EXHIBIT 10.2


 


REINSURANCE AGREEMENT


 


between


 


AMERICAN HERITAGE LIFE INSURANCE COMPANY


 


and


 


ALLSTATE LIFE INSURANCE COMPANY


 


RECITALS


 


This Reinsurance
Agreement dated December 17, 2004 (hereinafter “Agreement”) is made and
entered into by and between AMERICAN HERITAGE LIFE INSURANCE COMPANY, a life
insurance company domiciled in the State of Florida (hereinafter “Ceding
Company”) and ALLSTATE LIFE INSURANCE COMPANY, a life insurance company
domiciled in the State of Illinois (hereinafter the “Reinsurer”).


 


WHEREAS, Ceding Company
and Reinsurer desire to enter this Agreement, whereby Ceding Company will cede
on a coinsurance basis 100% of any and all liabilities of the Ceding Company
arising under the Policies, except for certain excluded liabilities.


 


NOW THEREFORE, in
consideration of the above stated premises and the promises and the mutual
agreements set forth below the Ceding Company and the Reinsurer agree as
follows.


 


ARTICLE I


DEFINITIONS


 


Unless otherwise defined
herein, as used in this Agreement the following terms shall have the meanings
ascribed to them below:


 


	
  A.

  	
   

  	
  “Annual Statement” shall mean the Ceding Company’s
  Life and Accident and Health Companies Annual Statement for the General
  Account as filed with the Florida Insurance Department.

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  “Code” shall
  mean the Internal Revenue Code of 1986, as amended.

  
	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  “Effective Date”
  shall mean the effective date of this Agreement, which shall be 11:59pm on
  December 31, 2004.

  



 


 


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  D.

  	
   

  	
  “Excluded
  Liabilities” shall mean (i) Extra-Contractual Obligations, and
  (ii) liabilities ceded by Ceding Company under Third-Party Reinsurance
  Agreements.

  
	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  “Extra-Contractual
  Obligations” shall mean all liabilities and obligations for consequential,
  extra-contractual, exemplary, punitive, special or similar damages or any
  other amounts due or alleged to be due (other than those arising under the
  express terms and conditions of the Policies) which arise from any real or
  alleged act, error or omission, whether or not intentional, in bad faith or
  otherwise, including without limitation, any act, error or omission relating
  to: (i) the marketing, underwriting, production, issuance, cancellation
  or administration of the Policies; (ii) the handling of claims or disputes
  in connection with the Policies; or (iii) the failure to pay or the
  delay in payment of benefits or claims, under or in connection with the
  Policies.

  
	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  “Net Benefits”
  shall mean the actual amounts paid or incurred by the Ceding Company with respect
  to the Policies for all surrenders, withdrawals (full and partial), death
  benefits, annuitizations, and payments on supplemental contracts, net of
  Excluded Liabilities.

  
	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  “Net Ceded
  Liabilities” shall mean any and all liabilities of the Ceding Company arising
  under the Policies, but shall not include Excluded Liabilities.

  
	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  “Net Statutory
  Liabilities” shall have the meaning set forth in Article V of this
  Agreement.

  
	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  “Policy or
  Policies” shall mean the annuity contracts defined in Exhibit A which
  are underwritten or reinsured by the Ceding Company.

  
	
   

  	
   

  	
   

  
	
  J.

  	
   

  	
  “Statutory
  Reserves” means the statutory reserves of the Ceding Company with respect to
  the Policies determined pursuant to accounting practices prescribed by
  applicable regulatory authorities and in accordance with sound actuarial
  practices, as such reserves would have been included in lines 1, 2, 3, 4, and
  8 of the NAIC Annual Statement Blank page 3 (2003 format)”.

  
	
   

  	
   

  	
   

  
	
  K.

  	
   

  	
  “Third-Party
  Reinsurance Agreements” shall mean any written reinsurance agreements under
  which Ceding Company has ceded liabilities with respect to the Policies,
  other than this Agreement.

  



 


ARTICLE II


BASIS OF REINSURANCE


 


The
Ceding Company agrees to cede and the Reinsurer agrees to accept Net Ceded
Liabilities. The reinsurance provided hereunder shall be on a 100% coinsurance
basis.


 


ARTICLE III


LIABILITY OF REINSURER; COINSURANCE PROVISIONS


 


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  A.

  	
   

  	
  All of the Net
  Ceded Liabilities shall be reinsured pursuant to the terms of this Agreement
  as of the Effective Date.

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  The liability of
  the Reinsurer with respect to Policies in force on the Effective Date will
  begin on the Effective Date. The liability of the Reinsurer with respect to
  any application received or any contract issued after the Effective Date and
  reinsured hereunder will begin simultaneously with that of the Ceding
  Company. The Reinsurer’s liability with respect to any Policy will terminate
  on the date the Ceding Company’s liability on such contract terminates.
  However, termination of this Agreement will not terminate the Reinsurer’s
  liability for Net Benefits paid or incurred by the Ceding Company on or after
  the Effective Date and prior to the date of termination. If any of the
  Policies are reduced or terminated by payment of a death benefit, withdrawal
  or surrender, the reinsurance will be reduced proportionately or terminated.

  
	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  The reinsurance
  provided under this Agreement is subject to the same limitations and
  conditions as set forth in the Policies.

  
	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Ceding Company
  shall not make any changes after the Effective Date in the provisions and
  conditions of any Policy except with Reinsurer’s prior written consent,
  including, but not limited to any changes to comply with any applicable law,
  rule or regulation. Such consent shall not be unreasonably withheld.

  
	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Some of the
  Policies ceded under this Agreement provide that the Ceding  Company may in its discretion, from time to time, as
  provided in the policy or contract, declare interest rates, cost of insurance
  rates, purchase payments or other non-guaranteed elements that are  or affect required purchase payments or are used to
  determine contract values. The Ceding Company agrees, while this Agreement is
  in effect, to set such discretionary interest rates, cost of insurance rates,
  or other non-guaranteed elements to be declared on the Policies and the
  effective dates thereof only with Reinsurer’s prior written approval.
  However, such prior approval shall not be required so long as Ceding Company
  and Reinsurer remain affiliates. The Ceding Company and Reinsurer  agree to fully cooperate in obtaining any required
  regulatory approvals in connection with setting or changing such
  discretionary interest rates, cost of insurance rates, or other
  non-guaranteed elements.

  
	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Ceding Company
  shall not make any changes or modifications to any of the Policies, nor waive
  or exercise any of its rights under any of the Policies without the prior
  written consent of Reinsurer. However, such prior approval shall not be
  required so long as Ceding Company and Reinsurer remain affiliates.

  
	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Conversions,
  exchanges, or replacements of Policies are not reinsured under this
  Agreement, unless agreed to in writing by Reinsurer.

  



 


 


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ARTICLE IV


CLAIMS


 


	
  A.

  	
   

  	
  Reinsurer shall not be
  liable to pay Ceding Company for any Extra-Contractual Obligations, except to
  the extent such liabilities or obligations arise directly from and are
  proximately caused by the gross negligence or willful acts or omissions of
  Reinsurer, its agents, contractors or employees in the performance of
  Reinsurer’s duties and obligations under this Agreement.

  



 


In the event of a change
in the amount of the Ceding Company’s liability on a Policy due to a
misstatement of age or sex, the Reinsurer’s liability will be changed
proportionately.


 


ARTICLE V


RESERVE TRANSFERS


 


Within forty-five (45)
days of the latter of the Effective Date or the date Ceding Company has
received approval from all necessary regulatory authorities, (“Settlement Date”),
assets consisting of policy loans (including accrued policy loan interest),
cash and investments, accrued investment income, and uncollected or deferred
premiums net of unearned investment income, shall be transferred by Ceding
Company to Reinsurer with a market value amount calculated as of the Effective
Date equal to the “Net Statutory Liabilities” for the Policies reinsured under
this Agreement plus the Interest Maintenance Reserve adjustment for current
year’s liability gains/losses impacting the positive or negative reserve
balance as a result of this transaction. 
The Net Statutory Liabilities shall equal the Statutory Reserves (net of
reserves for any Third-Party Reinsurance Agreements) plus premium deposit funds
plus unearned premiums plus unearned policy loan interest.  Ceding Company shall also pay to Reinsurer
interest on such amount at the rate of four percent (4%) per annum, simple
rate, beginning on the Effective Date and ending on the Settlement Date.


 


ARTICLE VI


SETTLEMENT AND REPORTING


 


A.                         While this Agreement is in effect, Ceding
Company shall pay to Reinsurer no less frequently than quarterly, with respect
to the Policies, a reinsurance premium equal to (or the accounting equivalent
of) the sum of Items (a) and (b) less (c) below, where:


 


(a)                         equals gross premiums  collected by Ceding Company during the
settlement period.


 


(b)                        equals policy loan repayments collected
by Ceding Company with respect to the Policies.


 


 


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(c)                         equals gross premiums refunded by Ceding
Company during the settlement period to policyholders.


 


B.                           While this Agreement is in effect,
Reinsurer shall pay to Ceding Company no less frequently than quarterly, a
benefit and expense allowance equal to (or the accounting equivalent of) the
sum of Items (a), (b), (c), (d), (e) and (f), as applicable for the period
since the date of Reinsurer’s last payment to Ceding Company, where:


 


	
  (a)

  	
   

  	
  equals Net Benefits
  paid or incurred by Ceding Company with respect to the Policies.

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  equals commissions and
  other sales compensation paid or incurred by Ceding Company with respect to
  the Policies.

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  equals premium taxes
  paid or incurred by Ceding Company with respect to the Policies.

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  equals policy loan distributions to policyholders
  paid or incurred by Ceding Company with respect to the Policies.

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  equals net reinsurance premiums paid or incurred by
  Ceding Company to another reinsurer with respect to the Policies.

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  equals adminstrative fees paid or incurred by the
  Ceding Company under third party administration agreements covering the
  Policies ceded under this Agreement.

  



 


C.                           Ceding Company will provide Reinsurer
with accounting reports on a time schedule determined by Reinsurer, which
schedule shall be no less frequently than quarterly within fifteen (15) days
following the end of each calendar quarter. 
These reports will contain sufficient information about the Policies to
enable the Reinsurer to prepare its quarterly and annual financial reports.


 


D.                          Settlements as set out in Article VI,
Paragraphs A and B will occur on a time schedule determined by Reinsurer, which
schedule shall be no less frequently than quarterly within sixty (60) days
following the end of each calendar quarter.


 


ARTICLE VII


TAX MATTERS


 


With respect to this
Agreement, the Ceding Company and the Reinsurer hereby make the election as set
forth in Exhibit B and as provided for in section 1.848-2(g)(8) of
the Treasury 


 


 


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Regulations.  Each of the parties hereto agrees to take
such further actions as may be necessary to ensure the effectiveness of such
election.


 


ARTICLE VIII


RESERVE CREDIT


 


The Reinsurer shall, to
the extent necessary, together with all its subsequent retrocessionaires,
establish adequate net reserves, and shall agree in good faith to take any
other steps necessary, pursuant to the requirements of Florida or any other
state or jurisdiction in which the Ceding Company is licensed or accredited,
for the Ceding Company to take statutory credit for reinsurance ceded to an
unadmitted, unauthorized or unaccredited reinsurer, up to the full amount of
the reserve that the Ceding Company would have established for the  Policies if it had retained the Policies.


 


ARTICLE IX


OVERSIGHTS


 


Unintentional clerical
errors, oversights, omissions or misunderstandings in the administration of
this Agreement by either the Ceding Company or the Reinsurer shall not be
deemed a breach of this Agreement provided the clerical error, oversight,
omission or misunderstanding is corrected promptly after discovery.  Both the Ceding Company and the Reinsurer
shall be restored to the positions they would have occupied had such error,
oversight, omission, or misunderstanding not occurred.


 


ARTICLE X


INSPECTION OF RECORDS


 


Either party, their
respective employees or authorized representatives, may audit, inspect and
examine, during regular business hours, at the home office of either party, any
and all books, records, statements, correspondence, reports, trust accounts and
their related documents or other documents that relate to the Policies covered
under this Agreement.  The audited party
agrees to provide a reasonable workspace for such audit, inspection or examination
and to cooperate fully and to faithfully disclose the existence of and produce
any and all necessary and reasonable materials requested by such auditors,
investigators, or examiners. The party performing a routine audit shall provide
no less than five (5) working days advance notice to the other party. The
expense of the respective party’s employee(s) or authorized representative(s) engaged
in such activities will be borne solely by such party.


 


 


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ARTICLE XI


INSOLVENCY


 


A.                         The portion of any risk or obligation
reinsured by the Reinsurer under this Agreement, when such portion is
ascertained, shall be payable on demand of the Ceding Company at the same time
as the Ceding Company shall pay its net retained portion of such risk or
obligation, and the reinsurance shall be payable by the Reinsurer on the basis
of the liability of the Ceding Company under the Policies without diminution
because of the insolvency of the Ceding Company.  In the event of the insolvency of the Ceding
Company and the appointment of a conservator, liquidator or statutory successor
of the Ceding Company, such portion shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, on the basis of claims
allowed against the Ceding Company by any court of competent jurisdiction or,
by any conservator, liquidator or statutory successor of the Ceding Company
having authority to allow such claims, without diminution because of such
insolvency or because such conservator, liquidator or statutory successor has
failed to pay all or a portion of any claims. 
Payments by the Reinsurer as above set forth shall be made directly to
the Ceding Company or its conservator, liquidator or statutory successor.


 


B.                           Further, in the event of the insolvency
of the Ceding Company, the liquidator, receiver or statutory successor of the
insolvent Ceding Company shall give written notice to the Reinsurer of the
pendency of any obligation of the insolvent Ceding Company on any Net Ceded
Liability, whereupon the Reinsurer may investigate such claim and interpose at
its own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses which it may deem available to the Ceding Company or its
liquidator or statutory successor.  The
expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Ceding Company as part of the expenses of
liquidation 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.


 


C.                           In the event of the Reinsurer’s
insolvency, any payments due the Reinsurer from the Ceding Company pursuant to
the terms of this Agreement will be made directly to the Reinsurer or its
conservator, liquidator, receiver or statutory successor.


 


ARTICLE XII


ARBITRATION


 


A.                         Prior
to initiation of arbitration, the Reinsurer and Ceding Company agree that they
will first negotiate diligently and in good faith to agree on a mutually
satisfactory resolution of any dispute. 
Provided, however that if any such dispute cannot be resolved within
sixty (60) days (or such longer period as the parties may agree) after written
notice invoking the negotiation period of this Article is delivered by
either party, the Reinsurer and the 


 


 


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                                      Ceding
Company agree that they will submit this dispute to arbitration as described
below.


 


B.                           The
Reinsurer and the Ceding Company intend that any and all disputes between them
under or with respect to this Agreement be resolved without resort to any
litigation.  Any and all disputes or
differences between the Ceding Company and the Reinsurer arising out of this Agreement,
including, but not limited to, disputes or differences relating to the
interpretation or performance of this Agreement, its formation or validity, or
any transaction under this Agreement, whether arising before or after
termination, shall be submitted to arbitration. 
Arbitration shall be the sole method of dispute resolution, regardless
of the insolvency of either party, unless the conservator, receiver, liquidator
or statutory successor is specifically exempted from arbitration proceeding by
applicable state law of the insolvency.


 


C.                           Arbitration
shall be initiated by the delivery of written notice of demand for arbitration
(“Arbitration Notice”) by one party to another. 
Such written notice shall contain a brief statement of the issue(s),
remedies sought, and the failure of the parties to reach amicable agreement as
provided in Paragraph A above.


 


D.                          The arbitrators and umpire shall be
present or former disinterested officers of life reinsurance or insurance
companies other than the two parties to this Agreement or any company owned by,
or affiliated with, either party.  Each
party shall appoint an individual as arbitrator and the two so appointed shall
then appoint the umpire.  If either party
refuses or neglects to appoint an arbitrator within thirty (30) days after
delivery of the Arbitration Notice, the other party may appoint the second
arbitrator.  If the two arbitrators do
not agree on an umpire within thirty (30) days of the appointment of the second
appointed arbitrator, each of the two arbitrators shall nominate three individuals.  Each arbitrator shall then decline two of the
nominations presented by the other arbitrator. 
The umpire shall be chosen from the remaining two nominations by drawing
lots.


 


E.                            The
arbitration hearings shall be held in the city in which the Reinsurer’s head
office is located or any such other place as may be mutually agreed.  Each party shall submit its case to the
arbitrators and umpire within one hundred and eighty (180) days of the
selection of the umpire or within such longer period as may be agreed.


 


F.                            The
arbitration panel shall make its decision with regard to the custom and usage
of the insurance and reinsurance business. 
The arbitration panel shall interpret this Agreement as an honorable
engagement; they are relieved of all judicial formalities and may abstain from
following strict rules of law.  The
arbitration panel shall be solely responsible for determining what evidence
shall be considered and what procedure they deem appropriate and necessary in
the gathering of such facts or data to decide the dispute.


 


 


8

















 


G.                           The
decision in writing of the majority of the arbitration panel shall be final and
binding upon the parties.  Judgment may
be entered upon the final decision of the arbitration panel in any court having
jurisdiction.


 


H.                          The jointly incurred costs of the
arbitration are to be borne equally by both parties.  Jointly incurred costs are specifically
defined as any costs that are not solely incurred by one of the parties (e.g.,
attorneys’ fees, expert witness fees, travel to the hearing site, etc.).  Costs incurred solely by one of the parties
shall be borne by that party.  Once the
panel has been selected, the panel shall agree on one billable rate for each of
the arbitrators and umpire and that sole cost shall be disclosed to the parties
and become payable as a jointly incurred cost as described above.


 


ARTICLE XIII


PARTIES TO AGREEMENT


 


This Agreement is solely
between the Ceding Company and the Reinsurer.   
Except as otherwise provided herein, the terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto, and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person, and no
such rights shall be conferred upon any person or entity not a party to this
Agreement.  Ceding Company shall be and
remain directly and solely liable to any insured, contract owner, or beneficiary
under any contract reinsured hereunder.


 


ARTICLE XIV


DURATION OF
AGREEMENT  AND TERMINATION


 


A.                         Duration.  This
agreement will be effective as of the Effective Date, and will be unlimited as
to its duration.


 


B.                           Termination for New Business. 
This agreement may be terminated for new business by either party with
sixty (60) days prior written notice.


 


ARTICLE XV


GENERAL PROVISIONS


 


A.                         Entire Agreement. 
This Agreement supercedes any and all prior discussions and
understandings between the parties and constitutes the entire Agreement between
the Reinsurer and the Ceding Company with respect to the Policies.  There are no understandings between the
parties other than as expressed in this Agreement.


 


B.                           Notices.  Any notice or
communication given pursuant to this Agreement must be in writing and (1) delivered
personally, (2) sent by facsimile transmission, (3) delivered by
overnight express, or (4) sent by registered or certified mail, postage
prepaid, to such 


 


 


9

















 


 


address
or addresses each party may designate from time to time for receipt of notices
or communications.  The initial notice
addresses are as follows:


 


	
  If to the
  Reinsurer:

  	
   

  	
  Allstate Life
  Insurance Company

  
	
   

  	
   

  	
  3100 Sanders Rd.

  
	
   

  	
   

  	
  Northbrook,
  Illinois 60062

  
	
   

  	
   

  	
  Attn:  Steve Shebik, Vice President, Finance

  
	
   

  	
   

  	
  Facsimile No.: (847)
  326-5054

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Ceding
  Company:

  	
   

  	
  American
  Heritage Life Insurance Company

  
	
   

  	
   

  	
  1776 American
  Heritage Life Drive

  
	
   

  	
   

  	
  Jacksonville,
  Florida 32224-6688

  
	
   

  	
   

  	
  Attention:  Greg Guidos, Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile No.:
  (904) 992-2658

  



 


All
notices and other communications required or permitted under the terms of this
Agreement that are addressed as provided in this Article XV shall: (1) if
delivered personally or by overnight express, be deemed given upon delivery; (2) if
delivered by facsimile transmission, be deemed given when electronically
confirmed; and (3) if sent by registered or certified mail, be deemed
given when received.  Any party from time
to time may change its address for notice purposes by giving a similar notice
specifying a new address, but no such notice shall be deemed to have been given
until it is actually received by the party sought to be charged with the
contents thereof.


 


C.                           Expenses.  Except as may
be otherwise expressly provided in this Agreement, whether or not the
transactions contemplated hereby are consummated, each of the parties hereto
shall pay its own costs and expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby.


 


D.                          Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.


 


E.                            Amendment.  Any
modification or modification to this Agreement shall be null and void unless
made by a written instrument executed by both parties hereto.


 


F.                            Assignment; Bind Effect. 
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by either of the
parties hereto without the prior written consent of the other party, which
consent shall not be unreasonably withheld, and any such assignment that is
attempted without such consent shall be null and void.  Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their 


 


 


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respective successors and permitted assigns.


 


G.                           Invalid Provisions. 
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or obligations
of the parties hereto under this Agreement will not be materially and adversely
affected thereby, (1) such provision shall be fully severable; (2) this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof; and (3) the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision
or by its severance herefrom.


 


H.                          Waiver.  Any term or
condition of this Agreement may be waived in writing at any time by the party
that is entitled to the benefit thereof. 
A waiver on one occasion shall not be deemed to be a waiver of the same
or any other breach or nonfulfillment on a future occasion.  All remedies, either under the terms of this
Agreement, or by law or otherwise afforded, shall be cumulative and not
alternative, except as otherwise provided by law.


 


I.                               Headings, etc. 
The headings used in this Agreement have been inserted for convenience
and do not constitute matter to be construed or interpreted in connection with
this Agreement.  Unless the context of
this Agreement otherwise requires, (1) words using the singular or plural
number also include the plural or singular number, respectively; (2) the
terms “hereof,” “herein,” “hereby,” “hereto,” “hereunder,”
and derivative or similar words refer to this entire Agreement (including the
exhibits hereto); (3) the term “Article” refers to the specified Article of
this Agreement; (d) the term “Exhibit” refers to the specified Exhibit attached
to this Agreement; and  (e) the term
“party” means, on the one hand, the Ceding Company, and on the other
hand, the Reinsurer.


 


J.                              Offset.  Any debits or
credits incurred after the Effective Date in favor of or against either the
Ceding Company or the Reinsurer with respect to this Agreement are deemed
mutual debits or credits, as the case may be, and shall be set off against each
other dollar for dollar.


 


K.                          Compliance with Laws. 
The parties hereto shall at all times comply with all applicable laws in
performing their obligations under this Agreement.


 


L.                            Survival.
All provisions of this Agreement shall survive its termination to the extent
necessary to carry out the purposes of this Agreement or to ascertain and
enforce the parties’ rights or obligations hereunder existing at the time of
termination.


 


M.                       Calendar
Days.  Unless otherwise specified, all references to
“day” in this Agreement shall mean calendar days.


 


 


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IN WITNESS HEREOF, the
parties to this Agreement have caused it to be duly executed in duplicate by
their respective officers on the dates shown below.


 


 


ALLSTATE LIFE INSURANCE COMPANY


 


	
  By:

  	
  /s/ James P.
  Zils

  
	
   

  	
   

  
	
  Name: 

  	
  James P. Zils

  
	
   

  	
   

  
	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
  Date

  	
  December 17,
  2004

  



 


 


 AMERICAN HERITAGE LIFE INSURANCE COMPANY


 


	
  By:

  	
  /s/ Samuel H.
  Pilch

  
	
   

  	
   

  
	
  Name:

  	
  Samuel H. Pilch

  
	
   

  	
   

  
	
  Title:

  	
  Group Vice
  President

  
	
   

  	
   

  
	
  Date

  	
  December 17,
  2004

  



 


 


12

















 


EXHIBIT A


ELIGIBLE AND
INELIGIBLE POLICIES


 


Policies reinsured under
this Agreement shall be Single Premium Deferred Annuities with form number
A-D031 (11.99)


 


 


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EXHIBIT B


TAX ELECTION


 


The Ceding Company and
the Reinsurer hereby make an election pursuant to Treasury Regulations Section 1.848-2(g)(8).  This election shall be effective for the tax
year during which the Effective Date falls and all subsequent taxable years for
which this Agreement remains in effect. 
Unless otherwise indicated, the terms used in this Exhibit are
defined by reference to Treasury Regulations Section 1.848-2 as in effect
on the date hereof.  As used below, the
term “party” or “parties” shall refer to the Ceding Company or
the Reinsurer, or both, as appropriate.


 


1.                             The party with the Net Positive
Consideration (as defined in Section 848 of the Code and related Treasury
Regulations) with respect to the transactions contemplated under this Agreement
for any taxable year covered by this election will capitalize specified policy
acquisition expenses with respect to such transactions without regard to the
general deductions limitation of Section 848(c)(1) of the Code.


 


2.                             The parties agree to exchange information
pertaining to the amount of Net Consideration (as defined in Section 848
of the Code and related Treasury Regulations) under this Agreement each year to
ensure consistency or as is otherwise required by the Internal Revenue
Service.  The exchange of information
each year will follow the procedures set forth below:


 


                                      


	
  (a)

  	
   

  	
  By April 1
  of each year, the Ceding Company will submit a schedule to the Reinsurer of
  its calculation of the Net Consideration for the preceding calendar year.
  This schedule of calculations will be accompanied by a statement signed by an
  authorized representative of the Ceding Company stating the amount of the Net
  Consideration the Ceding Company will report in its tax return for the
  preceding calendar year.

  



 


	
  (b)

  	
   

  	
  Within thirty
  (30) days of the Reinsurer’s receipt of the Ceding Company’s calculation, the
  Reinsurer may contest such calculation by providing an alternative
  calculation to the Ceding Company in writing. If the Reinsurer does not
  notify the Ceding Company that it contests such calculation within said
  30-day period, the calculation will be presumed correct and the Reinsurer
  shall also report the Net Consideration as determined by the Ceding Company
  in the Reinsurer’s tax return for the preceding calendar year.

  



 


	
  (c)

  	
   

  	
  If the Reinsurer
  provides an alternative calculation of the Net Consideration pursuant to
  clause (b), the parties will act in good faith to reach an agreement as to
  the correct amount of Net Consideration within thirty (30) days of the date
  the Ceding Company receives the alternative calculation from the Reinsurer.
  When the Ceding Company and the Reinsurer reach agreement on an amount of Net
  Consideration, each party shall report the applicable amount in their
  respective tax returns for the preceding calendar year.

  



.


 


 


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