, other than withdrawals made by the
Ceding Company for the purpose of effectuating the payment of daily settlement
amounts under Section 8.03(a), the Ceding Company shall only
withdraw funds from the Funds Withheld Account upon providing the Reinsurer
with written notice at least five (5) Business Days prior to such
withdrawal.


 


(f)                                    The Ceding
Company shall promptly return to the Funds Withheld Account any assets
withdrawn in excess of the actual amounts required in paragraphs (i) through
(iv) immediately above or any amounts that are subsequently determined not
to be due under paragraph (iii) immediately above (“Funds Withheld
Excess Withdrawals”).  The Ceding
Company shall also pay interest on any Funds Withheld Excess Withdrawals at a
rate equal to the portfolio yield on the assets in the Funds Withheld Account
for the calendar quarter immediately preceding the date of determination from
and including the date of withdrawal to but excluding the date on which the
Funds Withheld Excess Withdrawal is returned to the Funds Withheld Account.  Any Funds Withheld Excess Withdrawals shall
be held by the Ceding Company or any successor in interest of the Ceding
Company in trust for the benefit of the Reinsurer and shall at all times be
maintained separate and apart from any assets of the Ceding Company, for the sole
purposes described in paragraphs (i) through (iv) immediately above.


 


(g)                                 The Ceding
Company and the Reinsurer agree that any IMR required to be maintained with
respect to assets in the Funds Withheld Account shall be ceded to and held by
the Reinsurer and the Ceding Company shall have no obligation to establish any
IMR related to such assets.  Any IMR with
respect to assets in the Funds Withheld Account shall be calculated by the
Reinsurer.


 


(h)                                 Determinations
of statutory impairments of assets held in the Funds Withheld Account which are
made by the Ceding Company will be subject to the consent of the Reinsurer
(such consent not to be unreasonably withheld). 
Notwithstanding Article XIV, any disagreements with respect
to the determinations of statutory impairments of assets held in the Funds
Withheld Account shall be subject to this Section 9.03(h).  The Ceding Company shall promptly notify the
Reinsurer in writing if the Ceding Company determines that any assets held in
the Funds Withheld Account have become impaired for purposes of determining
Statutory Carrying Value.  Such notice
shall describe any such assets, the reason for the impairment and the effect on
Statutory Carrying Value of such assets. 
The Reinsurer shall have ten (10) Business Days to provide written
notice of its withholding of consent (the “Objection Notice”) to any
such impairment to the Ceding Company and if the Reinsurer fails to provide
such Objection Notice to the Ceding Company within such time period, the
Reinsurer shall be deemed to have consented to such impairment.  During the ten (10) Business Days
immediately following the delivery of an Objection Notice, the Ceding Company
and the Reinsurer will seek in good faith to resolve any disputes as to the
determination or calculation of statutory impairments of assets held in the
Funds Withheld Account, and in the event such dispute is the result of the
Ceding Company’s independent auditor’s determination or calculation of
statutory impairments of assets 


 


16

















 


held in the Funds Withheld Account, the Ceding Company agrees to
reasonably cooperate with the Reinsurer in presenting facts and evidence to
such independent auditor in appealing such determination or calculation.  In the event that a dispute as to the
determination or calculation of statutory impairments of assets held in the
Funds Withheld Account is not resolved within five (5) calendar days prior
to the date on which the Ceding Company is required to file a statutory
financial statement with an applicable insurance regulator, then the parties
shall use reasonable efforts and work together in good faith to resolve such
dispute prior to the date on which the Ceding Company is required to file the
relevant statutory financial statement with the relevant insurance regulator,
and if the parties are unable to resolve such dispute prior to such date, then
the Ceding Company may use its independent auditor’s good faith calculation of
statutory impairments for purposes of preparing its statutory financial
statements.  Except as otherwise set
forth in this Section 9.03(h), no statutory impairment that is
subject to dispute pursuant to this Section 9.03(h) shall be
effective prior to the resolution of such dispute.


 


(i)                                     Subject to Section 9.02,
in the event that the Reinsurer elects to provide the Ceding Company with
reinsurance credit through the use of any method other than the method set
forth in Section 9.02(a), the Ceding Company shall transfer assets
from the Funds Withheld Account to the Reinsurer with a Statutory Carrying
Value equal to any reinsurance credit provided under such alternative methods; provided,
that the Ceding Company and the Reinsurer shall reasonably agree upon the
assets to be transferred and the Ceding Company and the Reinsurer shall attempt
to ensure that the market value to book value ratio of the assets so
transferred is substantially the same as the market value to book value ratio
of the assets held in the Funds Withheld Account immediately prior to such
transfer.


 


(j)                                     The Reinsurer
shall bear the administrative costs and expenses related to the establishment
and maintenance of the Funds Withheld Account, including the fees of any
investment manager appointed pursuant to Section 9.07.  The Ceding Company shall promptly forward to
the Reinsurer any invoice it receives relating to such costs and expenses.  On the eighth (8th) Business Day following
the date on which it delivers such invoice to the Reinsurer, the Ceding Company
shall authorize the withdrawal of the amount of such costs and expenses from
the Funds Withheld Account; provided that if such amount is greater than the
Statutory Carrying Value of the assets in the Funds Withheld Account, then the
Reinsurer shall pay the amount of such difference to the Ceding Company no
later than eight (8) Business Days following the delivery of such invoice
to the Reinsurer.


 


Section 9.04             Reinsurance Trust.


 


(a)                                  Any trust
agreement establishing a Reinsurance Trust for the benefit of the Ceding
Company shall comply in all respects with the statutes and regulations of the
State of Iowa.


 


(b)                                 The assets
deposited in such Reinsurance Trust shall (i) be valued according to their
current fair market value and (ii) consist only of Permitted Assets.


 


(c)                                  Prior to
depositing assets with the trustee, the Reinsurer shall execute assignments,
endorsements in blank or transfer legal title to the trustee of all shares,
obligations or any other assets requiring assignments, in order that the Ceding
Company, or the trustee upon 


 


17

















 


the direction of the Ceding Company, may whenever necessary negotiate
any such assets without consent or signature from the Reinsurer or any other
entity.


 


(d)                                 All settlements
of account under such a trust agreement between the Ceding Company and the
Reinsurer shall be made in cash or its equivalent.


 


(e)                                  Notwithstanding
any other provision hereof, assets in any Reinsurance Trust may be withdrawn by
the Ceding Company at any time and shall be utilized and applied by the Ceding
Company or any of its successors in interest by operation of law, including any
liquidator, rehabilitator, receiver or conservator of the Ceding Company,
without diminution because of insolvency on the part of the Ceding Company or
the Reinsurer, only for the following purposes:


 


(i)                                     to reimburse
the Ceding Company for the Quota Share of premiums which are returned to the
owners of the Reinsured Policies because of cancellations of such Reinsured
Policies;


 


(ii)                                  to reimburse
the Ceding Company for the Quota Share of Claims paid pursuant to the
provisions of the Reinsured Policies;


 


(iii)                               to fund an
account with the Ceding Company (when combined with any Funds Withheld Amount
and amounts available under Letters of Credit pursuant to Section 9.05)
in an amount at least equal to the Ceding Company’s deduction for reinsurance
ceded on Ceded Reserves;


 


(iv)                              to pay any
other amounts which the Ceding Company claims are due under this Agreement; and


 


(v)                                 to pay any Net
Settlement Amount or Funds Withheld Adjustment due from the Ceding Company to
the Reinsurer.


 


Notwithstanding the foregoing, the Ceding Company shall not withdraw
funds from any Reinsurance Trust until the expiration of any payment periods
accorded the Reinsurer under Section 8.03, and then only upon
providing the Reinsurer with written notice at least five (5) Business
Days prior to such withdrawal.


 


(f)                                    The Ceding
Company shall promptly return to the Reinsurance Trust any assets withdrawn in
excess of the actual amounts required in paragraphs (i) through (v) immediately
above or any amounts that are subsequently determined not to be due under
paragraph (iv) immediately above (“Reinsurance Trust Excess Withdrawals”).  The Ceding Company shall also pay interest on
any Reinsurance Trust Excess Withdrawals at a rate equal to six percent (6%)
per annum from and including the date of withdrawal to but excluding the date
on which the Reinsurance Trust Excess Withdrawal is returned to the Reinsurance
Trust.  Any Reinsurance Trust assets
withdrawn by the Ceding Company, including any Reinsurance Trust Excess
Withdrawals, shall be held by the Ceding Company or any successor in interest
of the Ceding Company in trust for the benefit of the Reinsurer and shall at
all times be maintained separate and apart from any assets of the Ceding
Company, for the sole purposes described in paragraphs (i) through (v) immediately
above.


 


18






 












 


(g)                                 The Reinsurer
may seek the approval of the Ceding Company (which approval shall not be
unreasonably or arbitrarily withheld or delayed) to withdraw from the
Reinsurance Trust all or any part of the assets contained therein and transfer
such assets to the Reinsurer, provided that:


 


(i)                                     the Reinsurer
shall, at the time of such withdrawal, replace the withdrawn assets with other
qualified assets having a market value at least equal to the market value of
the assets withdrawn; or


 


(ii)                                  after such
withdrawals and transfers, the market value of the assets held in the
Reinsurance Trust is no less than 102% of (A) Ceded Reserves minus (B) the
book value of assets in the Funds Withheld Account, if any, minus (C) the
amount available under Letters of Credit pursuant to Section 9.05.


 


(h)                                 The Reinsurer
shall bear the administrative costs and expenses related to the establishment
and maintenance of the Reinsurance Trust, including the fees of any investment
manager appointed pursuant to Section 9.07.


 


Section 9.05             Letters of Credit.


 


(a)                                  Each Letter of
Credit shall be clean, irrevocable, unconditional, “evergreen” and issued or
confirmed by a Qualified United States Financial Institution for the benefit of
the Ceding Company.


 


(b)                                 Notwithstanding
any other provision hereof, any Letters of Credit may be drawn upon in full or
in part at any time and shall be utilized and applied by the Ceding Company or
any of its successors in interest by operation of law, including any
liquidator, rehabilitator, receiver or conservator of the Ceding Company,
without diminution because of insolvency on the part of the Ceding Company or
the Reinsurer, only for the following purposes:


 


(i)                                     to reimburse
the Ceding Company for the Quota Share of premiums which are returned to the
owners of the Reinsured Policies because of cancellations of such Reinsured
Policies;


 


(ii)                                  to reimburse
the Ceding Company for the Quota Share of Claims paid pursuant to the
provisions of the Reinsured Policies;


 


(iii)                               to fund an
account with the Ceding Company (when combined with any Funds Withheld Amount,
the market value of any assets held in a Reinsurance Trust pursuant to Section 9.04
and any undrawn amounts available under Letters of Credit pursuant to this Section 9.05)
in an amount at least equal to the Ceding Company’s deduction for reinsurance
ceded on Ceded Reserves;


 


(iv)                              to pay any
other amounts which the Ceding Company claims are due under this Agreement; and


 


(v)                                 to pay any Net
Settlement Amount or Funds Withheld Adjustment due from the Ceding Company to
the Reinsurer.


 


19

















 


Notwithstanding the foregoing, the Ceding Company shall not draw upon
any Letter of Credit until the expiration of any payment periods accorded the
Reinsurer under Section 8.03, and then only upon providing the
Reinsurer with written notice at least five (5) Business Days prior to
such draw.


 


(c)                                  The Ceding
Company shall promptly return to the Reinsurer any amounts withdrawn in excess
of the actual amounts required in paragraphs (i) through (v) immediately
above or any amounts that are subsequently determined not to be due under
paragraph (iv) immediately above (“Letter of Credit Excess Withdrawals”).  The Ceding Company shall also pay interest on
any Letter of Credit Excess Withdrawals at a rate equal to six percent (6%) per
annum from and including the date of withdrawal to but excluding the date of
return to the Reinsurer.  Any amounts
withdrawn under a Letter of Credit, including any Letter of Credit Excess
Withdrawals, shall be held by the Ceding Company or any successor in interest
of the Ceding Company in trust for the benefit of the Reinsurer and shall at
all times be maintained separate and apart from any assets of the Ceding
Company, for the sole purposes described in paragraphs (i) through (v) immediately
above.


 


Section 9.06             Priority of Withdrawal.  Notwithstanding any other provision of this
Agreement:


 


(a)                                  the Ceding
Company and its successors in interest shall only withdraw assets from the
Reinsurance Trust to the extent the sum of (i) the then-current Funds
Withheld Amount plus (ii) the Funds Withheld Excess Withdrawals has
been reduced to zero; and


 


(b)                                 the Ceding
Company and its successors in interest shall only draw upon Letters of Credit
to the extent the sum of (i) the then-current Funds Withheld Amount plus
(ii) the Funds Withheld Excess Withdrawals plus (iii) the
then-current market value of the assets held in the Reinsurance Trust plus
(iv) the Reinsurance Trust Excess Withdrawals has been reduced to zero.


 


Section 9.07             Investment Management.


 


(a)                                  Pursuant to an
investment management agreement attached as Exhibit E (the “Investment
Management Agreement”), Athene Asset Management, LLC has been appointed as
investment manager to provide investment management services with respect to
the assets held in the Funds Withheld Account (the “Investment Manager”).  The Ceding Company shall not remove or
replace the Investment Manager without the prior written consent of the
Reinsurer; provided that the Ceding Company may, in its sole discretion,
remove the Investment Manager in the event that the Investment Manager is no
longer an Affiliate of the Reinsurer.  In
the event that the Investment Manager is removed or resigns, the Ceding Company
shall appoint a replacement investment manager as directed by the Reinsurer; provided
that, if the Investment Manager is removed because it is no longer an Affiliate
of the Reinsurer, then the replacement investment manager shall be selected by
the Reinsurer but shall be subject to the consent of the Ceding Company (which
consent shall not be unreasonably withheld). 
The replacement investment manager shall accept its appointment by
entering into an investment management agreement in a form acceptable to the
Ceding Company and the Reinsurer, and substantially similar to the Investment
Management Agreement.  The Reinsurer
shall appoint Athene Asset 


 


20

















 


Management, LLC as investment manager to provide investment management
services with respect to the assets held in any Reinsurance Trust established
under this Agreement.


 


(b)                                 The Reinsurer
shall indemnify the Ceding Company for any loss, liability or damage resulting
from any claim brought against the Ceding Company by the counterparty to, and
arising out of, any swap, future, option or other derivative transaction which
is executed by the Investment Manager in the Ceding Company’s name in
accordance with the Investment Management Agreement.


 


ARTICLE
X


 


ADMINISTRATION


 


Section 10.01       Policy Administration.  The Ceding Company shall provide all
required, necessary and appropriate claims, administrative and other services,
including reporting under Article VIII, with respect to the
Reinsured Policies.  The Ceding Company
shall use reasonable care in its underwriting, administration and claims
practices with respect to the Reinsured Policies and in administering and
performing its duties under this Agreement and such practices, administration
and performance shall (a) be consistent with the Ceding Company’s existing
practices, administration and performance and the Underwriting Guidelines; (b) conform
with law; (c) not be fraudulent and (d) be no less favorable than
those used by the Ceding Company with respect to other policies of the Ceding
Company not reinsured by the Reinsurer. 
The Ceding Company shall not outsource any underwriting
functions, administrative functions or claims administration with respect to
the Reinsured Policies or this Agreement without the prior written consent of
the Reinsurer.  If the Reinsurer consents
to any such outsourcing, the Ceding Company shall secure the Reinsurer’s right
to audit and inspect the party performing such outsourced services.


 


Section 10.02       Record Keeping.


 


(a)                                  The Ceding Company shall maintain all records and correspondence for
services performed by the Ceding Company hereunder relating to the Reinsured
Policies in accordance with industry standards of insurance record
keeping.  In addition, such records shall
be made available for examination, audit, and inspection by the department of
insurance of any State within whose jurisdiction the Ceding Company or the
Reinsurer operates. The Ceding Company and the Reinsurer further agree that in
the event of the termination of this Agreement, any such records in the possession
of the Reinsurer shall promptly be duplicated and forwarded to the Ceding
Company unless otherwise instructed.


 


(b)                                 The Ceding Company shall establish and maintain an adequate system of
internal controls and procedures for financial reporting relating to the
Reinsured Policies including associated documentation and shall make such
documentation available for examination and inspection by the Reinsurer.  All reports provided by the Ceding Company
pursuant to Article VIII shall be prepared in accordance with such
system and procedures and shall be consistent with the Ceding Company’s books
and records.


 


21

















 


ARTICLE
XI


 


TERM
AND TERMINATION


 


Section 11.01       Duration  of Agreement.  Subject to Section 11.02,
this Agreement is unlimited as to its duration.


 


Section 11.02       Termination.


 


(a)                                  Termination by
Reinsurer.  The
Reinsurer may, in its sole discretion, terminate this Agreement as to the
reinsurance of new policies by providing thirty (30) calendar days prior
written notice to the Ceding Company. 
All then in force Reinsured Policies will remain Reinsured Policies
until the expiration thereof.  During the
thirty (30) calendar day notification period, the Ceding Company will continue
to cede and the Reinsurer will continue to accept policies covered under the
terms of this Agreement.


 


(b)                                 Termination for
Non-Payment.  Either
party may terminate this Agreement as to all Reinsured Policies if the other
party fails to pay any amounts due under this Agreement within thirty (30)
calendar days following written notice of non-payment from the non-defaulting
party (a “Non-Payment Event”); provided, that reinsurance that is
terminated due to non-payment by the Ceding Company may be reinstated by the
Ceding Company, subject to the Reinsurer’s approval, within sixty (60) calendar
days of the date of termination, and upon payment of all amounts in arrears
including any interest accrued thereon; provided, further, that
the Reinsurer shall have no liability for the payment of any Claims under the
Reinsured Policies that are incurred between the date of termination and the
date of the reinstatement of the reinsurance.


 


(c)                                  Termination for Material Breach.  In addition to all other
rights and remedies available under this Agreement, either party may terminate
this Agreement as to all Reinsurance Policies by providing the other party with
a minimum of thirty (30) calendar days prior written notice in the event the
other party commits a material breach of any provision of this Agreement, which
notice shall specify the nature of such material breach. The breaching party
shall have twenty (20) calendar days from the date of the breaching party’s
receipt of the foregoing notice to cure such material breach to the reasonable
satisfaction of the non-breaching party. If the breach is cured, the other
party shall provide written notice to the curing party that the breach has been
adequately cured. In the event the breaching party fails to cure the material
breach within such twenty (20) calendar day period, then, at the option of the
non-breaching party and upon notice, this Agreement will terminate upon
expiration of the thirty (30) calendar day notice period. Notwithstanding the
foregoing, the parties shall cooperate with each other to effect a cure of any
breach of the terms of this Agreement.


 


(d)                                 Termination for
Insolvency of Reinsurer.  The
Ceding Company may terminate this Agreement as to all Reinsured Policies in the
event that the Reinsurer becomes insolvent (as set forth in Article XV)
by promptly providing the Reinsurer or its Authorized Representative with
written notice of termination, to be effective as of the date on which the
Reinsurer’s insolvency is established by the authority responsible for such
determination.  Any 


 


22

















 


requirement for a notification period prior to the termination of this
Agreement shall not apply under such circumstances.


 


Section 11.03       Termination Payment.


 


(a)                                  In the event
that this Agreement is terminated as to all Reinsured Policies (including if
this Agreement is rejected by any liquidator, receiver, rehabilitator, trustee
or similar person acting on behalf of the Ceding Company (a “Receiver”)),
a net accounting and settlement as to any balance due under this Agreement will
be undertaken by the Ceding Company in accordance with Article VIII.  In addition, on the date of delivery of the
Quarterly Accounting Report related to such termination, the Ceding Company
shall transfer all assets in the Funds Withheld Account to the Reinsurer, and
the Reinsurer will pay to the Ceding Company, within fifteen (15) Business Days
after receipt of the Quarterly Accounting Report, an amount equal to the Ceded
Reserves as of the Termination Effective Date.


 


(b)                                 The Reinsurer’s
right to terminate the reinsurance provided hereunder will not prejudice its
right to collect premiums, and applicable interest as specified in Section 18.02,
for the period during which such reinsurance was in force, through and
including any notice period.


 


(c)                                  If this
Agreement is terminated by the Reinsurer as a result of a Non-Payment Event or
other material breach by the Ceding Company or is rejected by a Receiver of the
Ceding Company, the Ceding Company will provide to the Reinsurer within forty-five
(45) calendar days after the Termination Effective Date, a written report which
documents the Ceding Company’s good faith calculation of the Embedded Value as
of the Termination Effective Date (the “Embedded Value Report”) and will
pay an amount equal to the Embedded Value to the Reinsurer upon delivery of
such notice.  The Ceding Company will
provide the Reinsurer with reasonable access to knowledgeable personnel to
promptly assist in the evaluation of such calculation.  Within thirty (30) calendar days after
receipt of the Embedded Value Report, the Reinsurer shall notify the Ceding
Company in writing if the Reinsurer disagrees with the Ceding Company’s
calculation of the Embedded Value. 
During the ten (10) Business Days immediately following the delivery
of such notice of disagreement, the Ceding Company and the Reinsurer will seek
in good faith to resolve any disputes as to such calculation.  Notwithstanding Article XIV of
this Agreement, any and all disputes as to the calculation of the Embedded Value
that have not been resolved during such ten (10) Business Day period shall
be submitted to an independent actuarial firm reasonably agreed to by each of
the Ceding Company and the Reinsurer for review and determination.  The parties shall instruct the independent
actuarial firm to render its decision as to the appropriate calculation of the
Embedded Value within thirty (30) calendar days after the submission of the
matter for its review (or as soon thereafter as possible).  The parties agree that the arbitration
conducted by the independent actuarial firm shall be a “baseball arbitration”.  As such, the independent actuarial firm shall
evaluate which of the parties’ two calculations of the Embedded Value is more
reasonable in light of the evidence provided by both parties in connection with
their respective submissions to the independent actuarial firm.  The independent actuarial firm shall select
one and only one of the calculations of the Embedded Value submitted by the two
parties.  The independent actuarial firm’s
decision shall be final and binding upon each of the Ceding Company and the
Reinsurer.  In the event that the amount
of the Embedded Value (as such Embedded Value is agreed to by the parties or 


 


23

















 


finally determined by the independent actuarial firm) exceeds the
amount of the Embedded Value payment made by the Ceding Company to the
Reinsurer pursuant to the first sentence of this Section 11.03(c),
then the Ceding Company shall pay the amount of such difference to the
Reinsurer within two (2) Business Days following the date on which the
Embedded Value is agreed to by the parties or finally determined by the
independent actuarial firm.  All fees and
expenses relating to the work performed by the independent actuarial firm
pursuant to this Section 11.03(c) shall be shall be shared
equally between the Ceding Company and the Reinsurer.


 


Section 11.04       Survival.  All
provisions of this Agreement will survive any termination of this Agreement to
the extent necessary to carry out its purpose.


 


ARTICLE
XII


 


RECAPTURE


 


Section 12.01       Recapture.  The Reinsured Policies may not be recaptured.


 


ARTICLE XIII


 


ERRORS
AND OMISSIONS


 


Section 13.01       Errors and Omissions.


 


(a)                                  Any
unintentional or accidental failure to comply with the terms of this Agreement
which can be shown to be the result of an oversight or clerical error relating
to the administration of reinsurance by either party will not constitute a
breach of this Agreement.  Upon
discovery, the error will be promptly corrected so that both parties are
restored to the position they would have occupied had the oversight or clerical
error not occurred.  In the event a
payment is corrected, the party receiving the payment shall be entitled to
interest in accordance with Section 18.02.  Should it not be possible to restore both
parties to this position, the party responsible for the oversight or clerical
error will be responsible for any resulting liabilities and expenses.


 


(b)                                 If the Ceding
Company has failed to cede reinsurance as provided under this Agreement or has
failed to comply with reporting requirements with respect to business ceded
hereunder, the Reinsurer may require the Ceding Company to audit its records
for similar errors and take reasonable actions necessary to correct errors and
avoid similar errors.  Failing prompt
correction, the Reinsurer may limit its liability to the correctly reported
Reinsured Policies.


 


ARTICLE
XIV


 


DISPUTE
RESOLUTION


 


Section 14.01       Negotiation.


 


24

















 


(a)                                  Within fifteen
(15) calendar days after the Reinsurer or the Ceding Company has given the
other party written notification of a specific dispute arising out of or
relating to this Agreement, each party will appoint a designated officer of its
company to attempt to resolve such dispute. 
The officers will meet at a mutually agreeable location as soon as
reasonably possible and as often as reasonably necessary in order to gather and
furnish the other with all appropriate and relevant information concerning the
dispute.  The officers will discuss the
matter in dispute and will negotiate in good faith without the necessity of
formal arbitration proceedings.  During
the negotiation process, all reasonable requests made by one officer to the
other for information will be honored. 
The specific format for such discussions will be decided by the
designated officers.


 


(b)                                 If the officers
cannot resolve the dispute within thirty (30) calendar days of their first
meeting, the dispute will be submitted to formal arbitration pursuant to Section 14.02,
unless the parties agree in writing to extend the negotiation period for an
additional thirty (30) calendar days.


 


Section 14.02       Arbitration.


 


(a)                                  It is the
intention of the Reinsurer and the Ceding Company that the customs and
practices of the insurance and reinsurance industry will be given full effect
in the operation and interpretation of this Agreement.  The parties agree to act in all matters with
the utmost good faith.  However, if the
Reinsurer and the Ceding Company cannot mutually resolve a dispute that arises
out of or relates to this Agreement, including, without limitation, the
validity of this Agreement, and the dispute cannot be resolved through the
negotiation process, then, except as otherwise provided in Section 9.03(h) (relating
to statutory impairments of assets held in the Funds Withheld Account), and Section 11.03(c) (relating
to the Embedded Value of the Reinsured Policies), the dispute will be finally
settled by arbitration in accordance with the provisions of this Section 14.02.


 


(b)                                 To initiate
arbitration, either the Ceding Company or the Reinsurer will notify the other
party by certified mail of its desire to arbitrate, stating the nature of the
dispute and the remedy sought.


 


(c)                                  Any arbitration
pursuant to this Section 14.02 will be conducted before a panel of
three arbitrators who will be current or former officers of life insurance or
life reinsurance companies other than the parties to this Agreement, their
Affiliates or subsidiaries, or other professionals with experience in life
insurance or reinsurance, provided that such professionals shall not
have performed services for either party within the previous five (5) years.  Each of the arbitrators will be familiar with
the prevailing customs and practices for reinsurance in the life insurance and
life reinsurance industry in the United States. 
Each of the parties will appoint one arbitrator and the two so appointed
will select the third arbitrator who shall be independent and impartial.  If either party refuses or fails to appoint
an arbitrator within sixty (60) calendar days after the other party has given
written notice to such party of its arbitrator appointment, the party that has
given notice may appoint the second arbitrator. 
If the two arbitrators do not agree on a third arbitrator within thirty
(30) calendar days of the appointment of the second arbitrator, then the third
arbitrator shall be selected by the ARIAS-


 


25

















 


U.S. Umpire Selection Procedure (available at www.ARIAS-US.org),
subject to the arbitrator qualification requirements of this paragraph.


 


(d)                                 Each
arbitration hearing under this Agreement will be held on the date set by the
arbitrators at a mutually agreed upon location. 
In no event will this date be later than six (6) months after the
appointment of the third arbitrator.  As
soon as possible, the arbitrators will establish arbitration procedures as
warranted by the facts and issues of the particular case.  Notwithstanding Section 18.17,
the arbitration and this Section 14.02 shall be governed by
Title 9 (Arbitration) of the United States Code.


 


(e)                                  The arbitrators
will base their decision on the terms and conditions of this Agreement and the
customs and practices of the insurance and reinsurance industries rather than
on strict interpretation of the law.  The
decision of the arbitrators will be made by majority rule and will be
final and binding on both parties, unless (i) the decision was procured by
corruption, fraud or other undue means; (ii) there was evident partiality
by an arbitrator or corruption in any of the arbitrators or misconduct
prejudicing the rights of any party; or (iii) the arbitrators exceeded
their powers.  Subject to the preceding sentence,
neither party may seek judicial review of the decision of the arbitrators.  The arbitrators shall enter an award which
shall do justice between the parties and the award shall be supported by
written opinion.  The parties agree that
the federal courts in the State of Iowa, or the state courts of such state,
have jurisdiction to hear any matter relating to compelling arbitration or
enforcing the judgment of an arbitral panel, and the parties hereby consent to
such jurisdiction.  Each party hereby waives,
to the fullest extent permitted by law, any objection it may now or hereafter
have to the laying of such venue, or any claim that a proceeding has been
brought in an inconvenient forum.  In
addition, the Ceding Company and Reinsurer hereby consent to service of process
out of such courts at the addresses set forth in Section 18.06.


 


(f)                                    Unless the
arbitrators decide otherwise, each party will bear the expense of its own
arbitration activities, including its appointed arbitrator and any outside
attorney and witness fees.  The parties
will jointly bear the expense of the third arbitrator.


 


(g)                                 Waiver of Trial
by Jury.  THE REINSURER AND THE CEDING
COMPANY HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY MATTER ARISING
OUT OF OR RELATING TO THIS AGREEMENT.


 


ARTICLE
XV


 


INSOLVENCY


 


Section 15.01       Insolvency.


 


(a)                                  A party to this
Agreement will be deemed “insolvent” when it:


 


(i)                                     applies for or
consents to the appointment of a receiver, rehabilitator, conservator,
liquidator or statutory successor (the “Authorized Representative”) of
its properties or assets;


 


(ii)                                  is adjudicated
as bankrupt or insolvent;


 


26

















 


(iii)                               files or
consents to the filing of a petition in bankruptcy, seeks reorganization or an
arrangement with creditors or takes advantage of any bankruptcy, dissolution,
liquidation, rehabilitation, conservation or similar law or statute; or


 


(iv)                              becomes the
subject of an order to rehabilitate or an order to liquidate as defined by the
insurance code of the jurisdiction of the party’s domicile.


 


(b)                                 In the event of
the insolvency of either party, the rights or remedies of this Agreement will
remain in full force and effect.


 


(c)                                  Insolvency of
the Ceding Company.  In the
event of the insolvency of the Ceding Company:


 


(i)                                     The reinsurance
provided under this Agreement will be payable by the Reinsurer directly to the
Ceding Company or its Authorized Representative, without diminution because of
such insolvency, on the basis of the reported claims allowed against the Ceding
Company by any court of competent jurisdiction or by the Authorized
Representative having authority to allow such claims.


 


(ii)                                  The Reinsurer
will be liable only for benefits reinsured as benefits become due under the
terms of the Reinsured Policies and will not be or become liable for any
amounts or reserves to be held by the Ceding Company as to the Reinsured
Policies or for any damages or payments resulting from the termination or
restructuring of the Reinsured Policies that are not otherwise expressly
covered by this Agreement.  The Ceding
Company or its Authorized Representative will give written notice to the
Reinsurer of all pending Claims against the Ceding Company on any Reinsured
Policies within a reasonable time after filing in the insolvency proceedings.
While a Claim is pending, the Reinsurer may investigate such Claim and
interpose, at its own expense, in the proceedings where the Claim is to be
adjudicated, any defense or defenses which it may deem available to the Ceding Company
or its Authorized Representative.


 


(iii)                               The expense
incurred by the Reinsurer will be chargeable, subject to court approval,
against the Ceding Company as part of the expense of its insolvency proceedings
to the extent of a proportionate share of the benefit which may accrue to the
Ceding Company solely as a result of the defense undertaken by the
Reinsurer.  Where two or more reinsurers
are involved in the same Claim and a majority in interest elect to interpose a
defense to such Claim, the expense will be apportioned in accordance with the
terms of this Agreement as though such expense had been incurred by the Ceding
Company.


 


ARTICLE
XVI


 


TAXES


 


Section 16.01       Taxes.  No
taxes, allowances, or expense will be paid by the Reinsurer to the Ceding Company
for any Reinsured Policy, except as specifically referred to in this Agreement.


 


27

















 


Section 16.02       Premium Tax.  The Reinsurer shall reimburse the Ceding
Company for the Quota Share of any premium tax (“Premium Tax”) paid by
the Ceding Company with respect to a Reinsured Policy in respect of the
annuitization of such Reinsured Policy, which reimbursement will reflect any
credit received by the Ceding Company resulting from any Guaranty Fund
Assessments paid by the Reinsurer.  Such
Premium Taxes shall be payable in accordance with Section 8.03.


 


Section 16.03       Excise Tax.  In the event that any excise tax is due with
respect to any Reinsurance Premium due from the Ceding Company to the Reinsurer
under this Agreement, the Ceding Company shall pay the entire amount of such
excise tax.  The Reinsurer shall
reimburse the Ceding Company for any such excise tax paid by the Ceding Company
in accordance with Section 8.03.


 


ARTICLE
XVII


 


REPRESENTATIONS,
WARRANTIES AND COVENANTS


 


Section 17.01       Representations and Warranties of the Ceding Company.  The Ceding Company hereby
represents and warrants to the Reinsurer as follows:


 


(a)                                  Organization
and Qualification.  The Ceding
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Iowa and has all requisite corporate
power and authority to operate its business as now conducted, and is duly
qualified as a foreign corporation to do business, and, to the extent legally applicable,
is in good standing, in each jurisdiction where the character of its owned,
operated or leased properties or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or be in good
standing that, individually or in the aggregate, do not have, and would not
reasonably be expected to have, a material adverse effect on the Ceding Company’s
ability to perform its obligations under this Agreement.


 


(b)                                 Authorization.  The Ceding Company has all requisite corporate
power to enter into, consummate the transactions contemplated by and carry out
its obligations under, this Agreement. 
The execution and delivery by the Ceding Company of this Agreement, and
the consummation by the Ceding Company of the transactions contemplated by, and
the performance by the Ceding Company of its obligations under, this Agreement
have been duly authorized by all requisite corporate action on the part of the
Ceding Company.  This Agreement has been
duly executed and delivered by the Ceding Company, and (assuming due
authorization, execution and delivery by the Reinsurer) this Agreement
constitutes the legal, valid and binding obligation of the Ceding Company,
enforceable against it in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium, or similar
laws relating to or affecting creditors’ rights generally.


 


(c)                                  No Conflict.  The execution, delivery and performance by
the Ceding Company of, and the consummation by the Ceding Company of the
transactions contemplated by, this Agreement do not and will not (i) violate
or conflict with the organizational documents of the Ceding Company, (ii) conflict
with or violate any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any governmental authority


 


28






 












 


applicable to the Ceding Company or by which
it or its properties or assets is bound or subject, or (iii) result in any
breach of, or constitute a default (or event which, with the giving of notice
or lapse of time, or both, would become a default) under, or give to any Person
any rights of termination, acceleration or cancellation of, any agreement,
lease, note, bond, loan or credit agreement, mortgage, indenture or other
instrument, obligation or contract of any kind to which the Ceding Company or
any of its subsidiaries is a party or by which the Ceding Company or any of its
subsidiaries or any of their respective properties or assets is bound or
affected, except, in the case of clause (iii), any such conflicts,
violations, breaches, loss of contractual benefits, defaults or rights that,
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a material adverse effect on the Ceding Company’s ability to
perform its obligations under this Agreement.


 


(d)           Factual Information Relating to
the Reinsured Policies.  The
information relating to the business reinsured under this Agreement that was
supplied by or on behalf of the Ceding Company to the Reinsurer or any of the
Reinsurer’s representatives in connection with this Agreement (such
information, the “Factual Information”), as of the date supplied (or if
later corrected or supplemented prior to the date hereof, as of the date
corrected or supplemented), did not contain any untrue statement of a material
fact or omit to state any material fact necessary to make such Factual
Information, taken as a whole, not misleading in light of the circumstances
under which the statements contained therein were made, and was otherwise
complete and accurate in all material respects. 
The Factual Information was compiled in a commercially reasonable manner
given its intended purpose.  The
Underwriting Guidelines provided to the Reinsurer by the Ceding Company were
complete and accurate when disclosed and there has been no material change in the
Underwriting Guidelines since the date disclosed.


 


(e)           Solvency.  The Ceding Company is and will be Solvent on
a statutory basis immediately after giving effect to this Agreement.  For the purposes of this Section 17.01(e),
“Solvent” means that: (i) the aggregate assets of the Ceding Company are
greater than the aggregate liabilities of the Ceding Company, in each case
determined in accordance with SAP; (ii) the Ceding Company does not intend
to, and does not believe that it will, incur debts or other liabilities beyond
its ability to pay such debts and other liabilities as they come due and (iii) the
Ceding Company is not engaged in a business or transaction, and does not
contemplate engaging in a business or transaction, for which the Ceding Company’s
assets would constitute unreasonably insufficient capital.


 


(f)            Accuracy of Books and Records.  The Ceding Company maintains records relating
to the Reinsured Policies, and implements administrative and operating
procedures with respect to such records, and keeps and maintains all material
documents, books and records reasonably necessary for the maintenance of the
Reinsured Policies, which documents, books and records are complete and
accurate in all material respects, with the utmost good faith and with the
skill, diligence and expertise that would reasonably be expected from qualified
personnel performing such duties in like circumstances.


 


(g)           Governmental Licenses.  The Ceding Company has all
licenses, certificates of authority or other similar certificates,
registrations, franchises, permits, approvals or other similar authorizations
issued by governmental authorities (collectively, “Permits”) necessary
to conduct its business as currently conducted, except in such cases where the
failure


 


29





















 


to have a Permit has not had and would not reasonably be expected to
have a Material Adverse Effect with respect to the Ceding Company.  All Permits that are material to the conduct
of the Ceding Company’s business are valid and in full force and effect.  The Ceding Company is not subject to any
pending Action or, to the knowledge of the Ceding Company, any threatened
Action that seeks the revocation, suspension, termination, modification or
impairment of any Permit that, if successful, would reasonably be expected to
have, or with the passage of time become, a Material Adverse Effect with
respect to the Ceding Company.


 


(h)           Financial Statements.  The Ceding Company has provided to the
Reinsurer a copy of its audited statutory financial statements as of the end of
the most recent calendar year and its unaudited statutory financial statements
as of the end of the most recent calendar quarter for which the Ceding Company’s
statutory financial statements have been prepared and as were provided by the
Ceding Company to the Iowa Insurance Division. 
Except as disclosed in such financial statements (including in the notes
thereto), such financial statements have been prepared in all material respects
in accordance with SAP applied on a consistent basis during the period involved
and present fairly, in all material respects, the statutory financial position
and results of operations of the Ceding Company as of their respective dates or
for the respective periods covered thereby.


 


(i)            No Material Adverse Effect.  Since the last statutory financial statements
of the Ceding Company and any Securities Exchange Commission filings made by
the parent entity of the Ceding Company, there has not occurred any event or
events that, individually or in the aggregate, has or have had or would be
reasonably expected to have a Material Adverse Effect with respect to the
Ceding Company.


 


Section 17.02         Covenants of the Ceding Company.


 


(a)           Investigations.  To the extent permitted by applicable law or
regulation, the Ceding Company will notify the Reinsurer immediately, in
writing, of any and all investigations of the Ceding Company conducted by any
federal or state governmental authority commencing after the date hereof, other
than routine state insurance department examinations.


 


(b)           Statutory Accounting Principles.  The Ceding Company will prepare its financial
statements as required by, and in accordance with, SAP.


 


(c)           Existence; Conduct of Business.  The Ceding Company will do or cause to be done
all things reasonably necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business.


 


(d)           Compliance with Law.  The Ceding Company will comply with all
statutes, laws, ordinances, rules, regulations, judgments, decrees, orders,
injunctions, writs, permits, or licenses of any governmental authority
applicable to the Ceding Company or by which it or its properties or assets is
bound or subject, except where the failure to do so, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect
on the Ceding Company’s ability to perform its obligations under this
Agreement.


 


30





















 


(e)           Restriction on Liens.  The Ceding Company shall not create, incur,
assume or suffer to exist any liens on the assets in the Funds Withheld Account
owned on the date of this Agreement or hereafter acquired, or on any interest
therein or the proceeds thereof.


 


(f)            Governmental Notices.  The Ceding Company shall provide the
Reinsurer, within five (5) Business Days after receipt thereof, copies of
any written notice or report from any governmental authority with respect to
the business reinsured under this Agreement and a written summary of any
material oral communication with any governmental authority with respect to the
business reinsured under this Agreement.


 


Section 17.03         Representations and Warranties of
the Reinsurer.  The Reinsurer hereby
represents and warrants to the Ceding Company as follows:


 


(a)           Organization and Qualification.  The Reinsurer is a corporation duly
incorporated, validly existing and in good standing under the laws of Bermuda
and has all requisite corporate power and authority to operate its business as
now conducted, and is duly qualified as a foreign corporation to do business,
and, to the extent legally applicable, is in good standing, in each
jurisdiction where the character of its owned, operated or leased properties or
the nature of its activities makes such qualification necessary, except for
failures to be so qualified or be in good standing that, individually or in the
aggregate, do not have, and would not reasonably be expected to have, a
material adverse effect on the Reinsurer’s ability to perform its obligations
under this Agreement.


 


(b)           Authorization.  The Reinsurer has all requisite corporate
power to enter into, consummate the transactions contemplated by and carry out
its obligations under, this Agreement. 
The execution and delivery by the Reinsurer of this Agreement, and the
consummation by the Reinsurer of the transactions contemplated by, and the
performance by the Reinsurer of its obligations under, this Agreement have been
duly authorized by all requisite corporate action on the part of the
Reinsurer.  This Agreement has been duly
executed and delivered by the Reinsurer, and (assuming due authorization,
execution and delivery by the Ceding Company) this Agreement constitutes the
legal, valid and binding obligation of the Reinsurer, enforceable against it in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium, or similar laws relating to or
affecting creditors’ rights generally.


 


(c)           No Conflict.  The execution, delivery and performance by
the Reinsurer of, and the consummation by the Reinsurer of the transactions
contemplated by, this Agreement do not and will not (i) violate or
conflict with the organizational documents of the Reinsurer, (ii) conflict
with or violate any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any governmental
authority applicable to the Reinsurer or by which it or its properties or
assets is bound or subject, or (iii) result in any breach of, or
constitute a default (or event which, with the giving of notice or lapse of
time, or both, would become a default) under, or give to any Person any rights
of termination, acceleration or cancellation of, any agreement, lease, note,
bond, loan or credit agreement, mortgage, indenture or other instrument,
obligation or contract of any kind to which the Reinsurer or any of its
subsidiaries is a party or by which the Reinsurer or any of its subsidiaries or
any of their respective properties or assets is bound or affected, except, in
the case of clause (iii), any such 


 


31





















 


conflicts, violations, breaches, loss of
contractual benefits, defaults or rights that, individually or in the
aggregate, do not have, and would not reasonably be expected to have, a
material adverse effect on the Reinsurer’s ability to perform its obligations
under this Agreement.


 


(d)           Solvency.  The Reinsurer is and will be Solvent on a
statutory basis immediately after giving effect to this Agreement.  For the purposes of this Section 17.03(d),
“Solvent” means that: (i) the aggregate assets of the Reinsurer are
greater than the aggregate liabilities of the Reinsurer, in each case
determined in accordance with the regulations promulgated by the Bermuda
Monetary Authority; (ii) the Reinsurer does not intend to, and does not
believe that it will, incur debts or other liabilities beyond its ability to
pay such debts and other liabilities as they come due and (iii) the
Reinsurer is not engaged in a business or transaction, and does not contemplate
engaging in a business or transaction, for which the Reinsurer’s assets would
constitute unreasonably insufficient capital.


 


(e)           Accuracy of Books and Records.  The Reinsurer maintains records and
implements administrative and operating procedures with respect to such
records, and keeps and maintains all material documents, books and records
reasonably necessary in the ordinary course of business, which documents, books
and records are complete and accurate in all material respects, with the utmost
good faith and with the skill, diligence and expertise that would reasonably be
expected from qualified personnel performing such duties in like circumstances.


 


(f)            Governmental Licenses.  The Reinsurer has
all Permits necessary to conduct its business as currently conducted, except in
such cases where the failure to have a Permit has not had and would not
reasonably be expected to have a Material Adverse Effect with respect to the
Reinsurer.  All Permits that are material
to the conduct of the Reinsurer’s business are valid and in full force and
effect.  The Reinsurer is not subject to
any pending Action or, to the knowledge of the Reinsurer, any threatened Action
that seeks the revocation, suspension, termination, modification or impairment
of any Permit that, if successful, would reasonably be expected to have, or
with the passage of time become, a Material Adverse Effect with respect to the
Reinsurer.


 


(g)           No Material Adverse Effect.  Since July 15, 2009, there has not
occurred any event or events that, individually or in the aggregate, has or
have had or would be reasonably expected to have a Material Adverse Effect with
respect to the Reinsurer.


 


Section 17.04         Covenants of the Reinsurer.


 


(a)           Existence; Conduct of Business.  The Reinsurer will do or cause to be done all
things reasonably necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business.


 


(b)           Compliance with Law.  The Reinsurer will comply with all statutes,
laws, ordinances, rules, regulations, judgments, decrees, orders, injunctions,
writs, permits, or licenses of any governmental authority applicable to the
Reinsurer or by which it or its properties or assets is bound or subject,
except where the failure to do so, individually or in the aggregate, 


 


32





















 


would not reasonably be expected to have a
material adverse effect on the Reinsurer’s ability to perform its obligations
under this Agreement.


 


ARTICLE
XVIII



MISCELLANEOUS


 


Section 18.01         Currency.  All
payments due under this Agreement will be made in U.S. Dollars.


 


Section 18.02         Interest.  All amounts due and payable by the Ceding
Company or the Reinsurer under this Agreement that remain unpaid for more than
fifteen (15) calendar days from the date due hereunder will incur interest from
the date due hereunder.  Except as
otherwise set forth in this Agreement, such interest shall accrue at a rate
equal to six percent (6%), calculated on a 30/360 basis.


 


Section 18.03         Right
of Setoff and Recoupment.


 


(a)           Each of the Ceding Company and the
Reinsurer shall have, and may exercise at any time and from time to time, the
right to setoff or recoup any undisputed balance or balances, whether on
account of Reinsurance Premiums, allowances, credits, Claims or otherwise, due
from one party to the other under this Agreement and may setoff or recoup such
balance or balances against any balance or balances due to the former from the
latter under this Agreement.


 


(b)           The
rights provided under this Section 18.03 are in addition to any
rights of setoff that may exist at common law. 
The parties’ setoff rights may be enforced notwithstanding any other
provision of this Agreement including, without limitation, the provisions of Article XV.


 


Section 18.04         No
Third Party Beneficiaries.  This
Agreement is an indemnity reinsurance agreement solely between the Ceding
Company and the Reinsurer.  The
acceptance of risks under this Agreement by the Reinsurer will create no right
or legal relation between the Reinsurer and the insured, owner, beneficiary, or
assignee of any insurance policy of the Ceding Company.  In addition, nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third party
to any party to this Agreement.


 


Section 18.05         Amendment.  This Agreement may not be changed or modified
or in any way amended except by a written instrument duly executed by the
proper officers of both parties to this Agreement and any change or
modification to this Agreement will be null and void unless made by amendment
to this Agreement and duly executed by the proper officers of both parties to
this Agreement.


 


Section 18.06         Notices.  All demands, notices, reports and other
communications provided for herein shall be delivered by the following
means:  (i) hand delivery, (ii) overnight
courier service (e.g., FedEx, Airborne Express, or
DHL); (iii) registered or certified U.S. mail, postage prepaid and return
receipt requested; or (iv) facsimile transmission or e-mail provided that
the fax or e-mail is confirmed by delivery using one of the three methods
identified in 


 


33





















 


clauses (i) through (iii). 
All such demands, notices, reports and other communications shall be
delivered to the parties as follows:


 


if to the Ceding Company:


 


American Equity Investment
Life Insurance Company


5000 Westown Parkway, Suite 440


West Des Moines, Iowa 50266


Attention: Wendy Carlson


Telephone: (515) 457-1824


Facsimile: (515) 221-0744


Email:
wcarlson@american-equity.com


 


if to the Reinsurer:


 


Athene
Life Re Ltd.


44
Church Street


Hamilton
HM 12, Bermuda


Attention:
President and General Counsel


Telephone:
(441) 279-8412


Facsimile:
(441) 279-8401


Email:
cgillis@athenelifere.bm; tshanafelt@athenelifere.bm


 


with
a copy to


 


Sidley
Austin LLP


One
South Dearborn Street


Chicago,
Illinois 60603


Attention:
Perry Shwachman


Telephone:
(312) 853-7061


Facsimile:
(312) 853-7036


Email:
pshwachman@sidley.com


 


Either
party hereto 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
18.06.


 


If either party hereto becomes aware of any change
in applicable law restricting the transmission of notices or other information
in accordance with the foregoing, such party shall notify the other party
hereto of such change in law and such resulting restriction.


 


Section 18.07         Consent to Jurisdiction.  Subject to the terms and conditions of Article XIV,
the Reinsurer agrees that in the event of the failure of the Reinsurer to
perform its obligations under the terms of this Agreement, the Reinsurer, at
the request of the Ceding Company, shall (a) submit to the jurisdiction of
any court of competent jurisdiction in any state of the United States, (b) comply
with all requirements necessary to give such court jurisdiction, and (c) abide
by the final decision of such court or of any appellate court in the event of
an appeal.  This Section 18.07 is not intended to
conflict with or override Article XIV.


 


34





















 


Section 18.08         Service of Process.  The Reinsurer hereby designates the Iowa
Insurance Commissioner as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Ceding Company.  A copy of any such
process shall be delivered to the Reinsurer in accordance with Section 18.06.   This Section 18.08 is not intended to
conflict with or override Article XIV.


 


Section 18.09         Inspection of Records.


 


(a)           Upon giving at least five (5) Business
Days’ prior written notice, the Reinsurer, or its duly authorized
representatives, will have the right to audit, examine and copy, during regular
business hours, at the home office of the Ceding Company, any and all books,
records, statements, correspondence, reports, and other documents that relate
to the Reinsured Policies or this Agreement, subject to the confidentiality
provisions contained in this Agreement. 
In the event the Reinsurer exercises its inspection rights, the Ceding
Company must provide a reasonable work space for such audit, examination or copying,
cooperate fully and faithfully, and produce any and all materials reasonably
requested to be produced, subject to confidentiality provisions contained in
this Agreement.  The expenses related to
any two such inspections in any calendar year shall be borne by the Ceding
Company; provided that if any breach of this Agreement by the Ceding
Company has occurred, the expenses relating to all such inspections shall be
borne by the Ceding Company.


 


(b)           The Reinsurer’s right of access as
specified above will survive until all of the Reinsurer’s obligations under
this Agreement have terminated or been fully discharged.


 


Section 18.10         Confidentiality.


 


(a)           The parties will keep confidential
and not disclose or make competitive use of any shared Proprietary Information,
as defined below, unless:


 


(i)            The information becomes publicly
available or is obtained other than through unauthorized disclosure by the
party seeking to disclose or use such information;


 


(ii)           The information is independently
developed by the recipient;


 


(iii)          The disclosure is required by law, provided
that, if applicable, the party required to make such disclosure will allow the
other party to seek an appropriate protective order.


 


“Proprietary Information” includes,
but is not limited to, underwriting manuals and guidelines, applications,
contract forms, agent lists and premium rates and allowances of the Reinsurer
and the Ceding Company, but shall not include the existence of this Agreement
and the identity of the parties.   
Additionally, Proprietary Information may be shared by either party on a
need-to-know basis with its officers, directors, employees, Affiliates, third
party service providers, auditors, consultants or retrocessionaires, or in
connection with the dispute process specified in this Agreement.


 


35





















 


(b)           In addition, the Reinsurer and its
representatives and service providers will protect the confidentiality and
security of Non-Public Personal Information, as defined below, by:


 


(i)            holding all Non-Public Personal
Information in strict confidence;


 


(ii)           maintaining appropriate measures that
are designed to protect the security, integrity and confidentiality of
Non-Public Personal Information;


 


(iii)          disclosing and using Non-Public Personal
Information received under this Agreement for purposes of carrying out the
Reinsurer’s obligations under this Agreement, for purposes of retrocession, or
as may be required or permitted by law.


 


“Non-Public Personal Information” is
personally identifiable medical, financial, and other personal information
about proposed, current and former applicants, policy owners, contract holders,
insureds, annuitants, claimants, and beneficiaries of Reinsured Policies or
contracts issued by the Ceding Company, and their representatives, that is not
publicly available.  Non-Public Personal
Information does not include de-identified personal data, i.e.,
information that does not identify, or could not reasonably be associated with,
an individual.


 


Section 18.11         Successors.  This Agreement will be binding upon the
parties hereto and their respective successors and assigns including any
Authorized Representative of either party. 
Neither party may effect any novation of this Agreement without the
other party’s prior written consent.


 


Section 18.12         Entire  Agreement.  This
Agreement and the Exhibits hereto constitute the entire agreement between the
parties with respect to the business reinsured hereunder and supersede any and
all prior representations, warranties, prior agreements or understandings
between the parties pertaining to the subject matter of this Agreement.  There are no understandings between the
parties other than as expressed in this Agreement and the Exhibits hereto.  In the event of any express conflict between
this Agreement and the Exhibits hereto, the Exhibits hereto will control.


 


Section 18.13         Severability.  Determination
that any provision of this Agreement is invalid or unenforceable will not
affect or impair the validity or the enforceability of the remaining provisions
of this Agreement.


 


Section 18.14         Construction.  This Agreement will be construed and
administered without regard to authorship and without any presumption or rule of
construction in favor of either party. 
This Agreement is between sophisticated parties, each of which has
reviewed this Agreement and is fully knowledgeable about its terms and
conditions.


 


Section 18.15         Non-Waiver.  Neither
the failure nor any delay on the part of the Ceding Company or the Reinsurer to
exercise any right, remedy, power, or privilege under this Agreement shall
operate as a waiver thereof.  No single
or partial exercise of any right, remedy, power or privilege shall preclude the
further exercise of that right, remedy, power or privilege or the exercise of
any other right, remedy, power or privilege. 
No waiver of any right, remedy, power or privilege with respect to any
occurrence shall be construed as a waiver of that right, remedy, 


 


36





















 


power or privilege with respect to any other occurrence.  No prior transaction or dealing between the
parties will establish any custom, sage or precedent waiving or modifying any
provision of this Agreement. No waiver shall be effective unless it is in
writing and signed by the party granting the waiver.


 


Section 18.16         Further Assurances.  From time to time, as and when requested by a
party hereto, the other party hereto shall execute and deliver all such
documents and instruments and shall take all actions as may be reasonably
necessary to consummate the transactions contemplated by this Agreement.


 


Section 18.17         Governing  Law.  This
Agreement will be governed by and construed in accordance with the laws of the
State of Iowa without giving effect to any principles of conflicts of law
thereof that are not mandatorily applicable by law and would permit or require
the application of the laws of another jurisdiction.


 


Section 18.18         Counterparts.  This
Agreement may be executed in any number of counterparts, all of which taken together
shall constitute one agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. 
When this Agreement has been fully executed by the Ceding Company and
the Reinsurer, it will become effective as of the Effective Date.


 


37





















 


IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed effective as of the
Effective Date.


 


TREATY NUMBER 070109


 


AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY


 


	
  By:

  	
  /s/
  Wendy L. Carlson

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  EVP

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  October 14,
  2009

  	
   

  
	
   

  	
   

  	
   

  



 


 


ATHENE
LIFE RE LTD.


 


	
  By:

  	
  /s/
  Frank L. Gillis

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  October 14,
  2009

  	
   

  
	
   

  	
   

  	
   

  



 
















 


SCHEDULE I


 


REINSURED
POLICY FORMS


 


SPDA-MYGA


 

















 


SCHEDULE II


 


UNDERWRITING
GUIDELINES


 


To be promptly provided by the Ceding Company
following the execution of this Agreement.


 

















EXHIBIT A


 


MONTHLY ACCOUNTING REPORT


 


	
  For the Monthly Accounting
  Period ending on

  	
   

  	
   

  



 


 


 


	
  Section 1: 
  Policy cash flows to/(from) Ceding Company (gross)

  	
   

  	
   

  
	
   

  	
  Premium

  	
   

  	
   

  
	
   

  	
  Less: Returned Premium

  	
  (

  	
                                               

  	
  )

  	
   

  
	
  (A)

  	
  TOTAL Premium

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Penalty Free Withdrawals

  	
   

  	
   

  
	
   

  	
  Full and Partial
  Surrenders

  	
   

  	
   

  
	
   

  	
  Death Claims

  	
   

  	
   

  
	
   

  	
  Annuity Payments on
  Supplementary Contracts

  	
   

  	
   

  
	
   

  	
  Other

  	
   

  	
   

  
	
  (B)

  	
  TOTAL Claims

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Initial Commissions Paid

  	
   

  	
   

  
	
   

  	
  Less: Commissions
  Recovered on Returned Premium

  	
  (

  	
                                               

  	
  )

  	
   

  
	
   

  	
  Renewal Commissions Paid

  	
   

  	
   

  
	
   

  	
  Policy Issuance Fees
  (      policies issued x $145)

  	
   

  	
   

  
	
  (C)

  	
  TOTAL Commissions and
  Policy Issuance Fees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2: Policy
  cash flows due to/(owed from) Reinsurer

  	
   

  	
   

  
	
   

  	
  Net Policy Cash Flows (A -
  B - C)

  	
   

  	
   

  
	
   

  	
  x Quota Share

  	
   

  	
  x

  	
  80.0%

  
	
  (D)

  	
  Reinsurer’s share of Net
  Policy Cash Flows

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Premiums transferred to FW
  Account in period

  	
   

  	
   

  
	
   

  	
  Claims withdrawn from FW
  Account in period

  	
   

  	
   

  
	
   

  	
  Commissions and Policy
  Issuance Fees

  	
   

  	
   

  
	
   

  	
  withdrawn from FW Account
  in period

  	
   

  	
   

  
	
  (E)

  	
  Net Policy Cash Flows
  transferred to/(from) Reinsurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (F)

  	
  Policy Cash Flows due
  to/(owed from) Reinsurer (D-E)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3: Monthly
  Expenses owed from Reinsurer

  	
   

  	
   

  
	
   

  	
  Administration Fees
  (           average
  policies in force x $3)

  	
   

  	
   

  
	
   

  	
  Premium Taxes
  (           gross taxes
  paid x 80.0%)

  	
   

  	
   

  
	
   

  	
  Guaranty Fund Assessments
  (           gross
  assessments x 80.0%)

  	
   

  	
   

  
	
   

  	
  Excise Taxes Paid

  	
   

  	
   

  
	
  (G)

  	
  Monthly Expenses owed from
  Reinsurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (H)

  	
  Monthly Net Settlement
  Amount (F-G)

  	
   

  	
   

  



 

















EXHIBIT B


 


QUARTERLY ACCOUNTING REPORT


 


	
  For the Quarterly Accounting
  Period ending on

  	
   

  	
   

  



 


 


	
  Section 1: Ceded
  Reserves

  	
   

  	
   

  
	
  (A)

  	
  Ceded Reserves for
  Deferred Annuities at Beginning of Quarter

  	
   

  	
   

  
	
   

  	
  Increase due to Policies Issued in Quarter

  	
   

  	
   

  
	
   

  	
  Increase due to Tabular Interest

  	
   

  	
   

  
	
   

  	
  Decrease from Penalty Free Withdrawals

  	
  (

  	
                                               

  	
  )

  	
   

  
	
   

  	
  Decrease from Full and Partial Surrenders

  	
  (

  	
                                               

  	
  )

  	
   

  
	
   

  	
  Decrease from Death Claims

  	
  (

  	
                                              

  	
  )

  	
   

  
	
   

  	
  Decrease from Annuitizations

  	
  (

  	
                                              

  	
  )

  	
   

  
	
   

  	
  Other Increases / (Decreases)

  	
   

  	
   

  
	
  (B)

  	
  Change in Ceded Reserves
  for Deferred Annuities

  	
   

  	
   

  
	
  (C)

  	
  Ceded Reserves for
  Deferred Annuities at End of Quarter (A + B)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (D)

  	
  Ceded Reserves for
  Immediate Annuities at Beginning of Quarter

  	
   

  	
   

  
	
   

  	
  Increase due to Supplementary Contracts Issued

  	
   

  	
   

  
	
   

  	
  Increase due to Tabular Interest

  	
   

  	
   

  
	
   

  	
  Decrease from Annuity Payments on SCs

  	
  (

  	
                                              

  	
  )

  	
   

  
	
   

  	
  Other Increases / (Decreases)

  	
   

  	
   

  
	
  (E)

  	
  Change in Ceded Reserves
  for Immediate Annuities

  	
   

  	
   

  
	
  (F)

  	
  Ceded Reserves for
  Immediate Annuities at End of Quarter (D + E)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (G)

  	
  TOTAL Ceded Reserves at
  End of Quarter (C + F)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2: Quarterly
  Net Settlement Amount

  	
   

  	
   

  
	
  (H)

  	
  C4 Risk Charge ((A + D +
  G) x 0.5 x (.0023 /4))

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (I)

  	
  Quarterly Net Settlement
  Amount (H)

  	
   

  	
   

  
								



 

















 


	
  Section 3: Funds
  Withheld Account

  	
   

  	
   

  
	
  (J)

  	
  Book Value of Assets at
  Beginning of Quarter

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Premiums transferred into FW Account

  	
   

  	
   

  
	
   

  	
  Claims withdrawn from FW Account

  	
  (

  	
                                                 

  	
  )

  	
   

  
	
   

  	
  Commissions withdrawn from FW Account

  	
  (

  	
                                                 

  	
  )

  	
   

  
	
   

  	
  Policy Issuance Fees withdrawn from FW Account

  	
  (

  	
                                                 

  	
  )

  	
   

  
	
   

  	
  Renewal Commissions withdrawn from FW Account

  	
  (

  	
                                                

  	
  )

  	
   

  
	
  (K)

  	
  TOTAL Increases /
  (Decreases) from Policy Cash Flows

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Administration Fees withdrawn from FW Account

  	
   

  	
   

  
	
   

  	
  Premium Taxes withdrawn from FW Account

  	
   

  	
   

  
	
   

  	
  Guaranty Fund Assessments withdrawn from

  	
   

  	
   

  
	
   

  	
  FW Account

  	
   

  	
   

  
	
   

  	
  Excise Taxes withdrawn from FW Account

  	
   

  	
   

  
	
  (L)

  	
  TOTAL Decreases from
  Monthly Expenses

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Interest Income Received (Coupons)

  	
   

  	
   

  
	
   

  	
  Change in Accrued Interest

  	
   

  	
   

  
	
   

  	
  Accretion of Discount / (Amortization of Premium)

  	
   

  	
   

  
	
  (M)

  	
  TOTAL Net Investment
  Income

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (N)

  	
  Realized Gains / (Losses)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (O)

  	
  Statutory Impairments
  Realized

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (P)

  	
  Default Losses Realized

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Q)

  	
  Cash or other assets
  transferred (to) / from Reinsurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (R)

  	
  Expenses relating to FW
  Account and Reinsurance Trust

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (S)

  	
  Book Value of Assets at
  End of Quarter

  	
   

  	
   

  
	
   

  	
  (J + K - L + M +/- N - O -
  P +/- Q - R)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4:
  Calculation of Funds Withheld Adjustment

  	
   

  	
   

  
	
  (T)

  	
  TOTAL Ceded Reserves (G)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (U)

  	
  Statutory Carrying Value
  of Assets in the Funds Withheld Account (S)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (V)

  	
  Market Value of Assets in
  any Reinsurance Trust

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (W)

  	
  Amount Available under
  Outstanding Letters of Credit

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (X)

  	
  Amounts due but unpaid by
  Ceding Company

  	
   

  	
   

  
	
   

  	
  under Section 8.03(a),
  (b) or (c)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Y)

  	
  Funds Withheld Adjustment
  due from/(to) Reinsurer (T - (U + V + W + X))

  	
   

  	
   

  



 

















EXHIBIT C


 


REINSURED POLICIES REPORT


 


To be promptly provided by
the Ceding Company following the execution of this Agreement.


 

















EXHIBIT D


 


TRUST AGREEMENT


 


See attached.


 

















EXHIBIT E


 


INVESTMENT MANAGEMENT
AGREEMENT


 


See
attached.